On 26 March 2025, HMRC published a technical note on the tax implications for companies and employees when a company has shares traded on the Private Intermittent Securities and Capital Exchange System (PISCES), a new type of secondary stock exchange that will facilitate intermittent trading of private company shares.
The technical note provides HMRC’s guidance on how PISCES trading events will interact with Enterprise Management Incentives Schemes and Company Share Option Plans and also sets out the tax implications for employees selling their shares on PISCES.
Readily convertible assets
Onan income taxable event in relation to employment related securities (ERS) i.e. shares and securities acquired by reason of employment, the employment income tax liability is paid under self-assessment, with no national insurancecontributions (NIC) liabilities, if the ERS concerned are not readilyconvertible assets (RCAs). On the other hand, if the ERS are RCAs, income tax is accountable and payable under PAYE and both employer’s and employee’s class 1 NICs arise.
ERS are regarded as RCAs if there are trading arrangements in existence or if such trading arrangements are likely to come into existence at the relevant time.
HMRC takes the view that so far as shares being traded on PISCES:
- If arrangements exist for the ERS to be traded on a PISCES platform at the time of an acquisition of ERS, they will be regarded as RCAs, even if a trading window is not open at the time of award.
- ERS acquired in anticipation of the company being admitted to PISCES (even if admission is not guaranteed) will also be viewed as RCAs, because of the understanding at the relevant time that trading arrangements are likely to come into existence afterwards.
- If there is a previous admittance on a PISCES platform but not so at the relevant time, shares should not be RCAs provided that no other trading arrangements exist and no trading arrangements are likely to come into existence, the shares would not be RCAs. If the company has taken steps to prepare for a subsequent PISCES trading event, then trading arrangements would be considered as likely to come into existence.
EMI and CSOP
EMI and CSOP are tax-advantaged employee scheme option schemes provided by legislation. Briefly, no income tax (or NICs) arises on the gain (or some of the gain where an EMI Option was granted at a discount) on the exercise of such options.
With reference to PISCES, HMRC is of the view that:
- As long as the option agreement clearly provides, at the time the option was granted that a PISCES trading window is a specified event for the exercise of the option, it is acceptable exercise trigger.
- Existing options cannot be amended to include a trading on PISCES to be an exercise window as it would be considered to be a fundamental change to the terms of the option which would result in the option being released and regranted.
- Similarly, with regard to existing options, the exercise of a discretionary power by the company to allow exercise of an option on a PISCES trading window will cause the tax advantages to be lost.
- However, the government will consider allowing existing EMI and CSOP options to beexercised on PISCES by legislation
Valuation
With respect to share valuations, HMRC is of the view that:
- Arm’s length price agreed between a buyer and seller will not be disturbed and that employees should be able to rely on the transaction price; however, HMRC may review transactions between connected parties to determine the market value.
- Past transactions may represent market value, depending on the circumstances and the time that has elapsed.
- Normal principles of share valuation will apply in the context of determining and agreeing the market value of a share with HMRC in connection with the grant of EMI and CSOP options; a discount may not be appropriate if small shareholdings are being transacted on PISCES; also, depending on the circumstances, using a different value to the transaction values on PISCES maybe more appropriate.
- No advance assurance mechanism to agree market values for PISCES events.
Stamp duty
PISCES transactions will be exempt from stamp duty and stamp duty reserve tax, as announced in the Spring budget.
