Section 431 elections

At its core the employment-related securities (ERS) regime is a set of anti-avoidance provisions designed to ensure that employees (past present or future) are subject to income tax on the issue of securities or changes in value.

The legislation can be found in ITEPA 2003 Part 7.

Section 431(1) elections are a staple of the ERS regime and every due diligence questionnaire I have ever encountered seeks confirmation of whether these elections have been entered into at various events during a company’s lifecycle. Despite this there seems to be a lack of understanding of what they are when they are required and their impact.

It is true that a s 431(1) election can be invaluable in minimising a shareholder’s tax exposure. However a s 431(1) election is not always necessary or even possible in the case of some share transactions. Therefore ...