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United Kingdom

ITEPA 2003 Chapter 3C: Notional Loan Regime for Employment-Related Securities Acquired at a Discount, with Deferred Consideration or Nil/Partly Paid—Annual Interest, Discharge, Exemptions and Reporting

Published by a LexisNexis Share Incentives expert

Practice notes

This Practice Note deals with the specific rules applying to employment-related securities acquired for less than market value contained within Chapter 3C, Part 7 of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003)

For the definition of employment-related securities, see Practice Note: What is an employment-related security? Where the provisions apply, an employee or director who obtains shares or other securities:

is regarded as having an interest-free, notional loan (see: below), and
is charged to income tax each year on the benefit of that loan as though it were a real employment-related loan (see: below).

Further income tax (and potentially National Insurance contribution (NIC)) liabilities may arise when the notional loan is treated as discharged, for example on a disposal of the securities (see: below). In this Practice Note, these rules are called the ‘notional loan’ provisions.

Note that an employee or director who acquires shares or securities at a discount by reason of their employment will, in most cases, not be taxed under the notional loan provisions. Instead, they are typically within the general earnings charge, known as the Weight v Salmon charge...

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Dan Sharman

Shoosmiths

• Dan specialises in advising on all types of employee incentive arrangements, ranging from share options, share ownership (particularly growth shares), cash-based schemes and employee benefit trusts.• In addition to handling share options work, he also advises clients on all areas of employment tax, including employment related securities, internationally mobile employees and the tax efficient structuring of bonuses and termination payments.• Dan is dual qualified as both a solicitor and a chartered tax adviser....

Web page updated on 21/05/2026

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