| Financial Benefits to Encourage Employee Participation |
13 |
the rules apply where the securities are employment-related securities, ie securities acquired by a person by reason of the employment of that (or some other)26 person; employment includes former or prospective employment. Acquisition is decided by reference to beneficial entitlement.27 The expression ‘by reason of employment’ is elaborated upon in the same way as for other parts of the Act—eg chapter 3 part 10 section 201 so it is not satisfied if not made available to the person as an individual in normal course of domestic family or personal relationships.28 The rules cease to apply in three situations.29 Thus they cease to apply immediately after the securities are disposed of—unless to an associated person or immediately before the death of the employee. They also cease to apply 7 years from the ending of the employment. However this rule has to be widened to cover situations in which the person was employed by one company but had shares in another or obtains employment with a person connected with the employer or company. The start of the 7 year period must be after the acquisition of the securities. |
16.A.2.2 Associated Persons |
Section 421C provides definition of associated persons in relation to employment-related securities. This concept is important and potentially misleading. Other parts of the tax legislation use expressions such as the employee and any associates of the employee. Section 421C uses a different technique by lumping together the employee and the associates and describing them all as ‘associated persons’. So the definition covers both the person acquiring the shares and, if different, the employee. It also includes ‘any relevant linked person’ ie some one who is a connected person or member of the same household. This too is interesting; the more old-fashioned ‘connected person’ is defined in terms of legal relationships.30 The household refers to less formal relationships but is not further defined. |