Restricted securities

Produced by Tolley in association with

Employment Tax

Guidance

Overview

Restricted securities are shares (or other securities, for example loan notes) that are subject to certain restrictions, such as a risk of forfeiture if performance conditions are not met. These restrictions reduce the market value of the securities. If and when those restrictions are removed, the value of the securities goes up and the holder makes a notional gain if they continue to hold the securities, or an actual gain if the securities are sold.

The rules on restricted securities apply to employment-related securities, where:

•
those securities are subject to restrictions
•
those restrictions are lifted or varied, or the securities are sold

What is a ‘restriction’?

Securities are within the definition of restricted securities if they have restrictions which depress the market value of those securities, and which fall within one of three broad categories:

•
forfeiture ― the securities must be transferred or there will be an action taken which forfeits the employee’s rights over the securities in such a way that they will receive less than market

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Helen Wood

Founder, HLN WD TX , Employment Tax

Helen Wood is the founder of HLN WD TX, a share schemes and employee incentives advisory business.She qualified as a CA with ICAS in 2009 and has worked as a specialist reward and incentives advisor for 17 years, spending 13 of those at KPMG followed by 3 ½ years as an Associate Director at RSM. Helen has worked with businesses ranging from start-ups to fully listed companies, spanning owner-managed businesses, private equity portfolio companies, and AIM listed businesses.She advises on a wide range of employee share schemes and employment related securities matters including the design and implementation of effective management and employee incentives; tax valuation of employment related securities, buy and sell side transaction support, HMRC compliance, tax due diligence and employee ownership trust transactions.

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