Share Scheme Manual - SSM7.2

Summary

(Previously SE2876)

The question of shares valuation can be crucial in establishing whether Schedule E liability arises on an employee acquisition of shares. Although valuation for the purpose of a charge to tax under Schedule E is not an exact science, under SA the onus is clearly on the individual to determine whether or not the acquisition of shares leads to any tax liability. In practice of course employees who acquire shares in connection with their employment will usually have a clear idea of whether they have paid full price for the shares or not, even if they cannot put a figure on the exact value.

Since the introduction of SA various procedures have been put in place to help the individual to make a return in such circumstances, none of which replace the individual's right to obtain valuation advice independently, nor his or her obligation to make a full return.

In this chapter you will find details of the action to be taken by the accounts inspector, other network offices and by the Employee Share Schemes Unit.

The procedures differ depending on whether the shares or share options were acquired under

• a formal employee share scheme,(SSM7.3 - SSM7.6) or

• other informal schemes or arrangements (SSM7.7).

In general you will find that acquisitions of shares or share options by large groups of employees are easier to deal with than those where just a few individuals acquire shares.

The legislation provides three different bases of share valuation for Schedule E purposes.

In practice there is very rarely any difference in the valuation between these different bases, and the advice of Shares Valuation Division will be needed if the basis of valuation appears to be material.