Income Tax (Earnings and Pensions) Act 2003 section 463

Disposals of shares to connected persons etc. ignored

Section 463 ensures that when an employee disposes of shares to a connected person or in a non-arm's length transaction, that disposal is disregarded for tax purposes and the employee is treated as still holding a beneficial interest in the shares.

• If an employee (or a connected person holding shares on the employee's behalf) disposes of shares to a connected person, that disposal is ignored for the purposes of the restricted securities rules.
• Similarly, any disposal that is not made at arm's length is also disregarded.
• Despite the disposal, the employee is treated as retaining the beneficial interest in the shares, meaning any future tax charges or events under the restricted securities provisions still apply to the employee.
• This rule applies regardless of whether the shares were originally acquired directly by the employee or were issued to a connected person on the employee's behalf.