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This note considers the taxation of partly paid shares and the tax treatment of shares acquired on deferred terms. Although they have a very similar tax treatment they have different legal effects and commercial implications. In essence both types of arrangement involve acquiring shares and paying for them at a later date.

Nil paid or partly paid shares ― these are shares that are issued as new shares by the company to the employee on terms that state the shares must be paid up at a later date. The shares must be paid up if the company makes a call for the outstanding subscription price.

Shares acquired on deferred payment terms ― these are existing shares that are transferred to the employee by a third party but where the purchase price is left outstanding as a debt owing to the vendor. However, the shares have already been paid up and so are not subject to a