Restricted Securities Regime Elections

With private equity transactions appearing to be on the increase, perhaps now is a good time to revisit what employers and employees need to consider when deciding whether or not to make a restricted securities regime election.

The underlying principle of the restricted securities regime is that if an employee acquires restricted securities (e.g. shares which are subject to transfer restrictions), income tax on the proportion of the unrestricted market value ("UMV") (i.e. the market value of the restricted securities ignoring the effects of the restrictions) which represents the difference between the actual market value of the securities, taking account of the restrictions ("AMV") and the UMV of the securities, is deferred. When a restriction is lifted or the securities are sold (a chargeable event), the proportion of the unrestricted market value which is released is then charged to income tax.