Income Tax (Earnings and Pensions) Act 2003 section 453

Taxable amount under Chapter 4

Section 453 provides relief from the post-acquisition benefit charge under Chapter 4 where shares in a research institution spin-out company were acquired before the intellectual property transfer agreement was made.

• Where shares or an interest in shares are acquired before the intellectual property agreement is made (or before any transfer of intellectual property under it), any benefit the employee receives from that agreement or transfer is treated as giving rise to a nil taxable amount under the post-acquisition benefits charge in section 448.
• This effectively means that employees who already hold shares when the intellectual property is transferred into the spin-out company will not face an income tax charge on benefits flowing from that transfer.
• However, the relief does not apply if something has been done to the shares (at or before the time the agreement is made or the intellectual property is transferred) as part of a scheme or arrangement whose main purpose, or one of whose main purposes, is the avoidance of tax or national insurance contributions.
• The anti-avoidance rule looks at actions taken at or before the point when the intellectual property agreement is entered into or the intellectual property is actually transferred — if any such action affecting the shares forms part of a tax avoidance arrangement, the nil treatment is denied.