Employment related securities

By Tolley in association with Grant Thornton

The following Owner-Managed Businesses guidance note by Tolley in association with Grant Thornton provides comprehensive and up to date tax information covering:

  • Employment related securities
  • Introduction
  • Key considerations
  • Tax treatment and reporting requirements


The employment-related securities (ERS) legislation is set out in ITEPA 2003, Part 7. HMRC guidance is available on the HMRC website  and in HMRC’s Employment Related Securities Manual.


ERS broadly means that the shares or securities in question are acquired in connection with an employment. The definition of securities is quite wide and is listed out at ITEPA 2003, s 420. It includes:

  • shares
  • debentures
  • loan stock
  • financial instruments such as:
    • options
    • futures
    • contracts for differences
    • rights under contracts of insurance

Other exemptions and exclusions can be found both in the general section of the legislation and also in the subsequent, specific legislative chapters.

ITEPA 2003, Part 7, Chapter 1
Key considerations
General commentary

The ERS legislation is complex and it is not possible to cover all the areas comprehensively in this note. Instead this note provides an overview of the ERS legislation and focuses on common scenarios, including potential pitfalls associated with ERS in a management buyout (MBO) (see section below).

The rules that govern the tax treatment of ERS fall under the following chapters in ITEPA 2003, Part 7:

Type of securityLegislationDetailed commentary

More on Management buy-outs: