Restricted securities
Unrestricted market value: the section 431 election on growth shares
Updated
Growth shares usually carry restrictions, and a section 431 election decides whether those restrictions are ignored when the shares are valued for tax.
Describe my growth share plan Describe the company, the growth share class and when the shares go out, and we can pass it to a tax adviser or share valuer. The HMRC rules and deadlines are set out on these pages; which of them fit your plan is for the adviser or valuer to say.
The window
ITEPA 2003 says the election may not be made more than 14 days after the acquisition, and HMRC's manual ERSM30450 repeats the rule.
What the election does
For EMI options, HMRC's manual ETASSUM57150 says that with an election made within 14 days of exercise the restrictions are ignored at the date of exercise, so tax is payable as though the shares were not restricted.
Shares that may be forfeited
Where the shares can be forfeited within 5 years, HMRC's manual ERSM30300 describes relief from the initial charge on acquisition, with chargeable events when the restrictions are later lifted or varied, or the shares are sold.
Taxed as if unrestricted
HMRC's manual ERSM30450 says that on acquisition an election can be made to ignore all of the restrictions, to increase the amount charged to tax and NICs at that time and to remove any future Chapter 2 charge. So valuing growth shares as though unrestricted means any tax at acquisition is worked out on the higher, unrestricted value, and there is no Chapter 2 charge afterwards.