ERSM30460 - Restricted Securities

Schedule 22, FA 2003: elections to exclude outstanding restrictions: further issues

Period for making election

Although an election must be made not more than 14 days after the acquisition or chargeable event (to fit in with operation of PAYE 14 days after 5th of each month) it may be made any time before. Employers may be drawing up restricted securities arrangements many months before they are issued, so there is generally plenty of time to make an election.

An election may be made in respect of multiple acquisitions. However, prior to the date of any subsequent acquisition of a security it may be revoked by agreement between the employee and employer in respect of that and any later acquisition.

When does 14-day period run out?

The statutory wording imposes a cut off point after the acquisition or chargeable event of 14 days. So if acquisition is on Day 1 then an election must be signed before midnight at the end of Day 15.

No extension of time limit

There is no extension of the time limit, although the varying of a restriction can create an opportunity to make an election under ITEPA03/S430 – in which case all restrictions are deemed to have been lifted.

Power of attorney

An employee may authorise someone else to sign the election on his behalf, by power of attorney – but may consider it advisable to obtain legal advice beforehand.

Protective elections

An employee may be paying what he believes to be the unrestricted market value for his securities, which are subject to restrictions. However, that value will not yet have been agreed by HMRC and the employee and employer may make a “protective” joint election.

In those circumstances the Inspector will not regard this as evidence that there is actually a difference in value and the taxpayer’s position will not be prejudiced.