Employment-related securities

Produced by a Tolley Personal Tax expert

Personal Tax

Guidance

Introduction

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 security	Legislation	Detailed commentary
Restricted securities	ITEPA 2003, ss 422–432	ERSM30000; Simon’s Taxes E4.507B–E4.507FA
Convertible securities	ITEPA 2003, ss 435–444	ERSM40000; Simon’s Taxes E4.507G–E4.507L
Securities with artificially depressed market value	ITEPA 2003, ss 446A–446J	ERSM50000; Simon’s Taxes E4.507M–E4.507QA
Securities with artificially enhanced market value	ITEPA 2003, ss 446K–446P	ERSM60000; Simon’s Taxes E4.507R–E4.507TA
Securities

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