ERSM30460 - Restricted securities: elections to exclude outstanding restrictions: further issues

Period for making election

Although an election must be made not more than 14 days after the acquisition or chargeable event it may be made any time before. Employers may be drawing up restricted securities arrangements many months before they are issued, so there is generally plenty of time to make an election.

An election may be made in respect of multiple and future acquisitions. However, prior to the date of any subsequent acquisition of a security the election may be revoked by agreement between the employee and employer in respect of that and any later acquisition.

When does 14-day period run out?

The statutory wording imposes a cut off point after the acquisition or chargeable event of 14 days. So if acquisition is on Day 1 then an election must be signed before midnight at the end of Day 15.

No extension of time limit

There is no extension of the time limit, although the varying of a restriction can create an opportunity to make an election under ITEPA03/S430 - in which case all restrictions are deemed to have been lifted.

Power of attorney

An employee may authorise someone else to sign the election on his behalf, by power of attorney - but may consider it advisable to obtain legal advice beforehand.

Protective elections

An employee may be paying what he believes to be the unrestricted market value for his securities, which are subject to restrictions. However, that value will not yet have been agreed by HMRC and the employee and employer may make a ‘protective’ joint election.

In those circumstances the Inspector will not regard this as evidence that there is actually a difference in value and the taxpayer’s position will not be prejudiced.

Electronic signatures

Elections that conform to the requirements set out in ERSM30450 but where the ‘signatures’ of the employee and/or the employer are made electronically (by, for example, on-line confirmation or email voting buttons) will be acceptable to HMRC, provided that they can be verified and stored satisfactorily.

Other Formats

HMRC does not require the approved election forms to be used or agreed as part of a single or dual-part document so long as it can be shown that the relevant employee and employer have agreed whether by email, in a share subscription agreement or otherwise the key terms of an election in no less detail than the written form of election supplied by HMRC.

Employers should satisfy themselves that any arrangements meet the relevant requirements. HMRC will not preapprove or comment on documentation. However, HMRC is entitled to see evidence of an agreement having been made; companies should therefore store data in a form which can be verified.