Restricted Securities - Market Value Flashcards
(15 cards)
For what two purposes is determining the market value of securities essential in the operation of the restricted securities legislation?
1) Determining whether or not a security is restricted.
2) Calculating income tax charges arising under Chapter 2.
How is Market Value defined for the purposes of Chapter 2?
What is the legislative reference?
Market Value is defined as having the same meaning as in the CGT legislation.
section 421, ITEPA 2003 and Part VIII, Taxation of Capital Gains Act 1992) (CGT market value).
Does the CGT concept of Market Value make sense when applied throughout the Restricted Securities regime?
Provide some detail.
No.
The CGT market value (the meaning of which is supported by a wide body of case law) does not take into account any personal, or holder-specific restrictions applying to securities.
In order to ensure that Market Value in the Restricted Securities regime makes sense, what is it often necessary in practice to do?
It is often necessary to substitute a different market value that takes personal restrictions into account.
What is the problem with how CGT treated the concept of Market Value, when applied to Restricted Securities?
Because the CGT concept of Market Value does not take into account any personal, or holder-specific restrictions applying to securities, strictly speaking, very few restrictions would affect the CGT market value of shares.
Is Money’s Worth Value the same as CGT Market Value?
No.
What is Money’s Worth Value used for?
This value is used to calculate some income tax charges arising on acquisition of restricted securities.
What is Money’s Worth Value?
Money’s worth value reflects restrictions and personal entitlements, and is different from CGT market value.
Which case discusses some of the difficulties arising from the fact that Part 7 uses a single definition of market value( and from some of HMRC’s guidance)?
Grays Timber Products Ltd v HMRC (Scotland) [2010] UKSC 4.
For what two reasons does PLC note that the case of Grays Timber Products Ltd v HMRC (Scotland) [2010] UKSC 4 is relevant to Restricted Securities, and Market Value generally?
1) It highlights the problem caused by the single definition of “market value” in Part 7.
2) The case also suggests (albeit obiter) that each chapter of Part 7 must be interpreted on its own terms, and observes that for the purpose of Chapter 2, it might not be appropriate to dismiss personal restrictions as irrelevant to market value.
What does the Restricted Market Value mean?
This means the market value of a security taking into account any restrictions attaching to it (including personal and employee-specific restrictions). We also use this to describe the money’s worth value of securities, when illustrating how Chapter 2 charges work.
What does the Unestricted Market Value mean?
This means the market value of a security valued on the assumption that no restrictions apply to it (including any personal or employee-specific restrictions).
Will HMRC agree market values for restricted securities?
No.
What Market Value is required for a tax analysis of restricted securities?
Unrestricted Market Value.
How is it possible to determine the Unrestricted Market Value of an ERS?
If the company is quoted, then this is obviously not a problem. If the company is unquoted, then the UMV will need to be determined by a valuation process, unless there have been independent purchases of the same shares (not subject to restrictions) on “open market” terms around the same time as the acquisition of securities by employees.
