Income Tax (Earnings and Pensions) Act 2003 section 429

Case outside charge under section 426

Section 429 sets out the circumstances in which the income tax charge on restricted securities under section 426 does not apply, essentially providing an exemption where the restriction and the chargeable event affect all shares of the same class equally and genuinely.

• The exemption applies only where the employment-related securities are shares (or an interest in shares) of a particular class, and the restriction that makes them restricted securities applies equally to all shares of that class in the company.
• All other shares of the same class (i.e. those that are not the employment-related securities) must be affected by an event similar to the chargeable event — for example, restrictions are lifted, varied in the same way, or the shares are disposed of.
• The exemption is blocked if anything has been done to the employment-related securities as part of a scheme or arrangement whose main purpose (or one of its main purposes) is the avoidance of tax or national insurance contributions.
• In addition, either the company must be employee-controlled by virtue of holdings of shares of that class immediately before the event, or the majority of the company's shares of that class must not be employment-related securities at that point.