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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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Post Acquisition Benefits from Securities

Post-acquisition benefits: interaction with ‘spinout companies’

Chapter 4A deals with taxation for researchers who acquire shares in ‘spinout companies’ (see ERSM100000 onwards for more information on these).

However Chapter 4 may apply if the employee is not eligible for relief under Chapter 4A and the value of their shares is increased by the arrangements undertaken between the parties. He has received a benefit by virtue of the ownership of employment-related securities. The amount of charge is the amount or market value of the benefit (i.e. the uplift).

The control exemption under section 449 (see ERSM90230) is unlikely to apply because:

  • If the employee’s shares form a separate, usually restricted, class then (1)(a) and (1)(b) will be satisfied, but neither (2) nor (3) can be, because he neither controls the company through his shares, nor is the majority of that class of shares held by non-employment-related securities etc.
  • If they are of the same class as the University and Venture Capital shares, then a similar benefit will not be received and (1)(b) will not be satisfied.


The employee, whether an academic or a manager, acquires the shares by reason of an opportunity offered to him by his employer. This will usually be the research institute or University, and that organisation will be primarily responsible for operating PAYE/NIC should a charge arise and the shares prove to be Readily Convertible Assets (RCAs) within the expanded ITEPA03/S702. Occasionally the only employer will be the spinout company itself, so it will be responsible for operating PAYE/NIC. If the research institute and spinout company are both employers, they will both be responsible for operating PAYE/NIC but would typically agree between them who will do this. For more details on RCAs, see ERSM170030.


If there is receipt of a benefit chargeable under ITEPA03/S447, both the University and the spinout company have a duty to make returns under ITEPA03/S421L (3), by virtue of there being a reportable event under ITEPA03/S421K (3)(g). However, once one person complies with this duty, the duty on any other person is lifted by ITEPA03/S421J (7).