Section 437 | Adjustment of charge ^F1F2

(1)For the purposes of—^F1F2

(a)any liability to tax under Chapter 1 of Part 3 (earnings), Chapter 10 of Part 3 (taxable benefits: residual liability to charge) , section 226A (employee shareholder shares: amount treated as earnings) or Chapter 5 of this Part (acquisition of securities pursuant to securities option) or Chapter 2 of Part 7A (employment income provided through third parties), and^F1F2F3F4

(b)the operation of Chapter 3C of this Part (acquisition of securities for less than market value),^F1F2

(2)Subsection (1) does not apply if the main purpose (or one of the main purposes) of the arrangements under which the right or opportunity to acquire the employment-related securities is made available is the avoidance of tax or national insurance contributions unless the market value of the employment-related securities determined under subsection (1) would be greater than that determined under subsection (3).^F1F5

(3)Where subsection (1) does not apply by virtue of subsection (2) the market value of the employment-related securities is to be determined—^F1F5

(a)where the securities which are (or an interest in which is) the employment-related securities fall within paragraph (a) of section 436 and the entitlement to convert is not both immediate and unconditional, as if it were,^F1F5

(b)where they fall within paragraph (b) of that section, as if the circumstances are such that an entitlement to convert arises immediately, and^F1F5

(c)where they fall within paragraph (c) of that section, as if provision were made for their immediate conversion;^F1F5

and in each case is to be determined as if they were immediately and fully convertible.

(4)In subsection (3) “immediately and fully convertible” means convertible immediately after the acquisition of the employment-related securities so as to obtain the maximum gain that would be possible on a conversion at that time (assuming, where the securities into which the securities may be converted were not in existence at that time and it is appropriate to do so, that they were) without giving any consideration for the conversion or incurring any expenses in connection with it.^F1F5