Income Tax (Earnings and Pensions) Act 2003 section 455

Disapplication of Chapter 3B

Section 455 ensures that the rules on securities with artificially enhanced market value (Chapter 3B) do not apply to intellectual property agreements and transfers made under the research institution spin-out company provisions.

• Chapter 3B normally targets securities whose market value has been artificially inflated, potentially creating additional tax charges on employees
• Section 455 provides a specific exemption so that intellectual property agreements connected with spin-out companies are not caught by these anti-avoidance rules
• Neither the intellectual property agreement itself nor any transfer of intellectual property carried out under that agreement is to be treated as something done otherwise than for genuine commercial purposes
• This means the Chapter 3B charge cannot be triggered by these transactions, as they are deemed to have a genuine commercial purpose