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

Securities subject to restriction on valuation date

Section 446M adjusts the tax charge on securities with artificially enhanced market value where those securities are still subject to restrictions on the valuation date, reducing the charge to reflect only the proportion of value not attributable to those restrictions.

• Where employment-related securities are still restricted securities on the valuation date, the amount calculated under the main charging provision must be reduced by a chargeable proportion factor (CP)
• CP equals 1 minus OP, where OP (the outstanding proportion) measures the extent to which restrictions still depress the securities' value — calculated as (unrestricted market value minus actual market value) divided by unrestricted market value
• Securities do not count as "relevant restricted securities" for this purpose if the holder has already elected under section 430 (to ignore outstanding restrictions) before the valuation date, or under section 431(1) (to treat the securities as entirely unrestricted from acquisition)
• Where a partial election has been made under section 431(2) to ignore only certain specified restrictions, the OP calculation is adjusted so that it only reflects the restrictions that were not covered by that election