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The new PISCES regulations were laid before Parliament as a statutory instrument on 15 May and are due to come into force on 5 June. At the same time, HMRC updated its technical note to provide further information on employees trading their shares on PISCES. But why is this important and what does it all mean?
What is PISCES?
The Private Intermittent Securities and Capital Exchange System (PISCES) is being introduced to provide private companies with a route to market, potentially ahead of an Initial Public Offering (IPO) or third-party sale. Through this system, institutional and professional investors will be able to purchase shares in private companies during designated trading windows, facilitated by FCA-approved operators. More fundamentally, employees may also be permitted to sell their shares during these windows and the guidance published by HMRC on 15 May 2025 suggests that existing arrangements can be amended to cater for this without triggering tax liabilities.
An opportunity
As well as founders and investors realising value from their investments, this presents an invaluable opportunity for employees to also realise value from their holdings in private companies. However, there are important considerations. Many private company shares are subject to restrictions that control who can buy or sell them. Similarly, employee share schemes, such as the tax-advantaged Enterprise Management Incentive (EMI) and Company Share Option Plan (CSOP), often include specific vesting and exercise conditions that are unlikely to currently align with the PISCES trading framework.
Readily convertible assets (RCAs)
An RCA is broadly an asset that benefits from liquidity arrangements and can be easily converted into cash. HMRC has clarified that shares traded on PISCES will be treated as RCAs where arrangements exist for trading on PISCES and in anticipation of being admitted to PISCES. There are other circumstances where shares may be RCAs too, so this should be reviewed on a case-by-case basis. This means that if employees acquire shares and those shares are considered RCAs at the time of acquisition or exercise, income tax and class 1 national insurance contributions (NICs) will be due under PAYE. As such, this is particularly relevant where there is, or has been, a trading arrangement in place, such as a PISCES window, that makes the shares more liquid.
Employers will be responsible for operating PAYE on any income arising from the acquisition of RCAs. If the shares are not RCAs, employees must report and pay any tax due via self-assessment.
Interaction with EMI and CSOP
For EMI and CSOP schemes, the technical note confirms that tax advantages will continue to apply, provided that:
- the exercise of options complies with the scheme rules and any conditions set out in the option agreement; and
- a PISCES trading event is set from the date of grant as a specified event to allow employees to exercise their options.
The original version of the technical guidance published in March 2025 suggested that if the terms of a scheme were to be amended to facilitate trading on PISCES, this would be likely to invalidate the tax-advantaged status of the scheme. However, on 15 May 2025, this guidance was updated and the government announced that it will legislate in the next Finance Bill to allow employers to amend EMI and CSOP documents to provide a trigger for exercise pursuant to a PISCES trading window, without losing the tax advantages which the schemes offer. Further information on how the government will legislate is due to be published in July 2025.
Valuation of employee shares
Valuation remains a critical issue. HMRC has indicated that market value for tax purposes must reflect the existence of a trading platform like PISCES. This could lead to higher valuations for shares that were previously considered illiquid, especially if there is a realistic prospect of sale through PISCES. Companies should ensure that valuations used for granting options or reporting share acquisitions are robust and take into account the potential for secondary trading.
Planning considerations
Whilst we await further guidance, EMI and CSOP documents should not be amended to provide a trigger for exercise pursuant to a PISCES trading window. However, for new plans, it may be prudent to design them with the flexibility to accommodate PISCES participation. Leaving this option open could enhance liquidity opportunities while maintaining compliance with tax and regulatory requirements.
As always, careful planning and consideration of the details around any share option plan is essential to protect tax benefits and advice is recommended.
Please get in touch with your usual contact or the contacts listed if you would like to discuss any of the above.
Approval code: NTEH7052516
By necessity, this briefing can only provide a short overview and it is essential to seek professional advice before applying the contents of this article. This briefing does not constitute advice nor a recommendation relating to the acquisition or disposal of investments. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication.
Tax legislation is that prevailing at the time, is subject to change without notice and depends on individual circumstances. You should always seek appropriate tax advice before making decisions. HMRC Tax Year 2025/26.