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HMRC internal manual

Employment Related Securities Manual

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HM Revenue & Customs
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Securities acquired for less than market value: money’s worth charge on acquisition

Interaction with other provisions

ERSM20500 makes it clear that normally the money’s worth and the market value per TCGA92/S272 will be the same. Where market value exceeds money’s worth value there can be an additional charge under Chapter 3C on the excess.

Other Part 7 ITEPA charges

See also ERSM70030 for priority of charge of other provisions, ERSM70100 for interaction with restricted securities, and ERSM70410 for interaction with Chapter 5 on securities options for years up to 5 April 2015.

University spin-outs - Chapter 4A

The main guidance for university spin-outs is at ERSM100000 et seq.

The spinout legislation uses the expression “market value” as a measure of value whereas other legislation that taxes non-cash employment income (ITEPA03/S62) uses “money’s worth”. There is a difference between the two valuation standards but in practice it is unlikely to have a significant effect in the vast majority of cases for Chapter 4A. HMRC is likely to conclude in actual valuations that the price is the same under both tests. If a significant difference does arise in a particular case, HMRC would need to consider whether an attempt had been made to exploit that difference. See ERSM100430.

Tax-advantaged schemes

FA 2004 repealed section ITEPA03/S421G from 18 June 2004. The effect is that shares acquired under approved schemes are now subject to Chapters 2 to 4 of Part 7 of ITEPA 2003. When shares are acquired under tax-advantaged schemes, they are acquired at an under-value within Chapter 3C of Part 7 and if there is no Income Tax charge on acquisition, Chapter 3C could be argued to apply.

HMRC cannot confirm that they will never take a Chapter 3C charge for shares acquired under tax-advantaged schemes. However, provided that the scheme is not involved in avoidance then the charge under Chapter 3C will not be taken. If there is avoidance, then a charge may be pursued.