Employment-related securities (ERS) acquired by employees due to their employment are taxable as earnings. This document covers this in detail, along with the acquisition charge; ERS rules; reporting requirements; exceptions for certain control situations; restricted and convertible securities; securities with artificially depressed or enhanced market value; securities acquired for less than or sold for more than market value; post-acquisition benefits; spin-out companies; and security options.


Shares or securities awarded to employees are potentially taxable as earnings but the employment-related securities (ERS) rules are an overlay that modify the position in cases where the tax result that would flow from the particular circumstance does not reflect the full economic value received, or where the Govern-ment has determined that it wants a lesser / different tax burden to apply.

Charge on acquisition

It has long been established by case law that where an employee acquires shares in his employer and pays less than their market value for them, the discount is taxable as earnings (as defined in ITEPA 2003, s 62). Weight v Salmon HL (1935) 19 TC 174; Ede v Wilson and Cornwall [1945] 1 All ER 367

The charge to tax on employment income in ITEPA 2003, s 6 relates to:

  • general  earnings
  • specific  employment income

In outline, 'general earnings' are earnings within s 62 and amounts 'treated as' earnings, which includes benefits in kind within the benefits code, while 'specific employment income' refers to amounts which 'count as' employment income under various heads - the one we are concerned with here being the ERS rules in ITEPA 2003, Part 7.

The ERS legislation does not, in general, apply to the acquisition of securities since their value (less any consideration given by the employee) is taxable as earnings on general grounds.

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