Taxation of Chargeable Gains Act 1992 section 120

Increase in expenditure by reference to tax charged in relation to shares etc.

Section 120 allows the base cost of employee shares to be increased by amounts already taxed as employment income, so that the same economic gain is not taxed twice — once as income and again as a capital gain.

• Where an employee acquires shares and an amount is charged to income tax as employment income (for example, on post-acquisition benefits, exercise of share options, lifting of forfeiture restrictions, or conversion of share class), that income tax amount is added to the base cost of the shares for capital gains purposes.
• The uplift applies on the first disposal of the shares after the relevant income tax charge arises, and it does not matter whether the disposal is made by the employee or by another person who holds the shares at that time.
• This section works alongside section 119A of the same Act, which deals with similar uplifts for other employment-related securities charges; both sections may apply to the same shares if different income tax events have occurred, but neither section can duplicate relief for the same taxable event.
• For income tax charges that arose before 6 April 2003, the section applies by reference to the equivalent provisions of the earlier legislation (principally the Income and Corporation Taxes Act 1988 and the Finance Act 1988) rather than ITEPA 2003.