Basics 2

Question 1

What is a “restricted security”?

Answer 1

A restricted security is a security which is subject to a restriction that reduces its market value (see Market value in Chapter 2 for a discussion of the meaning of market value).

Question 2

To what category of restricted securities does Chapter 2 apply?

What is the legislation behind this?

Answer 2

It applies to Employment-Related Securities.

Section 422 of ITEPA 2003.

Question 3

Does Chapter 2 apply to securities securities acquired by someone other than an employee, by reason of that employee’s employment?

What is an example of legislation setting out the position on this?

Answer 3

Yes.

Section 421B(1), ITEPA 2003.

Question 4

Does Chapter 2 apply to an interest in securities as well as to securities themselves?

Where is this set out in the legislation?

Answer 4

Yes.

Section 422, ITEPA 2003.

Question 5

Does chapter 2 does not apply to securities or interests acquired before 16 April 2003?

Where is this set out in the legislation?

Answer 5

No.

Paragraph 3(2), Schedule 22, Finance Act 2003)

Question 6

What is the name for the old regime which applied before 16 April 2003?

Answer 6

The conditional shares regime.

Question 7

What are the conditions which apply before a security will be subject to Chapter 2?

Answer 7

1) The securities must be subject to one or more Relevant Securities.
2) The securities must not fall within one of the two exceptions.
3) The restrictions must reduce the market value of the securities.
4) Aside from the exceptions, the securities must not fall within the exclusion to the charge from income tax.

Note there are certain other circumstances when securities will cease to be subject to Chapter 2.