The Social Security (Contributions) Regulations 2001

Exercise of right to acquire shares gained as director or employee before 6th April 1999 U.K.

11.—(1) The amount of earnings comprised in any payment by way of gain which a person realises by the exercise of a right to acquire shares in a body corporate obtained by that person as a director or employee of that or any other body corporate, where—

(a) that right—

(i) formed all or part of the consideration given for the assignment or release of a right which was obtained before 6th April 1999 (“the first right”) to acquire shares in a body corporate (“the first body corporate”),

(ii) is a right to acquire shares in the first body corporate or any other body corporate; and

(iii) was not treated as consideration for the assignment or release of the first right by virtue of section 136(1) of the Taxes Act; and

(b) at the time of its acquisition, the total market value of the subsequent right was not similar to the total market value of the first right immediately before its assignment or release,

and which falls to be taken into account in computing a person’s earnings, shall be calculated or estimated in accordance with sub-paragraph (2).

(2) The basis of calculating or estimating the amount of a gain realised by the exercise at any time of a subsequent right shall be the best estimate that can reasonably be made of such part of that gain as relates to the difference between—

(a) the amount that a person might reasonably expect to obtain from a sale in the open market at the time that the shares were acquired pursuant to that subsequent right, less the amount or value of the consideration (if any) given for those shares and the grant of that right; and

(b) the amount that a person might reasonably expect to obtain from a sale in the open market of the shares which were the subject of the first right at the time of its assignment or release less the amount of value of the consideration (if any) given for those shares and the grant of that right.

(3) For the purpose of sub-paragraph (2) “gain” means the amount realised by the exercise of a subsequent right, less any amount which has previously been included in that person’s earnings for the purposes of assessing his earnings-related contributions in respect of his acquisition, assignment or release of the first right.

In making the estimate, a just apportionment shall be made of any entire consideration given for the grant of the right to acquire those shares and other shares or otherwise for the grant of the right to acquire those shares and for something else besides.