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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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Securities with Artificially Enhanced Value

Effect of changes in the rights attached to other shares

The legislation on restricted shares, FA88/S78 (2)(d), which became ITEPA03/S450 (d) & (e) as originally enacted, contained provisions that covered the situation where an employee’s shares were increased in value by reducing the rights attaching to other shares.

Where such provisions create an increase in the value of securities there will be two alternative charges:

  • Chapter 3B – where avoidance motive.
  • Chapter 4 – where no avoidance motive – e.g. ratchets see ERSM90500.