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Priority allocation

A charge to tax on earnings would normally arise in respect of the benefit of priority in the allocation of shares in a public offer, to which a director or employee is entitled by virtue of his office or employment, even where the subscription price is the same as for members of the public¹. The value of this benefit may be difficult to quantify, but would normally be the amount of the premium at which the shares are first traded, multiplied by the number of the shares, or additional shares, allocated to the individual because he was an employee or a director.

In practice, where the employee did not obtain the shares at a discounted price by reason of his employment, HMRC have not generally treated the benefit of priority allocation as being assessable to income tax as earnings². This exemption was put on a statutory basis for offers of shares made after 22 September 1987 where the following conditions are satisfied:

1. Ìý

   (a)