Taxes Consolidation Act 1997 section 122A

Notional loans relating to shares etc

Section 122A deals with the tax treatment of shares acquired at undervalue by employees and directors by reason of their employment, and with shares disposed of at above market value.

• Where an employee acquires shares at less than market value by reason of their employment, the unpaid balance is treated as an interest-free "notional loan" and taxed as a benefit-in-kind under section 122.
• The notional loan terminates when the outstanding balance is fully paid, the employee is released from the obligation to pay, the employee disposes of the shares, or the employee dies.
• If the notional loan terminates because the employee is released from paying or disposes of the shares, the outstanding balance is treated as a taxable emolument.
• Where shares are disposed of for more than their market value, the excess of the sale price over market value is also treated as a taxable emolument of the employment.