Income Tax (Earnings and Pensions) Act 2003 section 428

Amount of charge

Section 428 sets out how to calculate the taxable amount when a chargeable event occurs in relation to restricted employment-related securities under section 426.

• The taxable amount is calculated using the formula: UMV × (IUP − PCP − OP) − CE, which broadly measures the value unlocked when restrictions on securities are lifted or varied, after deducting amounts already taxed or paid
• Several categories of "deductible amounts" reduce the charge, including consideration paid for the securities, amounts already taxed as earnings on acquisition, amounts charged to non-UK income tax, and amounts previously counted as employment income under other share-related charging provisions
• If the chargeable event is a disposal and the consideration received is less than the actual market value immediately after the event, the taxable amount is scaled down by the ratio of consideration to market value — but this reduction is denied where a tax or national insurance avoidance scheme is involved
• Where the securities are also convertible securities, market value for the purposes of this calculation must be determined as if the conversion feature did not exist

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