Finance Act 2000

Part IX U.K. The trustees

Establishment of trustees U.K.

68 (1) The plan must provide for the establishment of a body of persons resident in the United Kingdom (“the trustees”) who are required by the plan—

(a) in the case of free or matching shares, to acquire shares and appropriate them to employees in accordance with the plan;

(b) in the case of partnership shares, to apply partnership share money in acquiring shares on behalf of employees in accordance with the plan; and

(c) in the case of dividend shares, to apply cash dividends in acquiring shares on behalf of participants in accordance with the plan.

(2) The functions of the trustees with respect to shares held by them must be regulated by a trust (“the plan trust”)—

(a) which is constituted under the law of a part of the United Kingdom, and

(b) the terms of which are embodied in an instrument which complies with the requirements of this Part of this Schedule.

(3) The instrument must not contain any terms which are neither essential nor reasonably incidental to complying with the requirements of this Part of this Schedule.

Power of trustees to borrow U.K.

69 The trust instrument may provide that the trustees have power to borrow—

(a) to acquire shares for the purposes of the plan, and

(b) for such other purposes as may be specified in the trust instrument.

Duty to give notice of award of shares etc. U.K.

70 (1) The trust instrument must make the following provision regarding notices.

(2) It must provide that, as soon as practicable after any free or matching shares have been awarded to an employee, the trustees shall give him notice of the award—

(a) specifying the number and description of those shares,

(b) stating their market value on the date on which they were awarded to him, and

(c) stating the holding period applicable to them.

(3) It must provide that, as soon as practicable after any partnership shares have been awarded to an employee, the trustees shall give him notice of the award—

(a) specifying the number and description of those shares, and

(b) stating—

(i) the amount of partnership share money applied by the trustees in acquiring the shares on his behalf, and

(ii) their market value on the acquisition date (within the meaning of paragraph 40(2) or, if there is an accumulation period, paragraph 42(3)).

(4) It must provide that, as soon as practicable after any dividend shares have been acquired on behalf of a participant, the trustees shall give him notice of the acquisition—

(a) specifying the number and description of those shares,

(b) stating their market value on the acquisition date (within the meaning of paragraph 56(3)),

(c) stating the holding period applicable to them, and

(d) informing him of any amount carried forward under paragraph 58 (certain amounts not reinvested).

(5) It must provide that, where any foreign cash dividend is received in respect of plan shares held on behalf of a participant, the trustees shall give him notice of the amount of any foreign tax deducted from the dividend before it was paid.

General duties of trustees U.K.

71 (1) The trust instrument must require the trustees—

(a) to dispose of a participant’s plan shares, and

(b) to deal with any right conferred in respect of any of his plan shares to be allotted other shares, securities or rights of any description,

only pursuant to a direction given by or on behalf of the participant.

This is subject to sub-paragraph (3) and to any provision made in the plan in accordance with paragraph 73 (meeting PAYE obligations).

(2) The plan may provide for participants to give such general directions, to such effect and in such terms, as are specified in the plan.

(3) The trust instrument must, in the case of a participant’s plan shares that are free, matching or dividend shares, prohibit the trustees from disposing of any of those shares (whether to the participant or otherwise) at any time during the holding period, unless the participant has at that time ceased to be in relevant employment.

This is subject to—

paragraph 32 (holding period: power to authorise trustees to accept general offers etc.);

paragraph 72 (power of trustees to raise funds to subscribe for rights issue);

paragraph 73 (meeting PAYE obligations);

paragraph 121(5) (termination of plan: early removal of shares with participant’s consent).

(4) The trust instrument must require the trustees to pay over to the participant as soon as practicable any money or money’s worth received by them in respect of or by reference to any of his shares, other than money’s worth consisting of new shares within the meaning of paragraph 115 (company reconstructions).

This is subject to—

(a) the provisions of Part VII (reinvestment of cash dividends);

(b) the trustees’ obligations under paragraphs 95 and 96 (PAYE: shares ceasing to be subject to the plan and capital receipts); and

(c) the trustees’ PAYE obligations.

Power of trustees to raise funds to subscribe for rights issue U.K.

72 (1) The trustees may dispose of some of the rights arising under a rights issue in order to be able to obtain sufficient funds to exercise other such rights.

This power is subject to paragraph 71(1) (duty to act in accordance with participant’s directions).

(2) In this paragraph references to rights arising under a rights issue are to rights conferred in respect of a participant’s plan shares to be allotted, on payment, other shares or securities or rights of any description in the same company.

Meeting PAYE obligations U.K.

73 (1) The plan must make provision to ensure that, where a PAYE obligation is imposed on the trustees as a result of any of a participant’s plan shares ceasing to be subject to the plan, the trustees are able to meet that obligation—

(a) by disposing of—

(i) any of those shares, or

(ii) any of the participant’s remaining plan shares (if any), or

(b) by virtue of the participant paying to the trustees a sum equal to the amount required to discharge the obligation.

(2) In sub-paragraph (1) the reference to a PAYE obligation includes an obligation under paragraph 95 (PAYE: shares ceasing to be subject to the plan).

(3) In sub-paragraph (1)(a) the reference to disposing of shares includes the acquisition of the shares by the trustees for the purposes of the trust.

(4) A disposal of any of the participant’s plan shares in accordance with provision made under sub-paragraph (1)(a)(ii) may give rise to a charge to tax under—

paragraph 81 (charge on free or matching shares ceasing to be subject to plan);

paragraph 86 (charge on partnership shares ceasing to be subject to plan); or

paragraph 93 (charge on dividend shares ceasing to be subject to plan).

Deemed disposal by trustees on disposal of beneficial interest U.K.

74 (1) If at any time the participant’s beneficial interest in any of his shares is disposed of, the shares in question shall be treated for the purposes of this Schedule as having been disposed of at that time by the trustees for the like consideration as was obtained for the disposal of the beneficial interest.

(2) For this purpose there is no disposal of the participant’s beneficial interest if and at the time when—

(a) in England and Wales or Northern Ireland, that interest becomes vested in any person on the insolvency of the participant or otherwise by operation of law, or

(b) in Scotland, that interest becomes vested in a judicial factor, in a trustee of the participant’s sequestrated estate or in a trustee for the benefit of the participant’s creditors.

(3) If a disposal of shares falling within this paragraph is not at arm’s length, the proceeds of the disposal shall be taken for the purposes of this Schedule to be equal to the market value of the shares at the time of the disposal.

Duties of trustees in relation to tax liabilities U.K.

75 (1) The trust instrument must require the trustees—

(a) to maintain such records as may be necessary for the purposes of—

(i) their own PAYE obligations, or

(ii) the PAYE obligations of the employer company so far as they relate to the plan,

(b) where the participant becomes liable to income tax under Case V of Schedule D, Schedule E or Schedule F by reason of the occurrence of any event, to inform him of any facts relevant to determining that liability.

(2) For the purposes of this paragraph—

• “employer company” has the same meaning as in paragraph 95 (PAYE: shares ceasing to be subject to the plan); and

• “PAYE obligations” includes obligations conferred on the trustees by paragraphs 95 and 96 (PAYE: shares ceasing to be subject to plan and capital receipts).

Acquisition by trustees of shares from employee share ownership trust U.K.

76 (1) The trust instrument must provide that, where there is a qualifying transfer of shares to the trustees, those shares—

(a) must not be awarded to participants under the plan as partnership shares, and

(b) must be included in any award of free or matching shares made after the date of the transfer in priority to other shares available for inclusion in that award.

(2) For the purposes of this paragraph there is a qualifying transfer of shares to the trustees if relevant shares—

(a) are transferred to them by the trustees of an employee share ownership trust, and

(b) the transfer is a qualifying transfer within section 69(3AA) of the M1 Finance Act 1989 (transfer of shares in, or shares purchased from money in, an employee share ownership trust immediately before 21st March 2000).

Marginal Citations

M1 1989 c. 26.