In Cyclops Electronics and another v HMRC [2018] UKUT 7 (17 January 2018) the UT found that loan notes which contained a forfeiture provision were not restricted securities for the purposes of ITEPA 2003 Part 7.
The appellants had issued loan notes to employees and their terms provided that they would be forfeited in the event of the death of the employees within a year. The issue was whether because of the existence of the forfeiture provision the loan notes were ‘restricted securities’ so that by virtue of ITEPA 2003 s 425 no income tax or NICs were payable on their acquisition by the employees.
The FTT applying the Supreme Court’s decision in UBS [2016] UKSC 13 had found that the loan notes were not restricted securities on the basis that the forfeiture provisions had no business or commercial purpose. The appellants...
