CheckLists.Tax (beta)
D3. Enhancement and variation of assets/rights
EMPLOYMENT INCOME
- Employer enhancing the value of employee's asset
-
PAYE
- If the enhancement is achieved by satisfying a legal entitlement to money, the ordinary PAYE rules will apply.
- If not, PAYE applies if the enhancement is of a readily convertible asset (ITEPA s.697; EIM11860).
Legislation:
Cases:
HMRC manuals: EIM11860 - PAYE: special type of income: a payment that enhances the value of an existing asset;
Commentary:
See also:
Options
- Varying EMI option
- Minor alterations that do not affect terms of option + do not increase value of shares that may be acquired are "generally acceptable" without affecting date of grant of option (ETASSUM54060).
- Disqualifying event if changes vary terms of option and increase value of shares that may be acquired or result in conditions no longer being met (s.536).
- A more than de minimis change to the fundamental terms of the option to improve rights is regarded as the grant of a new option (ETASSUM54060).
- De minimis alteration is one which makes only a very minor improvement. E.g. allowing exercise immediately prior to exit event or allowing cashless exercise (ETASSUM54060).
Legislation: ITEPA 2003, s.536;
Cases:
HMRC manuals:
Commentary:
See also:
Capital sum received for modification/variation
CHARGEABLE GAINS
- Capital sum as a deemed disposal
General position
- TCGA s.22 treats capital sums derived from assets as giving rise to a deemed disposal.
- "A capital sum received by a person because the terms of a contract to which he was a party have been modified, varied, waived, assigned, terminated, rescinded, relinquished or surrendered will normally fall to be treated as having been derived from the recipient’s contractual rights." (CG13000).
- If the modification/variation was done without T's consent and T takes legal action, the compensation may derive from the right of action.
Capital sum
- Means any money or money's worth not excluded from the consideration taken into account in computing gains (s.22(3)).
Quantum of consideration
- Logically the market value of the capital sum received.
Legislation: TCGA 1992, s.22.
Cases:
HMRC manuals: CG13000 - Capital sums derived from assets: s22(1) TCGA92: contractual rights;
Commentary:
See also:
XX
- Depreciatory transactions
- Depreciatory transaction followed by gift/sale, not within exclusion for arm's length transactions.
- "If an individual took steps which devalued his property on Monday with a view to making a gift thereof on Tuesday he would fail to satisfy the requirements of section 20(4) because the act of devaluation and the gift would be considered together." (Macpherson, at 174).
Legislation:
Cases:
IRC v. Macpherson [1989] AC 159 (HoL);
HMRC manuals:
Commentary:
See also: