Glossary

Section 431 Election (UK)

A tax election under Section 431 of the UK Income Tax (Earnings and Pensions) Act 2003. An employer and employee can jointly elect under section 431 to disapply the UK restricted securities tax rules in respect of specified shares. The effect of making a valid section 431 election is that (i) the employee suffers an income tax charge (and potentially National Insurance Contributions) on acquisition of the shares on the difference between the shares’ unrestricted market value (i.e., what they are worth on the open market ignoring any value-impacting restrictions) and the amount paid for them and (ii) any subsequent gain in value of the shares should be subject to capital gains tax rather than income tax.

In order for the section 431 election to be valid, both the employer and employee must sign the election no later than 14 days after the acquisition of the shares (or at any time prior to the acquisition).