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The fine line between employment-related securities and shares from employment

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The tax charge in respect of an acquisition of shares by an employee differs depending on whether the shares are an emolument of the employment (i.e. ‘from’ the employment and taxed under ITEPA 2003 s 62) or employment-related securities (i.e. ‘by reason of’ the employment and within ITEPA 2003 Part 7). Case law suggests that ‘from’ an employment (under s 62) requires a much closer connection to employment than ‘by reason of’ employment (for Part 7 purposes). Such closeness may be present less often than is commonly assumed to be the case. In particular where shares are acquired by a ‘rising star’ of a company run on ‘quasi-partnership’ lines there may well be on the facts a compelling argument that the shares are not ‘from’ the employment but are received ‘by reason of’ the employment and thus taxed only under Part 7. The broad effect of...

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