The charge on benefits in connection with employment-related
securities is set out in Chapter 4 of Part 7 of ITEPA 2003 as
amended by FA03/SCH22, FA04/S86 and F(No2)A05/SCH2.
Chapter 4 replaced three provisions of FA 1988:
The original charge on special benefits was introduced in
Finance Act 72. It was enacted to deal with the variety of employee
share incentives that appeared after share options were legislated
for in FA66, and was superseded by FA88/S80.
The FA88 charge on restricted securities was moved by
FA03/SCH22 to Chapter 2 Part 7 ITEPA03, at the same time as the
FA88 charge on dependent subsidiaries was repealed. The FA88 charge
on special benefits is now a “charge on other chargeable
benefits from securities” in Chapter 4 Part 7 ITEPA 2003.
The principal changes to the charge on special benefits as from 16 April 2003 are set out in the table below:
| FA 1988 & ITEPA before 16 April 2003 | ITEPA from 16 April 2003 |
| Person receives a benefit by virtue of that person’s ownership of shares – see ERSM91010 | As from 16/4/03
associated person receives a benefit by virtue of ownership of
employment-related securities – see
ERSM90020
As from 2/12/04 associated person receives a benefit in connection with employment-related securities - see ERSM90030 |
| Person includes person connected to employee – see ERSM91000 | Associated person – see ERSM20250 |
| Shares included company securities per ICTA88/S254 (1) – see ERSM91000 | Wider definition of
securities – see
ERSM20110
|
| No PAYE or NIC | PAYE & NIC as from 1/9/03 if benefit in cash or readily convertible assets see ERSM170030 |
| Only if not subject to Income Tax elsewhere – see ERSM91010 | Only if not subject to Income Tax elsewhere, except for avoidance cases as from 2/12/04 – see ERSM90200 |
| Exemptions for certain control situations – see ERSM91020 | Exemptions for certain control situations, except for avoidance cases as from 7/5/04 and as extended from 2/12/04 – see ERSM90210 |
There is no grandfathering of securities acquired before 16 April 2003 – the day Schedule 22 came into effect; so the new legislation applies to any benefit received on or after 16 April 2003 irrespective of when the securities (from which the benefit was derived) were acquired.
