Finance Act 1996

114 Requirements to be satisfied by approved schemes

(1) Part IV of Schedule 9 to the Taxes Act 1988 (requirements applicable to approved share option schemes which are not savings-related) shall be amended in accordance with subsections (2) and (3) below.

(2) In paragraph 28 (scheme must impose limit on aggregate market value of shares which may be acquired in pursuance of rights obtained under the scheme or certain related schemes)—

(a) in sub-paragraph (1) (aggregate market value of shares not to exceed the appropriate limit) for “the appropriate limit” there shall be substituted “£30,000”; and

(b) sub-paragraphs (2) and (4) (meaning of the appropriate limit and, for the purposes of that definition, the relevant emoluments) shall cease to have effect.

(3) In paragraph 29 (price at which shares may be acquired to be stated and to be not manifestly less than the market value, or, in certain circumstances, 85 per cent. of the market value, of shares of the same class) for sub-paragraphs (1) to (6) there shall be substituted—

“(1) The price at which scheme shares may be acquired by the exercise of a right obtained under the scheme—

(a) must be stated at the time the right is obtained, and

(b) must not be manifestly less than the market value of shares of the same class at that time or, if the Board and the grantor agree in writing, at such earlier time or times as may be provided in the agreement.”

(4) Section 185 of the Taxes Act 1988 (approved share option schemes) shall be amended in accordance with subsections (5) to (7) below.

(5) In subsection (2), for “Subject to subsections (6) to (6B) below” there shall be substituted “Subject to subsection (6) below”.

(6) For subsections (6) to (6B) there shall be substituted—

“(6) Where, in the case of a right obtained by a person under a scheme which is not a savings-related share option scheme, the aggregate of—

(a) the amount or value of any consideration given by him for obtaining the right, and

(b) the price at which he may acquire the shares by exercising the right,

is less than the market value, at the time he obtains the right, of the same quantity of issued shares of the same class, he shall be chargeable to tax under Schedule E for the year of assessment in which he obtains the right on the amount of the difference; and the amount so chargeable shall be treated as earned income, whether or not it would otherwise fall to be so treated.”

(7) In subsections (7) and (8) for “(6A)” there shall be substituted “(6)”.

(8) In section 120 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992 (increase in expenditure by reference to tax charged in relation to shares etc) in subsection (6) (which defines the applicable provision) for paragraph (b) (which refers to subsection (6A) of section 185 of the Taxes Act 1988) there shall be substituted—

“(b) subsection (6A) of that section (as that subsection has effect in relation to rights obtained before the day on which the Finance Act 1996 was passed), or

(c) subsection (6) of that section (as that subsection has effect in relation to rights obtained on or after that day).”

(9) Schedule 16 to this Act, which makes provision with respect to share option schemes approved before the day on which this Act is passed, shall have effect.

(10) Subsections (3) to (7) above have effect in relation to rights obtained on or after the day on which this Act is passed.