Employee securities and options
1 The Income Tax (Earnings and Pensions) Act 2003 (c. 1) is amended as
2 (1) For Chapter 1 of Part 7 (and the heading of that Part) substitute—
“Employment income: income and exemptions relating to securities
417 Scope of Part 7
(1) This Part contains special rules about cases where securities,
interests in securities or securities options are acquired in connection
with an employment.
(2) The rules are contained in—
Chapter 2 (restricted securities),
Chapter 3 (convertible securities),
Chapter 3A (securities with artificially depressed market
Chapter 3B (securities with artificially enhanced market value),
Chapter 3C (securities acquired for less than market value),
Chapter 3D (securities disposed of for more than market value),
Chapter 4 (post-acquisition benefits from securities),
Chapter 5 (securities options),
Chapter 6 (approved share incentive plans),
Chapter 7 (approved SAYE option schemes),
Chapter 8 (approved CSOP schemes),
Chapter 9 (enterprise management incentives), and
Chapter 10 (priority share allocations).
(3) The following make provision for amounts to count as employment
Chapters 2 to 6, and
(4) The following make provision for exemptions and reliefs from
Chapters 2 and 3, and
Chapters 5 to 10.
(5) Chapter 11 contains supplementary provisions relating to employee
(6) Section 5(1) (application of employment income Parts to office-
holders generally) does not apply to Chapters 6 to 10; and section
549(5) makes provision about its application to Chapter 11.
418 Other related provisions
(1) In Part 3—
Chapter 1 (earnings), and
Chapter 10 (taxable benefits: residual liability to charge),
may also have effect in relation to securities and interests in
securities (but not securities options).
(2) Part 7 of Schedule 7 (transitional provisions relating to securities and
securities options) may also be relevant.
(3) In view of section 49 of FA 2000 (phasing out of APS schemes) the
following are not rewritten in this Act and continue in force
unaffected by the repeals made by this Act—
section 186 of ICTA (APS schemes) and section 187 of that Act
(interpretation) so far as relating to APS schemes, and
Schedule 9 to ICTA (approval of share schemes) so far as
relating to APS schemes and Schedule 10 to that Act (further
provisions about APS schemes).
“APS schemes” means profit sharing schemes approved under
Schedule 9 to ICTA.
(4) Sections 138 to 140 of ICTA (share acquisitions by directors and
employees) continue to apply in relation to shares or interests in
shares acquired before 26th October 1987 (see paragraph 57 of
419 Negative amounts treated as nil
If the result given by any formula under any provision of this Part
would otherwise be a negative amount, the result is to be taken to be
Interpretation of Chapters 1 to 5
420 Meaning of “securities” etc
(1) Subject to subsections (5) and (6), for the purposes of this Chapter
and Chapters 2 to 5 the following are “securities”—
(a) shares in any body corporate (wherever incorporated) or in
any unincorporated body constituted under the law of a
country or territory outside the United Kingdom,
(b) debentures, debenture stock, loan stock, bonds, certificates of
deposit and other instruments creating or acknowledging
(c) warrants and other instruments entitling their holders to
subscribe for securities (whether or not in existence or
(d) certificates and other instruments conferring rights in respect
of securities held by persons other than the persons on whom
the rights are conferred and the transfer of which may be
effected without the consent of those persons,
(e) units in a collective investment scheme,
(f) futures, and
(g) rights under contracts for differences or contracts similar to
contracts for differences.
(2) In subsection (1)(e) “collective investment scheme” means
(a) which are made with respect to property of any description,
including money, and
(b) the purpose or effect of which is to enable persons taking part
in the arrangements (whether by becoming owners of the
property or any part of it or otherwise) to participate in or
receive profits or income arising from the acquisition,
holding, management or disposal of the property or sums
paid out of such profits or income.
(3) In subsection (1)(f) “futures” means rights under a contract for the
sale of a commodity or other property under which delivery is to be
made at a future date at a price agreed when the contract is made;
and for this purpose a price is to be taken to be agreed when the
contract is made—
(a) if it is left to be determined by reference to the price at which
a contract is to be entered into on a market or exchange or
could be entered into at a time and place specified in the
(b) in a case where the contract is expressed to be by reference to
a standard lot and quality, even if provision is made for a
variation in the price to take account of any variation in
quantity or quality on delivery.
(4) For the purposes of subsection (1)(g) a contract similar to a contract
for differences is a contract—
(a) which is not a contract for differences, but
(b) the purpose or pretended purpose of which is to secure a
profit or avoid a loss by reference to fluctuations in the value
or price of property or an index or other factor designated in
(5) The following are not “securities” for the purposes of this Chapter or
Chapters 2 to 5—
(a) cheques and other bills of exchange, bankers’ drafts and
letters of credit (other than bills of exchange accepted by a
(b) money and statements showing balances on a current,
deposit or savings account,
(c) leases and other dispositions of property and heritable
(d) rights under contracts of insurance (within the meaning of
the Financial Services and Markets Act 2000 (Regulated
Activities) Order 2001), and
(6) The Treasury may by order amend subsections (1) to (5).
(7) An order under subsection (6) may include any appropriate
consequential provision (including provision amending any
(8) In this Chapter and Chapters 2 to 5—
“interest”, in relation to securities (or shares), means an interest
in them less than full beneficial ownership and includes an
interest in proceeds of their sale, but does not include a right
to acquire them,
“securities option” means a right to acquire securities, and
“shares” includes stock.
421 Meaning of “market value” etc
(1) In this Chapter and Chapters 2 to 5 “market value” has the same
meaning as it has for the purposes of TCGA 1992 by virtue of Part 8
of that Act.
(2) Where consideration for anything is given in the form of an asset (as
opposed to a payment), any reference in this Chapter or any of
Chapters 2 to 5 to the amount of the consideration is to the market
value of the asset.
421A Meaning of “consideration”
(1) This section applies for determining for the purposes of Chapters 2
to 5 the amount of the consideration given for anything.
(2) If any consideration is given partly in respect of one thing and partly
in respect of another, the amount given in respect of the different
things is to determined on a just and reasonable apportionment.
(3) The consideration which is taken to be given wholly or partly for
anything does not include the performance of any duties of, or in
connection with, an employment.
(4) No amount is to be counted more than once in calculating the
amount of any consideration.
Application of Chapters 2 to 4
421B Application of Chapters 2 to 4
(1) Subject as follows (and to any provision contained in Chapters 2 to
4) those Chapters apply to securities, or an interest in securities,
acquired by a person where the right or opportunity to acquire the
securities or interest is available by reason of an employment of that
person or any other person.
(2) For the purposes of subsection (1)—
(a) securities are, or an interest in securities is, acquired at the
time when a beneficial interest is acquired (and not, if
different, the time when the securities are, or interest is,
conveyed or transferred), and
(b) “employment” includes a former or prospective
(3) A right or opportunity to acquire securities or an interest in securities
made available by a person’s employer, or by a person connected
with a person’s employer, is to be regarded for the purposes of
subsection (1) as available by reason of an employment of that
(a) the person by whom the right or opportunity is made
available is an individual, and
(b) the right or opportunity is made available in the normal
course of the domestic, family or personal relationships of
(4) Chapters 2 to 4 cease to apply to securities, or an interest in securities,
when subsection (5), (6) or (7) is satisfied.
(5) This subsection is satisfied immediately after the securities are, or the
interest in securities is, disposed of otherwise than to an associated
(6) This subsection is satisfied immediately before the death of the
(7) This subsection is satisfied 7 years after the first date after the
acquisition on which the employee is an employee of none of the
(a) the employer,
(b) (if the securities are, or the interest in securities is an interest
in, securities issued by a company) the company by which
they are issued, or
(c) a person connected with a person within paragraph (a) or (b).
(8) In this Chapter and Chapters 2 to 4—
“the acquisition”, in relation to employment-related securities,
means the acquisition of the employment-related securities
pursuant to the right or opportunity available by reason of
“the employment”, in relation to employment-related
securities, means the employment by reason of which the
right or opportunity to acquire the employment-related
securities is available (“the employee” and “the employer”
being construed accordingly unless otherwise indicated),
“employment-related securities” means securities or an interest
in securities to which Chapters 2 to 4 apply (ignoring any
provision of any of those Chapters which limits the
application of the Chapter to a particular description or
descriptions of employment-related securities).