Income Tax (Earnings and Pensions) Act 2003 section 446E

Charge on restricted securities

Section 446E imposes an income tax charge where the market value of employment-related restricted securities has been artificially depressed by non-commercial actions, and modifies how the amount of that charge is calculated.

• The section is triggered when the market value of restricted securities has been reduced by at least 10% through actions not carried out for genuine commercial purposes within a seven-year look-back period
• The charge can arise at three possible points: immediately after a chargeable event under the restricted securities rules, immediately before a disposal or cancellation that is not itself a chargeable event, or on 5 April in any tax year
• Where the trigger is a disposal, cancellation, or a 5 April date rather than a genuine chargeable event, the legislation deems a chargeable event (a lifting of restrictions) to have occurred, creating the charge
• The taxable amount is calculated using the market value the securities would have had if you strip out all restrictions, the value-depressing actions, and any imminent disposal or cancellation — ensuring the charge is based on a true, undistorted value