Meg Saksida outlines the restricted securities rules and explains how they are taxed.
There are several ways an employer can incentivise an employee to work more enthusiastically for the business; but issuing employment-related securities is one of the best. This is because the employee feels as if they have a personal stake in how the company is progressing.
Usually, the business will allow the employee a discount on the market value (MV) of the share when they offer the shares for purchase. The value of the share at the point of issue will be compared to the price the employee pays per share. If the employee contribution is not the full MV, the difference will be liable to income tax (under ITEPA 2003, s 62) as employment income. Class 1 National Insurance contributions (NICs) will also be due if the share is a readily convertible asset (RCA), i.e., if there is a market (even a private one) on which the shares can be sold. There
