| Financial Benefits to Encourage Employee Participation |
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16A.5 Special Tax Rules for Securities Options, Part 7 Chapter 5, Sections 471–484 |
16A.5.1 Introduction |
FA 2003 has rewritten the original ITEPA with sections 471–484 replacing sections 471–487. Securities option schemes cause problems in any tax system. Most tax systems agree that the grant of an option to buy, for example, shares at a figure below the market value is a taxable emolument, and that the gain accruing between the time of acquisition of the shares, ie the exercise of the option, and the date of disposal should be charged as a capital gain. Problems arise over how to tax the change in value between the date of the grant of the option and the date of its exercise. |
The rules in ITEPA part 7 chapter 5 apply where the option has been acquired by reason of employment of that person—or any other person78 an option within chapter 5 is called an employment-related securities option. The chapter has its own definition of associated persons.79 |
16A.5.2 Acquisition of Option and Later Chargeable Events |
ITEPA section 473 emphasises that section 475 excludes any liability under section 62 or under part 3 chapter 10 where an employment-related securities option is acquired. A slight but necessary qualification is made for the situation in which an approved share option is acquired at a discount.80 However it then provides81 that a charge can arise under section 446B where the market value has been artificially depressed, chapter 3C where the securities are acquired for less than market value or section 476 where the securities are acquired as the result of the exercise of an option already within chapter 5. Liability under section 476 can also arise on the assignment or release of the option and so that liability has to be preserved.82 Any |