Post-acquisition benefits
Post-acquisition benefits

The following Tax practice note provides comprehensive and up to date legal information covering:

  • Post-acquisition benefits
  • When does a charge arise?
  • Meaning of benefit
  • Meaning of receipt
  • Meaning of in connection with employment-related securities
  • Otherwise chargeable to income tax
  • IR35
  • Dividends
  • Amount of charge on post-acquisition benefits
  • Exclusion from post-acquisition benefits charge
  • More...

This note deals with the specific rules contained within sections 447–450 of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) (Part 7, Chapter 4), which subject employees or directors to income tax on post-acquisition benefits received in connection with employment-related securities. Benefits are broadly interpreted for these purposes to include, for example, improvements in share rights, the provision of travel or accommodation and an issue of bonus shares. For the meaning of employment-related securities, see: What is an employment-related security?

Following the judgment of the Court of Appeal in PA Holdings, HMRC may argue that dividend payments are simply taxable as earnings (or emoluments) under (what is now) ITEPA 2003, s 62 rather than the specific post-acquisition benefits charge (see: Employee remuneration and special purpose vehicles). However, the post-acquisition benefits rules remain as a 'sweeping-up' charge where an employee or director benefits in connection with employment-related securities and is not otherwise chargeable to income tax.

An important exclusion from the income tax charge applies where the employment-related securities are shares, all the owners of shares of that class receive a similar benefit and the company is either employee-controlled or the majority of such shares are not employment-related securities (for which, see Exclusion from post-acquisition benefits charge).

This note also refers to HMRC's agreed practice in relation to ratchet arrangements in a private equity context, for which

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