Section 120 | Increase in expenditure by reference to tax charged in relation to shares etc.

(1)Subsection (1A) applies where—^F1

(a)a person (“the employee”) has acquired shares or an interest in shares as mentioned in section 447(1) of ITEPA 2003, and^F1

(b)an amount counts as employment income of the employee under Chapter 4 of Part 7 of that Act in respect of the shares.^F1

(1A)On the first disposal of the shares after the acquisition occurs, the employment income amount shall be treated for the purposes of section 38(1)(a) as consideration given by the person making the disposal for the acquisition of the shares.^F1

(1B)For the purposes of subsections (1) and (1A)—^F1

(a)the “employment income amount” means the amount counting as employment income of the employee under that Chapter in respect of the shares, and^F1

(b)it is immaterial whether the disposal of the shares mentioned in subsection (1A) is made by the employee or another person.^F1

(2)Section 38(1)(a) applies as if the relevant amount as defined in the following provisions of this section in the cases there specified had formed part of the consideration given by the person making the disposal for his acquisition of the assets in question.

(3)Where an amount is treated as earnings under section 195(2) of ITEPA 2003 in respect of shares or an interest in shares, then—^F2F3

(a)on a disposal of the shares or interest, where that is the event giving rise to the charge; or

(b)in any case, on the first disposal of the shares or interest after the event,

the relevant amount is a sum equal to the amount so treated as earnings.

(4)If a gain counting as employment income under section 476 or 477 of ITEPA 2003 is realised by the exercise of a right to acquire shares, the relevant amount is a sum equal to the amount of the gain so counting as employment income.^F4F5

(5)Where an amount is chargeable to tax under section 138 of the Taxes Act on a person acquiring any shares or interest in shares, then on the first disposal (whether by him or another person) of the shares after his acquisition, the relevant amount is an amount equal to the amount so chargeable.

(5A)Where an amount counts as employment income under Chapter 2 of Part 7 of ITEPA 2003 in respect of—^F6F7F8

(a)the acquisition or disposal of any interest in shares, or^F6

(b)any interest in shares ceasing to be only conditional,^F6

the relevant amount is a sum equal to the amount so counting as employment income.

(5B)Where an amount counts as employment income under Chapter 3 of Part 7 of ITEPA 2003 in respect of the conversion of shares, the relevant amount is a sum equal to the amount so counting as employment income.^F6F9F10

(6)Repealed^F11

(7)Each of the provisions of this section mentioned in the first column of the following table is to be construed as if it were contained in the Chapter of ITEPA 2003 specified in the corresponding entry in the second column—^F12

and subsection (5) of this section is to be construed as one with section 138 of the Taxes Act.

(7A)In relation to events that gave rise to amounts chargeable to income tax before 6th April 2003, this section is to be read as if any reference to an amount mentioned in the first column of the following table included a reference to an amount mentioned in the corresponding entry in the second column—^F13

(8)For the purposes of subsection (5A) above this section shall have effect as if references in this section to shares included anything referred to as shares in Chapter 2 of Part 7 of ITEPA 2003.^F14F15

(9)References in this section to ITEPA 2003 are to that Act as originally enacted.^F16