What does section 421A of the Income Tax (Earnings and Pensions) Act 2003 do?

Section 421A establishes the ground rules for determining consideration given for anything under the employment-related securities provisions in Chapters 2 to 5. It ensures that consideration is properly identified and calculated when employees acquire, dispose of, or are involved in events relating to employment-related securities under United Kingdom law.

How is mixed consideration apportioned under section 421A?

Where consideration is given partly for one thing and partly for another, section 421A requires the amount attributable to each to be determined on a just and reasonable basis. For example, a single lump sum covering both share acquisition and another benefit must be fairly divided between the two elements for tax purposes.

Can the performance of employment duties count as consideration under section 421A?

No. Section 421A explicitly provides that the performance of any duties of, or in connection with, an employment is not treated as consideration. This prevents employees from arguing that work performed constitutes part of the price paid for securities, which could otherwise reduce a taxable amount under the employment-related securities rules.

What is the double counting rule in section 421A?

Section 421A provides that no amount may be counted more than once in calculating total consideration. This anti-avoidance rule prevents manipulation or distortion of figures by including the same sum in more than one part of the calculation, ensuring accurate determination of consideration across the employment-related securities chapters.

Income Tax (Earnings and Pensions) Act 2003 section 421A

Meaning of "consideration"

Section 421A establishes the rules for determining the amount of consideration given for anything under the employment-related securities provisions in Chapters 2 to 5.

Where consideration relates to more than one thing, it must be split on a just and reasonable basis
The performance of employment duties does not count as consideration
No amount may be counted more than once when calculating consideration
These rules apply across all the main employment-related securities chapters

Access full legislation.And much more.

By becoming a member, your team gets full access to Tax World research tools and source-backed tax resources.

Become a member