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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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Securities with Artificially Enhanced Value

What is artificially enhanced market value?

The provisions in Chapter 3B apply where the market value of employment-related securities (or other relevant securities or interests in securities) is increased by things done otherwise than for genuine commercial purposes.

Otherwise than for genuine commercial purposes

Per ITEPA03/S446A, the following are among the things that are, for the purposes of this Chapter, done otherwise than for genuine commercial purposes —

  1. Anything done that has as its main purpose (or one of its main purposes) the avoidance of tax or NIC, and
  2. Non-arm’s length transaction between members of a group of companies other than payments for group relief (ICTA88/S402 (6)). In this context “group” means a company and its 51% subsidiaries.

See examples at ERSM60030.

University spin-out companies

There is a specific exemption from the operation of Chapter 3B in Chapter 4A (shares in research institute spin-out companies). Where a company qualifies for relief within that Chapter, under ITEPA03/S455, neither an intellectual property agreement nor any transfer of intellectual property pursuant to such an agreement is regarded as a thing “done otherwise than for genuine commercial purposes”, see ERSM100010 et seq.