Income Tax (Earnings and Pensions) Act 2003 section 424

Exceptions

Section 424 sets out circumstances in which employment-related securities are not treated as restricted securities, thereby keeping them outside the special tax rules that apply to restricted shares.

• Unpaid or partly paid shares that can be forfeited solely for non-payment of calls are not restricted securities, provided the shareholder faces no restriction on meeting those calls.
• A requirement to offer shares for sale or transfer them if the employee is dismissed for misconduct does not, by itself, make the shares restricted securities.
• These two exceptions can apply individually or together — only one needs to be relevant for the shares to fall outside the restricted securities rules.
• All of these exceptions are lost if a main purpose of the arrangement under which the shares were made available is the avoidance of tax or national insurance contributions.