Income Tax (Earnings and Pensions) Act 2003 section 443

Case outside charge under section 438

Section 443 provides an exemption from the income tax charge on convertible securities under section 438, where a chargeable event affects an entire class of shares and certain conditions are met, ensuring the exemption does not apply to tax avoidance arrangements.

• The exemption applies where employment-related shares belong to a class that are all convertible securities, and all shares of that class (not just the employee's) are affected by the same type of event, such as conversion, disposal, release of conversion rights, or receipt of a benefit
• In addition, either the company must be employee-controlled by virtue of holdings of that class of shares, or the majority of shares of that class must not be employment-related securities, immediately before the event occurs
• 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
• All conditions must be satisfied simultaneously — if any one fails, the normal section 438 charge on the chargeable event will apply

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