Income Tax (Earnings and Pensions) Act 2003 section 501

Charge on capital receipts in respect of plan shares

Section 501 imposes an income tax charge when a participant in a share incentive plan receives a capital receipt in respect of plan shares that have been held for less than a specified period.

• A capital receipt received by a participant in respect of their plan shares is taxable as employment income if the shares have not been held long enough to qualify for exemption.
• For free, matching or partnership shares, the holding period threshold is 5 years from the date of award; for dividend shares, it is 3 years from the date of acquisition.
• The amount or value of the capital receipt is taxed as employment income in the tax year in which the participant actually receives it.
• No tax charge arises if the capital receipt is received by the participant's personal representatives following the participant's death.