HMRC publishes new guidance regarding PISCES

HMRC have published guidance on the tax implications in relation to employees trading their shares on PISCES, a new type of stock market set to be introduced in 2025. The guidance is available here.

What do I need to know? 

This guidance could change the way your business approaches granting EMI and CSOP share options and issuing or transferring shares to employees. 

It may also affect existing share options and shares held by employees.

What is PISCES?

The Private Intermittent Securities and Capital Exchange System (PISCES) is a new market being developed by the London Stock Exchange to facilitate trading in private company shares. 

PISCES is intended to operate as a secondary market to allow private companies access to periodic liquidity – ie to be able to trade their shares on a regulated market without the need for listing. It aims to improve liquidity for early stage investors and others who hold shares in private companies (including employees).

A period of consultation has closed and the Treasury now intends to proceed with establishing the legal framework for PISCES to be established.

How does HMRC’s guidance affect EMI and CSOP options?

The guidance indicates that:

• it will be acceptable for newly-granted options to include terms enabling them to be exercisable during a PISCES trading window; but
• amending existing options to allow for exercise during a PISCES trading window will result in the release and regrant of the EMI option, and therefore the loss of possible tax benefits up to that point; and
• discretion clauses can't be used to allow options to be exercised during a PISCES trading window and retain their tax advantages.

HMRC’s guidance indicates that the requirement for CSOP options to be held for three years to attract tax advantages will still apply, regardless of whether the option is exercisable during a PISCES trading window. 

How does the guidance affect shares acquired by employees? 

The guidance indicates that if arrangements exist for shares to be traded on PISCES at the time shares are acquired by an employee, or shares are acquired in anticipation of admission to PISCES, those shares will be ‘readily convertible assets’, regardless of whether a PISCES trading window is open or not.

This means that the employer must operate PAYE to collect any income tax and (both employee and employer) NICs due in respect of the shares.

HMRC’s guidance confirms that PISCES transactions will be exempt from Stamp Duty and Stamp Duty Reserve Tax.

More information

More information, including on share valuation in connection with PISCES-listed shares, can be found in HMRC’s guidance.

More information on PISCES can be found at the London Stock Exchange’s website.

How can we help?

Please feel free to contact any of the team if you’d like to discuss how PISCES might affect your share option arrangements. We’ll be happy to help. 

About our team

Our specialist employee incentives team advises all legal aspects of UK employee incentives, ranging from implementation and adoption through to the effects of company transactions, and our client base ranges from start-ups to large PLCs. 

Our team works closely alongside our corporate law, private client and employment law teams and offers multi-disciplinary knowledge of company law, employment law, trust law, regulatory law and tax. 

Members of our team are also members of Share Plan Lawyers, the forum for solicitors and barristers who advise on the UK legal and tax aspects of employee share plans.

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