Introduction

Shares, or other forms of securities, awarded to employees may be taxed as:

1. 鈥�

   earnings, or

2. 鈥�

   under the special employment-related securities (ERS) rules, which seek to modify the tax position in cases where the tax result that would flow from the particular circumstance does not reflect the full economic value received, or where the Government has determined that it wants a different tax burden or timing to apply.

What are securities?

The definition of 鈥榮ecurity鈥� includes stocks and shares of any description but is very wide and also includes items which one would not normally describe as a security, such as insurance contracts and contracts for differences. The definition excludes certain items such as cheques and bank statements (which hardly any-one would think of as such) but, perhaps surprisingly, excludes security options (unless used as part of a tax avoidance arrangement).

However securities options are subject to their own specific rules. ITEPA 2003 ss471 鈥� 484 (Chapter 5)

The significance of 鈥榚mployment related securities鈥�

It has