Part 7

Employment income: income and exemptions relating to securities
Chapter 2

Restricted securities

Tax charge on post-acquisition chargeable events

Amount of charge
428
1
The taxable amount for the purposes of section 426 (charge on occurrence of chargeable event) is—
UMV × (IUP - PCP - OP) - CE
2
UMV is what would be the market value of the employment-related securities immediately after the chargeable event but for any restrictions.
3
IUP is—
(IUMV - DA)/IUMV
where—
IUMV is what would have been the market value of the employment-related securities at the time of the acquisition but for any restrictions, and
DA
is the total of any deductible amounts.
4
PCP is the aggregate of the result of the application of the formula—
IUP - PCP - OP
on each previous event (if any) occurring since the acquisition that was a chargeable event for the purposes of section 426 in relation to the employment-related securities (and so is nil if there has not been such a previous event).
5
OP is—
(UMV - AMV)/UMV
where
AMV
is the actual market value of the employment-related securities immediately after the chargeable event.
6
CE is any expenses incurred by the holder of the employment-related securities in connection with—
a
the employment-related securities ceasing to be restricted securities or a restricted interest in securities,
b
the variation of a restriction relating to the employment-related securities, or
c
the disposal of the employment-related securities,
together (if the chargeable event is one within section 427(3)(a) or (b)
(lifting of restrictions and variation of restriction)) with any consideration given for the employment-related securities ceasing to be restricted securities or a restricted interest in securities or the variation of a restriction relating to the employment-related securities.
6A
CE also includes any amount that has counted as employment income of the employee in respect of the employment under Chapter 2 of Part 7A in relation to the employment-related securities where the relevant step (within the meaning of that Part) was taken before the chargeable event occurred.
7
For the purposes of this section each of the following is a “
deductible amount
”—
a
the amount of any consideration given for the acquisition of the employment-related securities,
b
any amount that constituted earnings from the employee’s employment under Chapter 1 of Part 3 (earnings) in respect of the acquisition of the employment-related securities
(other than an amount of exempt income)
,
ba
any amount treated as earnings from the employee's employment under section 226A (employee shareholder shares: amount treated as earnings) in respect of the acquisition of the employment-related securities (other than an amount of exempt income),
bb
any amount that was charged to non-UK income tax in respect of the acquisition of the employment-related securities, but only so far as that amount exceeds any amount within paragraph (b) or (ba),
c
any amount that counted as employment income in relation to the employment-related securities under Chapter 2 or 4 of this Part as originally enacted,
d
if the employment-related securities were acquired on a conversion of other employment-related securities, any amount that counted as employment income of the employee under Chapter 3 of this Part (including that Chapter as originally enacted)
(convertible securities) by reason of the conversion, and
e
if the acquisition of the employment-related securities was pursuant to a securities option, any amount that counted as employment income of the employee under section 476 (or section 476 or 477 as originally enacted)
(acquisition of securities pursuant to securities option) by reason of the acquisition.
7A
In subsection (7)(b) and (ba) the references to an amount of exempt income, in a case in which the amount that constituted, or was treated as, earnings in respect of the acquisition was not an amount of general earnings to which any of the charging provisions of Chapters 4 and 5 of Part 2 applied, includes any amount that would have been an amount of exempt income if any of those charging provisions had applied.
7B
In subsection (7)(bb) “
non-UK income tax
” means a tax chargeable on income under the law of a territory outside the United Kingdom that corresponds to United Kingdom income tax.
7C
A tax is not outside the scope of subsection (7B) by reason only that it—
a
is chargeable under the law of a province, state or other part of a country, or
b
is levied by or on behalf of a municipality or other local body.
8
If the employment-related securities are convertible securities, or an interest in convertible securities, their market value is to be determined for the purposes of this section as if they were not.
9
Where the chargeable event is one within section 427(3)(c)
(disposal) and
CD
is less than
AMV
, the taxable amount for the purposes of section 426 is the amount determined under subsection (1) multiplied by—
CD/AMV
where—
CD
is the consideration given for the employment-related securities, and
AMV
is the actual market value of the employment-related securities immediately after the chargeable event.
10
But subsection (9) does not apply if something which affects the employment-related securities has been done (at or before the time of the chargeable event) as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions.
Pt. 7 Ch. 2 substituted (1.9.2003 with effect in accordance with Sch. 22 para. 3(2)-(4) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 3(1); S.I. 2003/1997, art. 2
Pt. 7: power to modify conferred (7.4.2005) by Finance Act 2005 (c. 7), s. 21(8)-(10)
Words in s. 428(7)(b) inserted (with effect in accordance with s. 49(11) of the amending Act) by Finance Act 2008 (c. 9), s. 49(4)
S. 428(7)(ba) inserted (1.9.2013) by Finance Act 2013 (c. 29), Sch. 23 paras. 5, 38; S.I. 2013/1755, art. 2
S. 428(10) inserted (with effect in accordance with Sch. 2 para. 5(2) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 5
S. 428(6A) inserted (with effect in accordance with Sch. 2 paras. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 15
S. 428(7)(bb) inserted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by Finance Act 2014 (c. 26), Sch. 9 paras. 10(2), 47
Pt. 7 heading substituted (with effect in accordance with Sch. 22 para. 2(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 2(1)
S. 428(7A)-(7C) inserted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by Finance Act 2014 (c. 26), Sch. 9 paras. 10(3), 47
The words "(other than an amount of exempt income)" inserted at the end of s. 428(2)(b) as originally enacted (with effect in accordance with s. 49(10) of the amending Act) by Finance Act 2008 (c. 9), s. 49(3)