Introduction
Employment-related securities (ERS) broadly means that the shares or securities in question are acquired in connection with an employment. The term ‘securities’ is widely defined in ITEPA 2003, s 420. ‘Securities’ includes shares, debentures, loan stock and financial instruments such as options, futures, contracts for differences and rights under contracts of insurance.
The ERS legislation is complex and it is not possible to cover all the areas comprehensively in this guidance note. This is an overview of the ERS legislation, focused on common scenarios, including potential pitfalls associated with ERS in a management buy-out (MBO). Links are included to Simon’s Taxes for further commentary, where appropriate.
The rules that govern the tax treatment of ERS are listed below:
| Type of security | Legislation | Detailed commentary |
| Restricted securities | ITEPA 2003, ss 422–432 | ERSM30000; Simon’s Taxes E4.507B–E4.507FA |
| Convertible securities | ITEPA 2003, ss 435–444 | ERSM40000; Simon’s Taxes E4.507G–E4.507L |
| Securities with artificially depressed market value | ITEPA 2003, ss 446A–446J | ERSM50000; Simon’s Taxes E4.507M–E4.507QA |
| Securities with artificially enhanced market value | ITEPA 2003, ss 446K–446P | ERSM60000; Simon’s Taxes E4.507R–E4.507TA |
| Securities |
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