Convertible securities

Produced by Tolley in association with

Employment Tax

Guidance

STOP PRESS: The remittance basis is to be abolished from 6 April 2025, although this only applies to foreign income and gains arising on or after that date. The remittance basis rules still apply to unremitted income and gains arising before that date but remitted later. The legislation is included in Finance Bill 2025. For more details, see the Abolition of the remittance basis from 2025/26 guidance note.

Overview

Shares or securities may have certain rights to convert into other types of shares or securities on specific events or may be subject to certain conditions. Where the securities are also employment related securities (ERS), they may be considered to be ‘convertible securities’ under ITEPA 2003, ss 435–444 (Pt 7, Ch 3). See the Employment related securities overview note for the definition of ERS.

On conversion, the value of the shares or securities may increase so that the holder makes a notional gain or can sell the new securities for a real gain.

Where the rules on convertible securities apply, income tax and

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Helen Wood

, Employment Tax

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