Jurisdiction(s):
United Kingdom

Related legal acts

Key definition

restricted shares definition

What does restricted shares mean? In practice, restricted shares are shares subject to limits on sale, transfer, or forfeiture (for example under vesting, leaver or lock‑up provisions) that depress or could depress their value. They are common in employee share schemes, founder arrangements and investment rounds. In the UK, when used in a tax context, the term aligns with the statutory concepts of restricted securities and a restricted interest in securities in Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (employment‑related securities). In this sense, restricted shares means shares that are (a) restricted securities, or (b) a restricted interest in securities. The restrictions...

UK EMI Share Valuations: AMV/UMV, Limits, Grant/Exercise/Rollover, HMRC SAV (VAL231) Process, Public/Private Methods, PISCES Guidance, and Appeals

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Practice notes

restricted shares and EMI valuations

For EMI purposes, restricted shares are those subject to any restrictions described in sections 423(2)–(4) of the Income Tax (earnings and Pensions) Act 2003 (ITEPA 2003). See Practice Note: What are restricted securities?

There are two forms of market value relevant to restricted shares for enterprise management incentives (EMI):

actual market value (AMV) — the value of a share after allowing for any restrictions, including the risk of forfeiture; and
unrestricted market value (UMV) — the value of a share on the basis that no restrictions apply.

For restricted shares, the value that ignores the restrictions will be the higher of the two.

For EMI, AMV is used to decide whether income tax, employees’ and employers’ National Insurance contributions (NICs), and potentially the apprenticeship levy, will arise when options are exercised. For more on the tax treatment of an EMI option, see Practice Note: Enterprise management incentives (EMI)—income tax and NIC treatment of options.

UMV is used to determine whether EMI options fall within the individual limit of £250,000 and the company limit of £6m and not for the purpose of establishing...

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Web page updated on 21/05/2026

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