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HMRC internal manual

Employment Related Securities Manual

HM Revenue & Customs
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Post Acquisition Benefits from Securities

Benefits received before 16 April 2003: special benefits charge

The special benefits charge imposes a charge to Income Tax where a director or employee receives a special benefit by virtue of owning shares, or having an interest in shares,which they acquired within FA88/S77 (1) – see ERSM91000.

The section only applies if the benefit is not otherwise chargeable to Income Tax. Although it was designed to tax manipulated benefits, it can also apply in circumstances where employee shareholders are treated particularly favourably for commercial reasons.

The charge to tax is made for the year of assessment in which the benefit is received and is on an amount equal to the value of the benefit - FA88/S80 (4).


On 1 January 2000 an employee acquires 500 shares in a company at a cost (which is their market value) of £2 per share.

On 1 January 2002 the employee is given a bonus issue of 1 for 10 shares (50 shares) which have a market value of £3 each. No other shareholder receives any shares.

There is a charge under Schedule E on the market value of £150 (50 x £3).

Meaning of `benefit`

The section does not define the meaning of the word ‘benefit’. A benefit might take the form of bonus or rights issue shares, of cash, of vouchers or tokens exchangeable for goods or services, or of any form of shareholder ‘perk’.

It is important to note that most benefits received by employee shareholders would not be special benefits’ within FA88/S80. This is because either they are chargeable to Income Tax under some other provision, or the benefit is specifically exempted from being a special benefit.

The exemption conditions are set out in ERSM91020.