BIM44375 - Specific deductions - employee share schemes: Providing shares under FA03/SCH23, a/c periods from 1 Jan 2003 - forfeitable shares - before 1/9/2003

For forfeitable shares acquired before 16 April 2003 the special rules in Part 4 of FA03/SCH23 (as originally enacted) provide that:

• No deduction is given for the period in which the employees acquire the shares (the “acquisition period”), even if an employment income tax charge arises in respect of the acquisition.
• A deduction is given for the “post-acquisition” period in which the risk of forfeiture expires or is lifted (or, if earlier, when the employee disposes of the shares or dies).

Amount of the deduction for post-acquisition period

The amount of the FA03/SCH23 deduction given for the relevant post-acquisition period is equal to:

• the market value of the shares at the date of the relevant ‘relief-triggering event’,

• • LESS
    

• any consideration given by the recipient for the shares, or for any option to acquire them, or for the removal of the risk of forfeiture.

Market value for this purpose means the price that the shares might reasonably be expected to fetch on a sale in the open market.

The consideration given by the employee does not include services provided by the employee in performing the duties of their employment with the employing company.

Examples

Examples illustrating post-acquisition deductions for forfeitable shares acquired before 16 April 2003 are at BIM44380.

Forfeitable shares acquired on or after 16 April 2003

The same rules apply if forfeitable shares are acquired on or after 16 April 2003 and the post-acquisition event occurs before 1 September 2003. You are unlikely to see such short forfeiture periods in practice.

Guidance on deductions from 1 September 2003 for forfeitable shares acquired on or after 16 April 2003 is at BIM44365.