UK Spring Statement 2025 | What are the tax implications for employees selling shares on PISCES?

HMRC, as part of the Spring Statement 2025, has 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).

PISCES is a new type of stock market that will facilitate secondary trading of private company shares on an intermittent basis. The secondary legislation required to implement PISCES will be laid in May 2025, with the government indicating that trading on PISCES is "likely to begin later in 2025". 

HMRC guidance published

The Treasury has recently been consulting on PISCES and has obtained feedback from stakeholders on how tax-advantaged employee share schemes would interact with PISCES.

In response, HMRC published a technical note on 26 March that aims to address the main questions raised about tax implications for companies and employees in relation to employees trading their shares on PISCES.  The policy paper covers a number of issues including those set out below.

How do the readily convertible assets rules apply?

Where employees acquire shares which are "readily convertible assets" (RCAs), the employer is required to withhold any income tax and national insurance contributions (NICs) due through payroll (PAYE). Where shares acquired are not RCAs, reporting and payment of any income tax due is done via the employee's self-assessment tax return.

Broadly, shares are RCAs if they are listed on a stock exchange or if other trading arrangements exist – or are likely to come into existence –  at the time the shares are acquired.

HMRC's policy paper gives some examples of which scenarios are likely to be viewed as RCAs in the context of PISCES:

• If at the time of acquisition of shares by an employee arrangements exist for the shares to be traded on a PISCES platform, they will be viewed as RCAs (even if a trading window is not open at the time of award).
• Shares acquired in anticipation of the company being admitted to PISCES (even if admission is not guaranteed) will also be viewed as RCAs.
• If a company’s shares have been admitted on a PISCES platform in the past but are not admitted at the time of an acquisition, then (provided that no other trading arrangements exist or are likely to come into existence) the shares would not be RCAs. Trading arrangements would be considered as likely to come into existence if the company has taken steps to prepare for a subsequent PISCES trading event.

How do PISCES trading windows interact with tax-advantaged options?

HMRC provides further guidance in the context of options granted under a tax-advantaged company share option plan (CSOP) and enterprise management incentive (EMI) options.

HMRC confirms that it will be acceptable for a PISCES trading window to be a specified event to allow employees to exercise their options, provided that:

• it is clear from the date of grant in the option agreement that a PISCES trading window is a specified event that will allow the options to be exercised; and
• the normal legislative requirements for tax relief are met.

HMRC has further confirmed that:

• existing option agreements cannot be amended to include a PISCES trading window as a specified event. Such an amendment would be a change to a fundamental term of the option, resulting in the release and regrant of the option and a change to its tax treatment.
• a discretion clause cannot be used to allow options to be exercised on a PISCES trading window and retain the tax advantages.

The government has indicated that it will "continue to consider the case for legislating to allow existing EMI contracts to be exercised on PISCES"; however, it has provided no clarity on what this means in practice.

What share valuation rules will apply?

HMRC also provides some guidance on valuing shares in the context of PISCES transactions, which should be considered carefully by companies intending to use a PISCES platform.

When considering transactions that have occurred through a PISCES event, HMRC would not normally seek to disturb the price between the buyer and seller. This will provide some comfort that the transaction price can typically be relied upon as market value (although HMRC notes that if a transaction occurs between connected parties then HMRC may review the transaction through a compliance check).

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.

HMRC notes that if shares (in particular small minority holdings) are being transacted at a price on PISCES, then a discount may not be appropriate for other purposes such as the grant of EMI or CSOP options. There may be specific circumstances that warrant a price adjustment, which would be considered on the facts of each case.

HMRC has confirmed that there will be no advance assurance mechanism to agree market values for PISCES events.

HMRC's position on these issues (in particular, the possibility of PAYE withholding obligations and additional employer's and employee's NICs) will be among the factors to be considered by companies looking at using the PISCES platform.

PISCES and employment-related securities reporting

On 27 March, HMRC published Employment Related Securities (ERS) Bulletin 59 which clarifies further points in relation to reporting of shares acquired by employees via PISCES.

• When entering data in relation to shares that can be traded on PISCES on the ERS end of year return, the question "are they listed on a recognised stock exchange?" must be answered as "No".
• There are no other changes to the reporting requirements because of PISCES.

Stamp duty taxes

As announced at Autumn Budget 2024, PISCES transactions will be exempt from stamp duty and stamp duty reserve tax. A technical consultation on the draft statutory instrument providing the exemption was published at Spring Statement.  The consultation closes on 23 April 2025.

Osborne Clarke comment

From an incentives perspective, it remains open as to whether PISCES will be a useful platform for companies operating employee share plans involving transfers of existing shares. While it is helpful that HMRC has published guidance on the tax implications of PISCES ahead of the launch of the new market, certain aspects (in particular the RCAs treatment and employer PAYE withholding obligations) may discourage some companies from using it.

The government is still considering certain elements in connection with the treatment of existing tax-advantaged options. This provides some hope that further changes will be made to ensure that employees can sell the shares acquired on exercise of such options on PISCES without causing tax issues going forwards.