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HMRC internal manual

National Insurance Manual

From
HM Revenue & Customs
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Class 1 NICs: Securities: Securities with artificially depressed/enhanced market value

Regulation 22(7) of the Social Social Security (Contributions) Regulations 2001

Securities with artificially depressed market value

If the market value of employment-related securities (or other relevant securities or interests in securities) is reduced by things done otherwise than for genuine commercial purposes, an income tax charge arises under Chapter 3A of Part 7 to the Income Tax (Earnings and Pensions) Act 2003. Amongst things done otherwise than for genuine commercial services are:

  • anything done that has its main purposes (or one of its main purposes) the avoidance of tax and NICs; and
  • non-arms length transaction between members of a group of companies other than payment of group relief.

Chapter 3A treats the difference between the market value and the full market value if things had not been done as employment income, and provided section 698 of ITEPA 2003 (PAYE: special charges on employment-related securities) applies the same amount is treated as earnings liable for Class 1 NICs.

ERSM50100 et seq explains more about securities with an artificially depressed market value.

Securities with artificially enhance market value

If the market value of employment-related securities is increased by more than 10% by things done otherwise than for genuine commercial purposes, a tax charge arises under Chapter 3B of Part 7 of the Income Tax (Earnings and Pensions) Act 2003.

Chapter 3B treats value realised by artificial increases in the securities as employment income. The same amount which counts as employment income, and to which section 698 of ITEPA 2003 (PAYE: special charges on employment-related securities) applies is treated as earnings liable for Class 1 NICs.

ERSM60020 et seq explains more about securities with an artificially enhanced market value.