Jurisdiction(s):
United Kingdom

HMRC v Vermilion: UKSC confirms ITEPA s 471(3) bright-line—employer-granted options during employment are employment-related securities taxed as income, not capital gains

Published on: 01 November 2023

Published by a LexisNexis Share Incentives expert

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What are the practical implications of this case?
What was the background?
What did the court decide?
Case details

Article summary

What are the practical implications of this case?

In Commissioners for His Majesty’s Revenue and Customs v Vermilion Holdings Ltd [2023] UKSC 37, the ruling carries notable, practical consequences for employers aiming to grant shares or share options to company officers or employees. Unless an officer or employee can rely on one of the exceptions in ITEPA 2003, s 471(3), any option issued while they hold office or employment will be classified as an employment-related security and, accordingly, taxed as employment-related income. The purpose behind offering the security option to the relevant officer or employee is immaterial. There is, however, an open question as to whether ITEPA 2003, s 471(3) will remain the central provision where options are granted to former employees or individuals yet to begin employment with the company. It appears, on balance, more likely that in those situations, ITEPA...

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