Income Tax (Earnings and Pensions) Act 2003 section 498

No charge on shares ceasing to be subject to plan in certain circumstances

Section 498 sets out the circumstances in which a participant in a Share Incentive Plan (SIP) will not face an income tax charge when shares leave the plan, either because the participant leaves relevant employment for specified reasons, or because shares are withdrawn as part of a corporate takeover or restructuring where the participant receives only cash in exchange.

• No income tax arises when shares leave the plan because the participant ceases relevant employment due to injury, disability, redundancy, a TUPE transfer, loss of associated company status, retirement, or death.
• No income tax arises when shares are withdrawn from the plan as part of a qualifying compromise, arrangement, scheme, general offer, or compulsory acquisition under the Companies Act 2006, provided the participant receives only cash in exchange for those shares.
• The cash-only exemption does not apply if the participant had the option to receive non-cash assets instead, or if it is reasonable to suppose the shares would not have been awarded but for the corporate transaction being made or contemplated.
• A qualifying corporate transaction must affect all ordinary share capital, all shares of the same class, or all shares held by a class of shareholders not identified by reference to employment or SIP participation; a general offer must be conditional on the offeror obtaining control of the company.