½Û×ÓÊÓƵ

The formula giving the amount to be taxed on a chargeable event is undeniably complex. However, the approach of using formulae is easier to follow than an attempt to prescribe the calculation in words. It is perfectly possible to follow the stages of the calculation by rote, without bothering with the underlying logic. The formula is¹:

The meanings of each part of the formula are explained below, although note that IUP and PCP have modified definitions in relation to new securities where there has been an exchange of restricted securities: these are explained in E4.507EA. The purpose of the calculation is to tax the increase in value on the proportion of the security remaining untaxed, rather than the full increase in value. So if 70% of the unrestricted value has been taxed under ITEPA 2003, ss 417–554 (Pt 7) on acquisition of the restricted security, only 30% of its later higher value will be taxed under that Part when the restriction is lifted. Any increase in value of the 70% will