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HMRC internal manual

Employment Related Securities Manual

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HM Revenue & Customs
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Securities with Artificially Depressed Value

Charge on restricted securities as from 7 May 2004

ITEPA03/S446E modifies the Chapter 2 charge on restricted securities. It applies wherethe market value of employment-related restricted securities is artificially low on theearliest of the following dates:

  • immediately after an event which is a chargeable event (see ERSM30390) in relation to the securities for the purposes of ITEPA03/S426 (charge on restricted securities), or
  • immediately before the securities are disposed of (in circumstances which do not constitute such an event) or are cancelled without being disposed of, or
  • on 5th April in any year.

The market value of the employment-related securities must be artificially low andreduced by at least 10% as a result of things done otherwise than for genuine commercialpurposes (ERSM50020) within the relevant period.

Relevant period

The “relevant period” is the period beginning:

  • if forfeitable securities (ITEPA03/S425 (2)) are acquired, 7 years before the acquisition, and
  • in any other case, 7 years before the relevant date,

and ending with the relevant date.

Relevant date

The “relevant date” is –

  • the date on which the chargeable event concerned occurs, or
  • the date on which the disposal or cancellation concerned occurs, or
  • if neither, then the relevant 5th April.

Deemed chargeable event if no real chargeable event

Where there is

  • a 5 April charge, or
  • a disposal or cancellation of securities that is not treated as a chargeable event,

there is deemed to be a chargeable event within section ITEPA03/S427 (3)(a)(lifting of restrictions) in relation to the securities on the relevant date.

Modification of charge under section 428

ITEPA03/S428 (amount of charge on restricted securities – see ERSM30400) applies as if

  1. the reference in subsection (2) of that section to
  • what would be the market value of the employment-related securities immediately after the chargeable event but for any restrictions

were amended to

  • what would be their market value at the appropriate time (see below) but for the matters to be disregarded (see below);
  1. OP is nil in subsection (1); and
  2. where there is a disposal that is a real chargeable event, then the relief under subsection 9 of ITEPA03/S428 does not apply.

Appropriate time

The “appropriate time” is –

  • for a real chargeable event (see ERSM30390) or on the 5 April, the time immediately after the chargeable event concerned, or
  • where securities are disposed of (in circumstances which do not constitute such an event), or are cancelled without being disposed of, the time immediately before the chargeable event concerned.

Matters to be disregarded

The “matters to be disregarded” are –

  • any restrictions,
  • the things done to depreciate the securities, and
  • any prospect of cancellation of the securities