Income Tax (Earnings and Pensions) Act 2003 section 431B

Securities acquired for purpose of avoidance

Section 431B deals with the automatic deemed election that applies when restricted employment-related securities are acquired as part of an arrangement whose main purpose, or one of whose main purposes, is the avoidance of tax or national insurance contributions.

• Where restricted securities are acquired through arrangements mainly aimed at avoiding tax or NICs, the employer and employee are automatically treated as having made a section 431 election
• This deemed election means any restrictions on the securities are disregarded, and the full unrestricted market value is subject to income tax at the date of acquisition
• The rule applies where the earnings from the employment are, or would be, general earnings chargeable under the rules for employees who are UK resident or who work in the UK
• Neither the employer nor the employee has any choice in the matter — the deemed election is imposed automatically when the avoidance conditions are met