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HMRC internal manual

Employment Related Securities Manual

Restricted securities: computation of OP

The disposal for consideration of restricted securities at a time when they are still restricted is a chargeable event (under ITEPA03/S427(3)(c)) and following such an event, the securities cease to be employment-related securities and Chapters 2 to 4A of Part 7 no longer apply to them. (See ERSM30390 and ERSM20250.)

Where there is a chargeable event within ITEPA03/S427(3)(c), the previously charged proportion (PCP) (if there has been a previous chargeable event - see ERSM30400) and the outstanding proportion (OP) are deducted from the initial uncharged proportion (IUP) to compute the factor which determines the proportion of unrestricted market value (UMV) charged to tax. OP is computed using the formula


where AMV is actual market value immediately after the disposal, taking remaining restrictions into account. This feeds into the computation so that (assuming there has not been a previous chargeable event),:

  • where the restriction remains unchanged at sale, OP is likely to equal IUP, thus giving a nil charge;
  • where it is effectively lifted, the proportion represented by IUP will be charged; and
  • where part of the restriction has wasted away over time there will be a charge based on IUP - OP.

The price paid for a share will generally reflect whether the restriction remains, except where, for example, there is forfeiture at less than market value.