Income Tax (Earnings and Pensions) Act 2003 section 502

Meaning of "capital receipt" in section 501

Section 502 defines what counts as a "capital receipt" for the purposes of the income tax charge on Share Incentive Plan shares under section 501, and sets out the exceptions where money or value received is not treated as a capital receipt.

• The general rule is very broad: any money or money's worth received in respect of SIP plan shares is a capital receipt and potentially subject to income tax under section 501
• Amounts that already count as income for income tax purposes (or would do so but for the SIP tax exemptions or the exemption for dividend reinvestment) are excluded from the definition of capital receipt
• Proceeds from selling the plan shares themselves and new shares received as part of a company reconstruction are also excluded
• Where a participant directs the SIP trustees to sell some rights issue entitlements and use the proceeds to take up other rights under the same issue, the disposal proceeds are not treated as a capital receipt