The following Owner-Managed Businesses guidance note by Tolley in association with Grant Thornton provides comprehensive and up to date tax information covering:
The application of the restricted securities legislation is complex, and this guidance note summarises the key tax implications. It looks at some of the practical issues for employers in analysing and handling the potential risks associated with the acquisition of restricted securities by employees and directors in private and unlisted public companies.
The rules governing the tax treatment of restricted securities acquired by a person by reason of his employment, or that of another person, are found in, ITEPA 2003, Part 7 Chapter 2. From April 6 2008, the charging provisions of Chapter 2 apply to securities acquired by employees and directors who are UK resident. Prior to 6 April 2008 it applied only if the individual was both resident and ordinarily resident in the UK. (note that the concept of ordinary residence is to be abolished from 6 April 2013).
The definition of securities is found within ITEPA 2003, s 420. It includes, amongst other things, shares (the most common type of security issued in a private company and the focus of this section), loan stock, warrants and units in a collective investment scheme.
The restricted securities regime is most likely to be relevant where a director or employee acquires shares at less than market value (disregarding any restrictions on the shares) which are subject to compulsory transfer arrangements, such that the director / employee can be required to sell the shares when they leave employment for less than their market value at the time of ceasing employment.
Restrictions are not limited to those contained in the company’s Articles of Association, but also include restrictions contained in any 'contract, agreement, arrangement or condition'. For example, restrictions contained in shareholders agreements would
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