Share Scheme Manual - SSM7.7

No formal scheme

(Previously SE2879)

Where directors or employees acquire shares or share options other than under a formal scheme, it is more likely that

· just a few directors or employees will be involved

• it will be less clear whether they acquired the shares or options because of their employment

• the price paid will not be the market value or at a discount which can be readily quantified.

So, whether the shares are listed or not, the valuation issues will be more difficult, and there may also be questions of capacity to resolve.

Accounts Inspector's responsibility

The Inspector who deals with the accounts of the company whose shares are involved is responsible for deciding whether amounts are chargeable to tax under Schedule E. Accounts Inspectors will need to obtain or refer to the documents which govern the acquisition of the shares.

Accounts Inspectors will need to ask Shares Valuation division, using form P388 or P389 for an informal valuation in such cases, or ask for the values provided by the company in its information return to be checked. A copy of the scheme documents should be sent with the request for valuation. If the shares are unlisted you should also send:

• a copy of the company's articles of association which were in force at the time the shares were acquired, and

• a copy of any shareholders' agreement or other document which might create special conditions relating to the shares acquired.