Finance Act 2000

118 (1) If any disqualifying event occurs in relation to an approved employee share ownership plan, the Inland Revenue may by notice to the company withdraw the approval with effect from the time at which the disqualifying event occurred or such later time as the Inland Revenue may specify.

(2) The following are disqualifying events—

(a) a contravention in relation to the operation of the plan of any of the requirements of this Schedule, the plan itself or the plan trust;

(b) any alteration being made in a key feature of the plan, or in the terms of the plan trust, without the approval of the Inland Revenue;

(c) if the plan provides for performance allowances in accordance with paragraph 30 (method two), the setting, in respect of an award of shares, of performance targets that, at the time they are set in accordance with the plan, cannot reasonably be viewed as being comparable;

(d) any alteration being made in the share capital of the company whose shares are the subject of the plan, or in the rights attaching to any shares of that company, that materially affects the value of participants' plan shares;

(e) shares of a class of which shares have been awarded to participants receiving different treatment in any respect from the other shares of that class;

(f) the trustees, the company or, in the case of a group plan, a company which is or has been a participating company failing to furnish any information which they are or it is required to furnish under paragraph 117.

(3) For the purposes of sub-paragraph (2)(b)—

(a) an alteration is an alteration of a “key feature” of the plan if it relates to a provision that is necessary in order to meet the requirements of this Schedule; and

(b) the Inland Revenue shall not withhold their approval unless it appears to them that the plan as proposed to be altered would not now be approved on an application under paragraph 4.

(4) For the purposes of sub-paragraph (2)(c) performance targets are comparable if they are comparable in terms of the likelihood of their being met by the performance units to which they apply.

(5) Sub-paragraph (2)(e) applies, in particular, to different treatment in respect of—

(a) the dividend payable;

(b) repayment;

(c) the restrictions attaching to the shares; or

(d) any offer of substituted or additional shares, securities or rights of any description in respect of the shares.

This is subject to sub-paragraph (6).

(6) Sub-paragraph (2)(e) does not apply—

(a) where the difference in treatment arises from—

(i) a key feature of the plan, or

(ii) any of the participants' shares being subject to provision for forfeiture, or

(b) on the ground only that shares which have been newly issued receive, in respect of dividends payable with respect to a period beginning before the date on which they were issued, treatment less favourable than that accorded to shares issued before that date.

(7) The withdrawal of approval of an employee share ownership plan does not affect the operation of this Schedule in relation to shares awarded to participants in the plan before the time with effect from which approval was withdrawn.

References in this Schedule to an approved employee share ownership plan in relation to such shares are to a plan that was approved at the time the shares were awarded.