Basic rule

A charge to income tax on earnings does not arise on acquisition of a forfeitable security where that forfeiture restriction will cease within 5 years after the date of acquisition – ITEPA03/S425 (2). This is the case whether or not other restrictions continue to apply after this five year period.

5 years

HMRC regards the 5-year period as commencing at midnight at the end of the day of acquisition and expiring at midnight on the fifth anniversary of the day of acquisition.

So, if acquisition were on 1 June 2004, the 5-year period would run from midnight on 1 June 2004 to midnight on 1 June 2009.

Exceptions to the rule

A charge to income tax may still arise if the securities are

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