Freddie Schwier quoted in Tax Journal discussing employment-related securities
Davis Polk associate Freddie Schwier was quoted in Tax Journal on the UK Supreme Court’s recent decision in HMRC v Vermilion Holdings Ltd, which clarifies whether an award of shares or share options to an employee should be treated as an employment-related securities option for tax purposes. The ruling confirms that share options granted to a director by Vermilion were not employment-related securities because they were not issued by reason of his employment.
“On the face of it, Vermilion is concerned with a simple point of statutory construction. The underlying fact pattern is not particularly complex and the words of the statute are, at first glance, clear. And yet it required a decision of the Supreme Court to rule on the application of section 471 to [a director’s] acquisition of a securities option,” Freddie explained.
He added that the judgment sets out a clear methodology for how to apply the deeming provision, which provides that a right or opportunity to acquire a securities option made available by a person’s employer are to be regarded as available by reason of the employment of that person. “Parliament’s intention behind inserting the deeming provision was to make it clear that if an employer makes available an opportunity to acquire securities or a securities option, those securities or option should be employment-related (thus side-stepping the thorny issue of what was the cause of the opportunity being made available),” Freddie explained.
“HMRC v Vermilion Holdings Ltd,” Tax Journal (October 31, 2023) (subscription required)