Part 7Employment income: share-related income and exemptions
Chapter 4Post-acquisition benefits from shares
Tax charge on other benefits from shares
457Charge on other chargeable benefits from shares
1
This section applies if a person within subsection (2) receives a chargeable benefit by virtue of that person’s ownership of or interest in the shares.
2
The persons within this subsection are—
a
the employee;
b
the person referred to as “A” in section 447(5) (shares acquired by connected person), in a case where that provision applies in relation to the shares;
c
any other person, in a case where the employee is for the time being treated as continuing to have a beneficial interest in the shares by virtue of section 463 (disposals of shares to connected persons etc. ignored).
3
The taxable amount determined under section 459 counts as employment income of the employee for the relevant tax year.
4
The “relevant tax year” is the tax year in which the benefit is received.
5
Section 458 explains what are chargeable benefits for the purposes of this section.
6
This section—
a
does not apply if the benefit is otherwise chargeable to income tax, and
b
is subject to section 460 (cases outside charge under this section).
458Chargeable benefits
1
This section applies for the purposes of section 457 (charge on other chargeable benefits from shares).
2
A benefit received by a person is a “chargeable benefit” if subsection (3), (4) or (5) applies to the benefit.
3
This subsection applies to a benefit if, at the time when it becomes available, it is available to less than 90% of the persons who then hold shares of the same class as the shares.
4
This subsection applies to a benefit if, at the time when it is received—
a
the company is a dependent subsidiary, and
b
its shares are of a single class.
5
This subsection applies to a benefit if, at the time when it is received, none of the conditions in subsection (6) is met.
6
The conditions are—
a
that the majority of the company’s shares in respect of which the benefit is received are held by outside shareholders;
b
that the company is employee-controlled by virtue of holdings of shares of the same class as the shares;
c
that, in a case where the company is a 51% subsidiary which is not a dependent subsidiary, the majority of its shares in respect of which the benefit is received are held otherwise than by or for the benefit of—
i
directors or employees of the company,
ii
a company which is an associated company of the company but is not its parent company, or
iii
directors or employees of a company which is an associated company of the company.
7
For the purposes of this section—
a
“the company”, in relation to the shares (see section 457(1)), means the company whose shares they are; and
b
a company (“P”) is the “parent company” of another company (“S”) if S is a 51% subsidiary of P.
459Amount of charge
The taxable amount for the purposes of section 457 (charge on other chargeable benefits) is the amount which the person receiving the benefit might reasonably expect to obtain from a sale in the open market.
460Cases outside charge under section 457
Section 457 (charge on other chargeable benefits) does not apply in relation to shares in a company if the employee has not, at any time in the period of 7 years ending with the date on which the benefit is received, been a director or employee of—
a
the employer company,
b
if different, the company whose shares they are, or
c
an associated company of a company within paragraph (a) or (b).