When is an ITEPA S431 needed?

There are a number of circumstances when a UK employee or director receiving shares should complete an ITEPA S431 election

To minimise the risk of any future income tax charges under the 'restricted securities legislation', there are times when a UK employee or director should enter into a section 431 election within 14 days of the acquisition of shares.

For the purpose of activities on the Vestd platform, the key times are listed below:

On acquisition of conditional growth shares or ordinary shares

When a company issues an employee conditional or ordinary shares, ERS rules state that the employee could be liable to pay income tax on the eventual sale of the shares. 

However, entering into an ITEPA S431 confirms the employee purchased the shares at their unrestricted market value (UMV) and is therefore protected against income tax charges upon sale. They will only be subject to Capital Gains Tax at their usual rate. 

On the exercise of EMI options 

When the shares cannot be immediately sold and the exercise price has been set below the Actual Market Value (AMV) agreed with HMRC at the date of grant of the options.

On the exercise of EMI options more than 90 days after the holder has become ineligible

When an employee leaves the company that granted the EMI options, they become ineligible for the EMI tax treatment after 90 days. At this point though, the option holder may choose to set the tax point at the UMV (as opposed to the AMV) of the shares at the time of exercise.

On the exercise of Unapproved options by a UK employee or director

When the holder has chosen for the tax at this point to be based on the UMV, rather than the AMV of the shares at the time.

You can download the ITEPA S431 form here

  • Certain web browsers (e.g. Chrome) don't open the HMRC form. You can either try a different browser or right-click the link, click ‘Copy Link Address’ and paste the address in a new tab. 

In most circumstances, all restrictions will be disapplied in Section 4 of the form 

Once the form is complete, both the employer and recipient should maintain a copy for their records. The employer doesn't need to submit the form to HMRC within the 14-day window, but they will need it when submitting an annual ERS notification.   

Our team, content and app can help you make informed decisions. However, any guidance and support should not be considered as 'legal, tax or financial advice.'