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ARTICLE · 17 JANUARY 2005

Tax Update on Spin-out Activities

Pinsent Masons
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The saga relating to the application of the employment related securities legislation to university spin-out activities rambles on without satisfactory conclusion.

United KingdomTax
Suzannah Crookes
Suzannah Crookes

Originally published October 2004

The saga relating to the application of the employment related securities legislation to university spin-out activities rambles on without satisfactory conclusion.

The Inland Revenue together with UNICO published a Memorandum of Understanding in April 2004 setting out a ‘safe harbour’ for particular spin-out structures using convertible preference shares. For our Bulletin on this MOU, please see Inland Revenue's Views on Tax Treatment of Spinout Transactions.

In addition to the MOU mentioned above, we have now seen further draft guidance from the Inland Revenue describing the manner in which tax charges may arise in a number of different spin out structures. It should be stressed that this guidance is currently only a first draft and that comments have been invited from interested parties. However, as currently drafted, it seems a second ‘safe harbour’ can be drawn out of the guidance as follows:

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