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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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Disposals for more than Market Value: Disposals prior to 16 April 2003

Section 162(6) ICTA 1988

The old legislation worked in virtually the same way as its successor. It was set out in ICTA88/S162 (6) in the following terms:

Where after 6th April 1976 shares are acquired, whether or not at an under-value but otherwise as mentioned in subsection (1) above [shares acquired by employee or connected person by reason of employment], and -

(a) the shares are subsequently disposed of by surrender or otherwise so that neither the employee nor any person connected with him any longer has a beneficial interest in them; and   

(b) the disposal is for a consideration which exceeds the then market value of the shares,  

then for the year in which the disposal is effected the amount of the excess is treated as emoluments of the employee’s employment and accordingly chargeable to Income Tax under Schedule E.

Chapter 9 Part 3 ITEPA 2003

The legislation was rewritten as Chapter 9 Part 3 ITEPA 2003, which applies to the period from 6 April 2003 to 15 April 2003.

Differences in PAYE & NIC

Both ICTA88/S162 and Chapter 9 of Part 3 were in the benefits part of the legislation, which meant that no PAYE could be applied and only Class 1A NIC was due on any charge. Furthermore, the legislation did not apply to employees earning less than £8,500 p.a.

Securities covered

Rather than securities, the charge applied to shares, but these included loan stock and any securities defined in ICTA88/S254 (1).

Computation of charge

The formula was:

CD - MV  


CD is the amount of the consideration given for the disposal, and

MV is the market value of the employment-related securities at the time of the disposal.

There was no deduction for sale expenses.