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

Charge on non-commercial increases

Section 446L imposes an annual income tax charge where employment-related securities have been artificially inflated in value by at least 10% through non-commercial means.

• Where the actual market value of employment-related securities exceeds by at least 10% what the value would have been without non-commercial increases, a tax charge arises
• The taxable amount is the difference between the actual market value (IMV) and the value stripped of artificial increases (MV), and is treated as employment income for the tax year containing the valuation date
• When calculating both IMV and MV, any restrictions attached to the securities on the valuation date and any non-commercial reductions in value during the relevant period must be ignored
• The charge is subject to further modifications where the securities are subject to restrictions, as set out in sections 446M and 446N