Income Tax (Earnings and Pensions) Act 2003 section 544

Exemption: different offers made to public and employees

Section 544 provides an income tax exemption for directors and employees who receive priority share allocations under an employee offer that runs alongside a genuine public offer of shares in multiple companies, provided certain conditions on allocation limits, similar terms and eligible participants are met.

• Where shares in two or more companies are genuinely offered to the public, and a separate employee offer covers shares in some (but not all) of those companies, directors or employees with priority allocation rights may be exempt from income tax on the benefit of that priority entitlement.
• The total number of priority shares for each company in the employee offer must not exceed specified limits — generally 10% of the combined public and employee offer shares, or up to 40% where the offers form part of wider arrangements that include other public offers of the same class of shares (subject to an overall 10% cap across all such offers).
• All persons entitled to priority share allocations must receive them on similar terms, and eligibility must not be restricted mainly to directors or to those earning above a particular salary level.
• The exemption does not cover any discount element on the shares — that aspect is dealt with separately under section 545.