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HMRC internal manual

Employment Related Securities Manual

From
HM Revenue & Customs
Updated
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Post Acquisition Benefits from Securities

Benefits received before 16 April 2003: exemptions

Certain control situations

Per FA88/S80 (1A), (2)(a) & (2)(b), a benefit is not a special benefit if

  • it is received in respect of shares in a company, which
    • is not a dependent subsidiary company, or
    • is a dependent subsidiary company which has more than one class of shares,

and

  • it is available to at least 90 per cent of the holders of shares of the same class as that in which the director or employee acquired shares or an interest in shares, and
  • any of the three following conditions is satisfied when the benefit is received.

The three conditions, per FA88/S80 (3)(a), (3)(b) & (3)(c), are as follows:

  1. the majority of the shares of the same class are held otherwise than by
    1. directors or employees of the company
    2. an associated company
    3. directors or employees of an associated company
  2. The company is employee-controlled by virtue of holdings of shares of the class in respect of which the benefit is received.
  3. The company is a subsidiary which is not a dependent subsidiary and the majority of the shares of the same class are held otherwise than by
    1. directors or employees of the company
    2. an associated company which is not the parent company, or
    3. directors or employees of an associated company.

Employee-controlled company

The charges to Income Tax under Sections 78 and 80 may not bite if the shares inquestion are shares in a company which is employee-controlled by virtue of shares of the class concerned. A company is employee-controlled by virtue of shares of a particularclass if

  • the majority of the company’s shares of that class (except any held by or for the benefit of an associated company) are held by or for the benefit of
    • employees or directors of the company, or
    • employees or directors of a company controlled by the company,

and

  • those directors and employees are together able, as holders of the shares, to control the company.

7-year rule

A benefit is only a special benefit if the person who receives it has been, at sometime within the period of seven years ending with the date the benefit is received, adirector or employee of one of the following companies:

  • the company who issued the shares,
  • the company as a director or employee of which he acquired the shares, or
  • an associated company of either of the above.