ITEPA03/S446T determines the amount of the notional loan initially outstanding. This is defined in subsection (1) as:
MV - DA
MV is the market value (as if the securities were fully paid up and disregarding any outstanding debt due) of the employment-related securities at the time of acquisition (or deemed acquisition, per ITEPA03/S446Q (4)), and
DA is the total of deductible amounts.
Market value follows the TCGA92/S272 definition (see ERSM20400).
Deductible amounts comprise, per subsection (3) of ITEPA03/S446T:
Any amounts charged to Income Tax on grant of an option will be
treated as a deductible amount within (b) above.
Where the acquisition of the securities causes a reduction in the market value of other securities held by the employee, by, for example, dilution of the value of the original shares by the issue of new shares, the amount of the reduction may be treated as a payment within (a) above.
See Example 3 in ERSM70120 for effect of election under ITEPA03/S431.
Subsequently, the amount of the notional loan outstanding at any
given time will be the amount initially outstanding, as computed
above, less the amount of any payments or further payments made for
the securities after the acquisition but before that given time.
See Example 2 at ERSM70120.