Income Tax (Earnings and Pensions) Act 2003 Schedule 4 paragraph 18

Shares must be fully paid up and not redeemable

Schedule 4 paragraph 18 sets out two fundamental conditions that shares must satisfy in order to qualify as eligible shares under a CSOP (Company Share Option Plan).

• Shares used in a CSOP must be fully paid up — no outstanding amounts can be owed on them
• The shares must not be redeemable, meaning the company cannot buy them back under a redemption mechanism
• Both conditions must be met for shares to qualify as eligible shares under the scheme
• These requirements ensure participants receive a genuine, permanent equity stake in the company