Employment-related securities

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Employment-related securities
  • Introduction
  • Exclusions from the ERS rules
  • Restricted securities
  • Convertible securities
  • Securities with artificially depressed market value
  • Securities with artificially enhanced market value
  • Securities acquired for less than market value
  • Securities disposed of for more than market value
  • Post-acquisition benefits from securities
  • Shares in research institution spin-out companies
  • Securities options
  • Potential pitfalls in an MBO
  • Tax treatment and reporting requirements


Employment-related securities (ERS) broadly means that the shares or securities in question are acquired in connection with an employment. The term ‘securities’ is widely defined in ITEPA 2003, s 420. ‘Securities’ includes shares, debentures, loan stock and financial instruments such as options, futures, contracts for differences and rights under contracts of insurance.


The ERS legislation is complex and it is not possible to cover all the areas comprehensively in this guidance note. This is an overview of the ERS legislation, focused on common scenarios, including potential pitfalls associated with ERS in a management buy-out (MBO). Links are included to Simon’s Taxes for further commentary, where appropriate.

The rules that govern the tax treatment of ERS are listed below:

Type of securityLegislationDetailed commentary
Restricted securitiesITEPA 2003, ss 422–432ERSM30000; Simon’s Taxes E4.507B–E4.507FA
Convertible securitiesITEPA 2003, ss 435–444ERSM40000; Simon’s Taxes E4.507G–E4.507L
Securities with artificially

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