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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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Disposals for more than Market Value: Example: stop-loss

Maggie Joshi buys 100 shares in her employer for £5 each on 1 January 2005 on condition that she does not sell them for three years. Her employer guarantees that she will not get less than £5 for each of them if she sells them at any time during a two-year period commencing on 1 January 2008.

Maggie wants to sell the shares on 30 September 2008 when the the market price is only £4 per share. Her employer buys them from her for £5 each. The sale expenses are £30.

Applying the formula CD - MV - DA:

CD = £500.

MV = £400 market value of shares

DA = £30 expenses of sale

So CD - MV - DA = £500 - £400 - £30 = £70 charged as employment income.