Income Tax (Earnings and Pensions) Act 2003

SCHEDULES

Section 2

SCHEDULE 1 U.K. Abbreviations and defined expressions

Part 1 U.K. Abbreviations of Acts and instruments

[F1 FA followed by a year	The Finance Act of that year
F(No.2)A followed by a year	The Finance (No.2) Act of that year.]
[F2 ETA(NI) 1950	The Employment and Training Act (Northern Ireland) 1950 (c. 29 (N.I.))]
TMA 1970	The Taxes Management Act 1970 (c. 9)
ICTA 1970	The Income and Corporation Taxes Act 1970 (c. 10)
F3 . . .	F3 . . .
F3 . . .	F3 . . .
[F2 ETA 1973	The Employment and Training Act 1973 (c. 50)]
OPA 1973	The Overseas Pensions Act 1973 (c. 21)
F3 . . .	F3 . . .
F3 . . .	F3 . . .
F3 . . .	F3 . . .
F3 . . .	F3 . . .
ICTA	The Income and Corporation Taxes Act 1988 (c. 1)
F3 . . .	F3 . . .
F3 . . .	F3 . . .
SSCBA 1992	The Social Security Contributions and Benefits Act 1992 (c. 4)
SSCB(NI)A 1992	The Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7)
TCGA 1992	The Taxation of Chargeable Gains Act 1992 (c. 12)
VERA 1994	The Vehicle Excise and Registration Act 1994 (c. 22)
F3 . . .	F3 . . .
JSA 1995	The Jobseekers Act 1995 (c. 18)
CSA 1995	The Child Support Act 1995 (c. 34)
CS(NI)O 1995	The Child Support (Northern Ireland) Order 1995 (S.I. 1995/2702 (N.I. 13))
JS(NI)O 1995	The Jobseekers (Northern Ireland) Order 1995 (S.I. 1995/2705 (N.I. 15))
F3 . . .	F3 . . .
ERA 1996	The Employment Rights Act 1996 (c. 18)
ER(NI)O 1996	The Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16))
F3 . . .	F3 . . .
WRPA 1999	The Welfare Reform and Pensions Act 1999 (c. 30)
WRP(NI)O 1999	The Welfare Reform and Pensions (Northern Ireland) Order 1999 (S.I. 1999/3147 (N.I. 11))
F3 . . .	F3 . . .
CAA 2001	The Capital Allowances Act 2001 (c. 2)
F3 . . .	F3 . . .
SPCA 2002	The State Pension Credit Act 2002 (c. 16)
TCA 2002	The Tax Credits Act 2002 (c. 21)
SPCA(NI) 2002	The State Pension Credit Act (Northern Ireland) 2002 (c. 14 (N.I.))
F3 . . .	F3 . . .
[F4 ITTOIA 2005	The Income Tax (Trading and Other Income) Act 2005]
F3 . . .	F3 . . .
[F5 ITA 2007	The Income Tax Act 2007]
[F6 WRA 2007	The Welfare Reform Act 2007]
[F7 CTA 2009	The Corporation Tax Act 2009]
[F8 CTA 2010	The Corporation Tax Act 2010]
[F9 TIOPA 2010	The Taxation (International and Other Provisions) Act 2010]
[F10 WRA 2012	The Welfare Reform Act 2012]
[F11 PA 2014	The Pensions Act 2014]

Textual Amendments

F1 Words in Sch. 1 Pt. 1 inserted (21.7.2009) by Finance Act 2009 (c. 10), s. 126(3)

F2 Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 46(3) of the amending Act) by Finance Act 2008 (c. 9), s. 46(2)

F3 Words in Sch. 1 Pt. 1 omitted (21.7.2009) by virtue of Finance Act 2009 (c. 10), s. 126(4)

F4 Words in Sch. 1 Pt. 1 inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 616(2) (with Sch. 2)

F5 Words in Sch. 1 Pt. 1 inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 445 (with Sch. 2)

F6 Words in Sch. 1 Pt. 1 inserted (18.3.2008 for specified purposes, 27.10.2008 in so far as not already in force) by Welfare Reform Act 2007 (c. 5), s. 70(2), Sch. 3 para. 24(6); S.I. 2008/787, art. 2(1), Sch.; S.I. 2008/787, art. 2(4)(f)

F7 Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 556(a) (with Sch. 2 Pts. 1, 2)

F8 Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 395(2) (with Sch. 2)

F9 Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 323 (with Sch. 9 paras. 1-9, 22)

F10 Words in Sch. 1 Pt. 1 inserted (8.4.2013 for specified purposes, 10.6.2013 in so far as not already in force) by Welfare Reform Act 2012 (c. 5), s. 150(3), Sch. 9 para. 50; S.I. 2013/358, art. 7(1)(2)(k), Sch. 3; S.I. 2013/1250, art. 2

F11 Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 16(4) of the amending Act) by Finance Act 2015 (c. 11), s. 16(3)

Part 2 U.K. Index of expressions defined in this Act or ICTA

Note: this index does not apply to expressions used in any of Chapters 6 to 9 of Part 7 (share incentive plans and other arrangements for acquiring shares): separate indexes appear at the end of Schedules 2 to 5.

accessory (in Chapter 6 of Part 3)	[F12 sections 125(2) and 125A(2)]
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
[F14 the acquisition (in Chapters 1 to 4 of Part 7)	section 421B(8) (see also section 446Q(4))]
F13 . . .	F13 . . .
[F14 the acquisition (in Chapter 5 of Part 7)	section 471(5)]
F15 . . .	F15 . . .
[F16 adjusted net income (in Chapter 8 of Part 10)	section 681H]
age of a car F17 ... (in Chapter 6 of Part 3)	section 171(3)
agency contract (in Chapter 7 of Part 2)	section 47(1)
annual rental value (in Chapter 10 of Part 3)	section 207
annual value (in Chapter 5 of Part 3)	section 110
F15 . . .	F15 . . .
F15 . . .	F15 . . .
F15 . . .	F15 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
asset (in Chapter 4 of Part 11)	section 701
F13 . . .	F13 . . .
assignment (in the application of the Act to Scotland)	[F18 section 1008(1) of ITA 2007]
associate (in Chapter 8 of Part 2)	section 60
[F19 associate (in Chapter 9 of Part 2)	section 61I (but see section 61C(4))]
associate (in Chapter 11 of Part 7)	section 549(4)
associated company (in Chapter 8 of Part 2)	section 61(1)
[F14 associated company (in section 421H(1) and Chapters 2 to 4 of Part 7)	section 421H(2)]
F13 . . .	F13 . . .
[F14 associated person (in Chapters 1 to 4 of Part 7)	section 421C]
[F14 associated person (in Chapter 5 of Part 7)	section 472]
available for private use (in Chapter 6 of Part 3)	section 118(1)
basic rate	[F20 section 6(2) of ITA 2007 (as applied by section 989 of that Act)]
benefit (in Chapter 10 of Part 3)	section 201(2)
benefit (in Chapter 3 of Part 6)	section 402
the benefits code (in the employment income Parts)	section 63(1)
[F21 the Commissioners for Her Majesty’s Revenue and Customs]	section 720(2)
body of persons	[F22 section 989 of ITA 2007]
business (in Chapter 8 of Part 2)	section 61(1)
[F19 business (in Chapter 9 of Part 2)	section 61J]
business travel (in Chapter 6 of Part 3)	section 171(1)
business travel (in Chapter 2 of Part 4)	section 236(1)
capital allowance	[F23 section 989 of ITA 2007]
car (in Chapter 6 of Part 3)	section 115(1)
car (in Chapter 2 of Part 4)	section 235(2)
car (in Chapter 3 of Part 4)	section 249
car is available to an employee (in Chapter 6 of Part 3)	section 116(1)
car first made available to an employee (in Chapter 6 of Part 3)	section 116(2)(a)
car made available by reason of employment (in Chapter 6 of Part 3)	section 117
car with a CO2 emissions figure (in Chapter 6 of Part 3)	section 134(1)
car without a CO2 emissions figure (in Chapter 6 of Part 3)	section 134(2)
cash voucher	section 721(1)
[F14 chargeable event (in Chapter 3B of Part 7)	section 446P(5)]
charging provisions of Chapter 4 of Part 2 (in the employment income Parts)	section 14(3)
charging provisions of Chapter 5 of Part 2 (in the employment income Parts)	section 20(3)
cheque voucher (in Chapter 4 of Part 3)	section 84(4)
child, children	F24 ... section 721(6)
[F19 the client (in Chapter 9 of Part 2)	section 61D(4)]
close company	[F25 section 989 of ITA 2007]
company	[F26 section 992 of ITA 2007]
company (in Chapter 8 of Part 2)	section 61(1)
[F27 company (in Chapter 10A of Part 4)	section 312I]
F13 . . .	F13 . . .
company vehicle (in Chapter 2 of Part 4)	section 236(2)
connected (in the context of “connected person” or one person being “connected” with another)	[F28 section 993 of ITA 2007] (see section 718)
[F14 consideration (in Chapters 2 to 5 of Part 7)	sections 421(2) and 421A]
[F14 consideration given for the acquisition of employment-related securities (in Chapters 2 to 3A of Part 7)	section 421I]
F13 . . .	F13 . . .
[F29 the Contributions and Benefits Act	section 721(1)]
control	[F30 section 995 of ITA 2007] (see section 719)
control (in the benefits code)	section 69
F13 . . .	F13 . . .
[F14 convertible securities (in Chapters 2 to 3A of Part 7)	section 436]
cost of provision in relation to non-cash voucher (in Chapter 4 of Part 3)	section 87(3)
credit-token	section 721(1)
cycle (in Chapter 2 of Part 4)	section 235(5)
date of first registration (in relation to a car F17 ...) (in Chapter 6 of Part 3)	section 171(2)
deductible payment (in Part 8)	section 558
the deductibility provisions (in Part 5)	section 332
[F31 dependants' income withdrawal (in Chapter 5A of Part 9)	section 579D]
F13 . . .	F13 . . .
diesel (in Chapter 6 of Part 3)	section 171(1)
director (in the benefits code)	section 67(1)
F15 . . .	F15 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
director (in Chapter 10 of Part 7)	section 548(1)
director, full-time working (in the benefits code)	section 67(3)
disabled person’s badge (in Chapter 6 of Part 3)	section 171(4)
distribution	[F32 section 989 of ITA 2007]
domiciled in the United Kingdom	section 721(3)
donations (in Part 12)	section 714(1)
earnings (in the employment income Parts)	section 62 and see section 721(7)
earnings (from which deductions are allowed) (in Part 5)	section 327(2)(a)
earnings charged on receipt (in Part 5)	section 335(4)
earnings charged on remittance (in Part 5)	section 335(4)
earnings “for” a tax year (in Chapter 4 of Part 2)	section 16
earnings “for” a tax year (in Chapter 5 of Part 2)	section 29
earnings-only exemption	section 227(2)
EC certificate of conformity (in Chapter 6 of Part 3)	section 171(1)
EC type-approval certificate (in Chapter 6 of Part 3)	section 171(1)
eligible period (in Chapter 6 of Part 5)	section 378(2)
employed (in the employment income Parts)	sections 4 and 5(2)(a)
employed (in the benefits code)	section 66(1)(b)
employee (in the employment income Parts)	sections 4 and 5(2)(b)
employee (in the benefits code)	section 66(1)(b) (see also section 216(5))
employee (in Chapter 3 of Part 3)	section 70(4)
F13 . . .	F13 . . .
F13 . . .	F13 . . .
employee (in Chapter 10 of Part 3)	section 201(5)
F15 . . .	F15 . . .
F15 . . .	F15 . . .
[F14 the employee (in Chapters 1 to 4 of Part 7)	section 421B(8)]
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
[F14 the employee (in Chapter 5 of Part 7)	section 471(5)]
employee (in Chapter 10 of Part 7)	section 548(1)
employee (in Chapter 11 of Part 7)	section 549(5)
employee (in Part 8)	section 562(2)
F15 . . .	F15 . . .
employee (in Chapter 13 of Part 9)	section 628(1)
employee (in Part 11)	section 712(1)
employee benefit trust (in Chapter 11 of Part 7)	section 550
[F14 employee-controlled (in Chapters 2 to 4 of Part 7)	section 421H(1)]
F13 . . .	F13 . . .
F13 . . .	F13 . . .
the employee offer (in Chapter 10 of Part 7)	section 544(1)
employer (in the employment income Parts)	sections 4 and 5(2)(c)
employer (in the benefits code)	section 66(1)(b)
the employer (in the benefits code)	section 66(2)(b)
F15 . . .	F15 . . .
[F14 the employer (in Chapters 1 to 4 of Part 7)	section 421B(8)]
[F14 the employer (in Chapter 5 of Part 7)	section 471(5)]
employer (in Part 8)	section 562(2)
employer (in Part 11)	section 712(1)
[F33 employer-financed retirement benefits scheme (in Chapter 2 of Part 6)	section 393A]
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
employer’s national insurance contributions (in Chapter 8 of Part 2)	section 61(1)
[F19 employer's national insurance contributions (in Chapter 9 of Part 2)	section 61J]
employment (in the employment income Parts)	sections 4 and 5(1)
employment (in the benefits code)	section 66(1)(a)
the employment (in the benefits code)	section 66(2)(a)
F15 . . .	F15 . . .
[F14 the employment (in Chapters 1 to 4 of Part 7)	section 421B(8)]
[F14 the employment (in Chapter 5 of Part 7)	section 471(5)]
employment (in Part 8)	section 562(2)
employment (in Chapter 5 of Part 11)	section 707
employment as a seafarer (in Chapter 6 of Part 5)	section 384(1)
the employment change (in Chapter 7 of Part 4)	section 275
employment income	section 7(2)
the employment income Parts	section 3(2)
employment income exemption	section 227(3)
employment-related benefit (in Chapter 10 of Part 3)	section 201(2)
employment-related loan (in Chapter 7 of Part 3)	section 174
[F14 employment-related securities (in Chapters 1 to 5 of Part 7)	section 421B(8) (see also section 484(4))]
[F14 employment-related securities option (in Chapter 5 of Part 7)	section 471(5)]
F13 . . .	F13 . . .
F13 . . .	F13 . . .
engagement to which Chapter 8 of Part 2 applies (in Chapter 8 of Part 2)	section 49(5)
excluded benefits (in Chapter 10 of Part 3)	section 202
F34 . . .	F34 . . .
F34 . . .	F34 . . .
excluded services (in Chapter 7 of Part 2)	section 47(2)
F15 . . .	F15 . . .
exempt income (for the purposes of the employment income Parts)	section 8
exempt income (for the purposes of Part 9)	section 566(3)
exempt income (for the purposes of Part 10)	section 656(2)
F15 . . .	F15 . . .
F15 . . .	F15 . . .
foreign employer	section 721(1)
F15 . . .	F15 . . .
[F35 former civil partner (in Chapter 2 of Part 6)	section 588(1)
[F35 former civil partner (in Chapter 6 of Part 9)	section 588(1)
former employee (in Part 8)	section 562(1)
former employer (in relation to former employee) (in Part 8)	section 563
former employment (in relation to former employee) (in Part 8)	section 563
F36 . . .	F36 . . .
general earnings	section 7(3)
[F37 generally accepted accounting practice	[F38 section 997 of ITA 2007]]
F13 . . .	F13 . . .
House of Commons Members' Fund (in Chapter 12 of Part 9)	section 620
the included amount (in Chapter 5 of Part 5)	section 369(2)
[F31 income withdrawal (in Chapter 5A of Part 9)	section 579D]
F15 . . .	F15 . . .
individual learning account training (in Chapter 4 of Part 4)	section 256
initial extra accessory (in Chapter 6 of Part 3)	section 126(2)
F39 . . .	F39 . . .
F40 . . .	F40 . . .
[F14 interest, in relation to securities (or shares) (in Chapters 1 to 5 of Part 7)	section 420(8)]
interest in residence (in Chapter 7 of Part 4)	section 276(3)
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
last day on which car available (in Chapter 6 of Part 3)	section 116(2)(b)
later accessory (in Chapter 6 of Part 3)	section 126(3)
the limitation day (in Chapter 7 of Part 4)	section 274
list price (of a car) (in Chapter 6 of Part 3)	section 123(1)
list price (of accessories) (in Chapter 6 of Part 3)	section 127
listed provision (in Chapter 11 of Part 7)	section 549(2)
loan (in Chapter 7 of Part 3)	section 173(2)(a)
local authority	[F41 section 999 of ITA 2007]
F34 . . .	F34 . . .
[F42 lower-paid employment as a minister of religion (in the benefits code)	section 66(5)
lower-paid employment as a minister of religion (in Part 4)	section 290D]
making a loan (in Chapter 7 of Part 3)	section 173(2)(b)
[F19 managed service company (in Chapter 9 of Part 2)	section 61B]
F13 . . .	F13 . . .
F13 . . .	F13 . . .
[F14 market value (in Chapters 1 to 5 of Part 7)	section 421(1)]
F13 . . .	F13 . . .
market value (of asset) (in Chapter 10 of Part 3)	section 208
material interest (in company) (in the benefits code)	section 68
members of a person’s family	section 721(4)
member of a person’s family or household	section 721(5)
mileage allowance payments (in Chapter 2 of Part 4)	section 229(2)
motor cycle (in Chapter 2 of Part 4)	section 235(4)
national insurance contributions (in Chapter 8 of Part 2)	section 61(1)
[F19 national insurance contributions (in Chapter 9 of Part 2)	section 61J]
[F43 net income	section 23 of ITA 2007 (as applied by section 989 of that Act]
net taxable earnings (for the purposes of Part 2)	section 11
net taxable specific income (for the purposes of Part 2)	section 12
F15 . . .	F15 . . .
F15 . . .	F15 . . .
non-cash voucher	section 721(1)
[F14 non-commercial increase (in Chapter 3B of Part 7)	section 446K(4)]
[F14 non-commercial reduction (in Chapter 3B of Part 7)	section 446K(4)]
non-standard accessory (in Chapter 6 of Part 3)	section 125(4)
the normal self-assessment filing date	[F44 section 989 of ITA 2007]
notice	[F45 section 989 of ITA 2007]
[F14 the notional loan (in Chapter 3C of Part 7)	section 446S(1)]
notional price (of a car) (in Chapter 6 of Part 3)	section 124(1)
notional price (of accessories) (in Chapter 6 of Part 3)	section 130(1)
office (in the employment income Parts)	section 5(3)
office (in Part 8)	section 564(3)
official rate of interest (in Chapter 7 of Part 3)	section 181
[F46 offshore installation	[F47 sections 1001 and 1002 of ITA 2007]]
F13 . . .	F13 . . .
ordinary commuting (in Chapter 3 of Part 4)	section 249
ordinary share capital	[F48 section 989 of ITA 2007]
original pensioner (in Chapter 14 of Part 9)	section 630(1)
[F49 the overseas part	section 989 of ITA 2007]
passenger payments (in Chapter 2 of Part 4)	section 233(3)
[F16 partner (in Chapter 8 of Part 10)	section 681G]
PAYE income	section 683
PAYE provisions (in Chapter 8 of Part 2)	section 61(1)
[F19 PAYE provisions (in Chapter 9 of Part 2)	section 61J]
PAYE regulations	section 684(8)
F13 . . .	F13 . . .
pension (in Chapter 3 of Part 9)	section 570
pension (in Chapter 4 of Part 9)	section 574
pension (in Chapter 11 of Part 9)	section 615(7)
pension (in Chapter 18 of Part 9)	section 647(4)
pension income	section 566(2)
[F50 pension under a registered pension scheme (in Chapter 5A of Part 9)	section 579D]
permanent workplace (in Chapter 3 of Part 4)	section 249
permanent workplace (in Part 5)	section 339(2)
person involved in providing the accommodation (in Chapter 5 of Part 3)	section 112
person paying an amount (in Chapter 2 of Part 5)	section 333(2)
F15 . . .	F15 . . .
F15 . . .	F15 . . .
personal representatives	[F51 section 989 of ITA 2007]
persons providing a benefit (in Chapter 10 of Part 3)	section 209
post-employment earnings (in relation to former employee) (in Part 8)	section 563
premium (in relation to qualifying insurance contract) (in Chapter 2 of Part 5)	section 346(3)(a)
premium (in relation to qualifying insurance contract) (in Part 8)	section 558(3)(a)
pre-1973 pension (in Chapter 14 of Part 9)	section 630(2)
prescribed (in Chapter 5 of Part 11)	section 707
price of a car (in Chapter 6 of Part 3)	section 122
private use (in Chapter 6 of Part 3)	section 118(2)
the property, in relation to living accommodation (in Chapter 5 of Part 3)	section 113
F15 . . .	F15 . . .
provision of cash voucher for employee (in Chapter 4 of Part 3)	section 74
provision of credit-token for employee (in Chapter 4 of Part 3)	section 91(a)
provision of non-cash voucher for employee (in Chapter 4 of Part 3)	section 83
F15 . . .	F15 . . .
the public offer (in Chapter 10 of Part 7)	section 544(1)
published price of the manufacturer, importer or distributor of the accessory (in Chapter 6 of Part 3)	section 129(1)
published price of the manufacturer, importer or distributor of the car (in relation to accessory) (in Chapter 6 of Part 3)	section 128(1)
qualifying accessory (in Chapter 6 of Part 3)	section 125(1)
qualifying journey (in Chapter 3 of Part 4)	section 249
readily convertible asset (in Chapter 4 of Part 11)	section 702
receipt of cash voucher by employee (in Chapter 4 of Part 3)	section 74
receipt of money earnings (in Chapter 4 of Part 2)	section 18
F52 . . .	F52 . . .
receipt of non-cash voucher by employee (in Chapter 4 of Part 3)	section 83
receipt of non-money earnings (in Chapter 4 of Part 2)	section 19
F53 . . .	F53 . . .
[F14 recognised stock exchange	[F54 section 1005 of ITA 2007]]
[F55 registered pension scheme	[F56 section 150(2) of FA 2004 (as applied by section 989 of ITA 2007)]]
registrant discount (in Chapter 10 of Part 7)	section 547
F15 . . .	F15 . . .
F13 . . .	F13 . . .
F15 . . .	F15 . . .
[F33 relevant benefits (in Chapter 2 of Part 6)	section 393B]
[F57 relevant debt (in Part 11)	section 684(7AA)]
F15 . . .	F15 . . .
relevant engagements (in Chapter 8 of Part 2)	section 50(4)
[F14 relevant period (in Chapter 3B of Part 7)	section 446O]
relevant retirement benefit (in relation to former employee) (in Part 8)	section 563
[F19 the relevant services (in Chapter 9 of Part 2)	section 61D(4)]
F15 . . .	F15 . . .
relevant taxes (in Chapter 6 of Part 3)	section 171(1)
remittance of earnings (in Chapter 5 of Part 2)	section 33
remuneration (in Chapter 7 of Part 2)	section 47(3)
residence, former residence and new residence (in Chapter 7 of Part 4)	section 276(1), (2)
[F33 responsible person (in Chapter 2 of Part 6)	section 399A]
[F14 restricted securities and restricted interest in securities (in Chapters 2, 3A and 3B of Part 7)	sections 423 and 424]
[F14 restriction (in Chapters 2, 3A and 3B of Part 7)	section 432(8)]
F15 . . .	F15 . . .
retirement benefits scheme (in Chapter 1 of Part 6)	section 387(1)
F15 . . .	F15 . . .
road fuel gas (in Chapter 6 of Part 3)	section 171(1)
F58 . . .	F58 . . .
F13 . . .	F13 . . .
[F14 secondary Class 1 contributions (in Chapter 5 of Part 7)	section 484(7)]
[F14 securities (in Chapters 1 to 5 of Part 7)	section 420]
[F14 securities option (in Chapters 1 to 5 of Part 7)	section 420(8)]
F13 . . .	F13 . . .
F13 . . .	F13 . . .
[F14 shares (in Chapters 1 to 5 of Part 7)	section 420(8)]
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
F13 . . .	F13 . . .
shares (in Chapter 10 of Part 7)	section 548(1)
ship (in Chapter 6 of Part 5)	section 385
social security income	section 657(2)
F59 . . .	F59 . . .
specific employment income	section 7(4)
[F49 split year	section 989 of ITA 2007]
standard accessory (in Chapter 6 of Part 3)	section 125(4)
[F35 stepchild (in Parts 4 and 5	[F60 section 246 of the Civil Partnership Act 2004 (as applied by section 989 of ITA 2007)]]
51% subsidiary	[F61 section 989 of ITA 2007]
Table A (in Part 10)	section 657(5)
Table B (in Part 10)	section 657(6)
tax	[F62 section 989 of ITA 2007]
tax credit	[F63 section 397(1) [F64 or 397A(1)] of ITTOIA 2005 (as applied by section 989 of ITA 2007)]
taxable benefit (in Chapter 5 of Part 11)	section 707
taxable benefits (in Part 10)	section 657(3)
taxable cheap loan (in Chapter 7 of Part 3)	section 175(2)
taxable earnings (in the employment income Parts)	section 10(2)
taxable employment under Part 2 (in the benefits code)	section 66(3)
taxable pension income (in Part 9)	section 567(3), (4)
the taxable period (in Chapter 5 of Part 3)	section 102(2)
taxable person (in Chapter 3 of Part 6)	section 403(6)
taxable social security income (in Part 10)	section 658(4)-(7)
taxable specific income (in the employment income Parts)	section 10(3)
tax year	[F65 section 4(2) of ITA 2007 (as applied by section 989 of that Act)]
the tax year (in Part 5)	section 327(2)(b)
the tax year 2003-04 etc.	[F66 section 4(4) of ITA 2007 (as applied by section 989 of that Act)]
F13 . . .	F13 . . .
F13 . . .	F13 . . .
total income	[F67 section 23 of ITA 2007 (as applied by section 989 of that Act)]
trade	[F68 section 989 of ITA 2007]
[F27 trade (in Chapter 10A of Part 4)	section 312I]
transport voucher (in Chapter 4 of Part 3)	section 84(3)
[F69 tribunal	section 989 of ITA 2007]
United Kingdom	[F70 section 1013 of ITA 2007]
UK approval certificate (in Chapter 6 of Part 3)	section 171(1)
[F49 the UK part	section 989 of ITA 2007]
F58 . . .	F58 . . .
use of credit-token by employee (in Chapter 4 of Part 3)	section 91(b)
[F14 valuation date (in Chapter 3B of Part 7)	section 446O]
F13 . . .	F13 . . .
van (in Chapter 6 of Part 3)	section 115(1)
van (in Chapter 2 of Part 4)	section 235(3)
van is available to an employee (in Chapter 6 of Part 3)	section 116(1)
van made available by reason of employment (in Chapter 6 of Part 3)	section 117
[F14 variation, in relation to a restriction (in Chapter 2 of Part 7)	section 427(4)]
[F16 week (in Chapter 8 of Part 10)	section 681H]
[F19 the worker (in Chapter 9 of Part 2)	section 61D(4)]
workplace (in Chapter 3 of Part 4)	section 249
workplace (in Part 5)	section 339(1)
work-related training (in Chapter 4 of Part 4)	section 251(1)]]

Textual Amendments

F12 Words in Sch. 1 Pt. 2 substituted (with effect in accordance with s. 14(5) of the amending Act) by Finance Act 2012 (c. 14), s. 14(4)

F13 Sch. 1 Pt. 2 entries repealed (1.9.2003 with effect in accordance with Sch. 22 para. 42(4) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 42(2), Sch. 43 Pt. 3(4); S.I. 2003/1997, art. 2

F14 Words in Sch. 1 Pt. 2 inserted (1.9.2003 with effect in accordance with Sch. 22 para. 42(4) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 42(3); S.I. 2003/1997, art. 2

F15 Words in Sch. 1 Pt. 2 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

F16 Words in Sch. 1 Pt. 2 inserted (with effect in accordance with Sch. 1 para. 7 of the amending Act) by Finance Act 2012 (c. 14), Sch. 1 para. 5(7)

F17 Words in Sch. 1 Pt. 2 repealed (22.7.2004) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(9)

F18 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(2) (with Sch. 2)

F19 Words in Sch. 1 Pt. 2 Table inserted (retrospective to 6.4.2007) by Finance Act 2007 (c. 11), s. 25(2), Sch. 3 para. 8

F20 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(3) (with Sch. 2)

F21 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(2); S.I. 2005/1126, art. 2(2)(h)

F22 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(4) (with Sch. 2)

F23 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(5) (with Sch. 2)

F24 Words in Sch. 1 Pt. 2 Table repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(6), Sch. 3 Pt. 1 (with Sch. 2)

F25 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(7) (with Sch. 2)

F26 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(8) (with Sch. 2)

F27 Words in Sch. 1 Pt. 2 inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 37 para. 7

F28 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(9) (with Sch. 2)

F29 Words in Sch. 1 Pt. 2 substituted (1.9.2004) by Finance Act 2004 (c. 12), s. 85(2), Sch. 16 para. 7(3); S.I. 2004/1945, art. 2

F30 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(10) (with Sch. 2)

F31 Words in Sch. 1 Pt. 2 inserted (with effect in accordance with Sch. 16 para. 85 of the amending Act) by Finance Act 2011 (c. 11), Sch. 16 para. 61

F32 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(11) (with Sch. 2)

F33 Words in Sch. 1 Pt. 2 inserted (6.4.2006) by Finance Act 2004 (c. 12), ss. 249(12), 284(1) (with Sch. 36)

F34 Words in Sch. 1 Pt. 2 omitted (with effect in accordance with s. 13(4) of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 1 para. 21(2)

F35 Words in Sch. 1 Pt. 2 inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 169

F36 Sch. 1 Pt. 2 Table entry omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 340(2)

F37 Words in Sch. 1 Pt. 2 inserted (with effect in accordance with Sch. 2 para. 2(8) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 2(7)

F38 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(12) (with Sch. 2)

F39 Sch. 1 Pt. 2 entries repealed (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 120, Sch. 5; S.I. 2005/1126, art. 2(2)(h)(i)

F40 Sch. 1 Pt. 2 Table entry repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(13), Sch. 3 Pt. 1 (with Sch. 2)

F41 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(14) (with Sch. 2)

F42 Words in Sch. 1 Pt. 2 inserted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 21(3)

F43 Words in Sch. 1 Pt. 2 Table inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(15) (with Sch. 2)

F44 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(16) (with Sch. 2)

F45 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(17) (with Sch. 2)

F46 Words in Sch. 1 Pt. 2 inserted (with effect in accordance with Sch. 27 para. 16 of the amending Act) by Finance Act 2004 (c. 12), Sch. 27 para. 15

F47 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(18) (with Sch. 2)

F48 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(19) (with Sch. 2)

F49 Words in Sch. 1 Pt. 2 inserted (with effect in accordance with Sch. 45 para. 153(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 45 para. 105

F50 Words in Sch. 1 Pt. 2 inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 31 para. 15 (with Sch. 36)

F51 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(20) (with Sch. 2)

F52 Sch. 1 entry omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 40(a)

F53 Sch. 1 entry omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 40(b)

F54 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(21) (with Sch. 2)

F55 Words in Sch. 1 Pt. 2 inserted (6.4.2006) by Finance Act 2004 (c. 12), s. 284(1), Sch. 35 para. 65(3) (with Sch. 36)

F56 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(22) (with Sch. 2)

F57 Words in Sch. 1 Pt. 2 inserted (20.7.2011) by The Finance Act 2009 (Consequential Amendments) Order 2011 (S.I. 2011/1583), arts. 1, 2(11)

F58 Sch. 1 Pt. 2 Table entries repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 556(b), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F59 Sch. 1 Pt. 2 Table entry omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 340(3)

F60 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(24) (with Sch. 2)

F61 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(25) (with Sch. 2)

F62 Words in Sch. 1 Pt. 2 substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 395(3) (with Sch. 2)

F63 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(27) (with Sch. 2)

F64 Words in Sch. 1 Pt. 2 Table inserted (with effect in accordance with Sch. 19 para. 14 of the amending Act) by Finance Act 2009 (c. 10), Sch. 19 para. 12

F65 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(28) (with Sch. 2)

F66 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(29) (with Sch. 2)

F67 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(30) (with Sch. 2)

F68 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(31) (with Sch. 2)

F69 Words in Sch. 1 Pt. 2 Table inserted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 340(4)

F70 Words in Sch. 1 Pt. 2 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 446(32) (with Sch. 2)

Section 488

SCHEDULE 2 U.K. F71 ... share incentive plans

Textual Amendments

F71 Word in Sch. 2 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 14, 89 (with Sch. 8 paras. 90-96)

Part 1 U.K. Introduction

[F72 Introduction to Schedule 2] share incentive plans (SIPs) U.K.

Textual Amendments

F72 Words in Sch. 2 para. 1 cross-heading substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 15, 89 (with Sch. 8 paras. 90-96)

1 [F73 (A1) For the purposes of the SIP code a share incentive plan (a “SIP”) is a Schedule 2 SIP if the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP.] U.K.

(3) The requirements consist of general requirements (see Part 2) and requirements as to—

• the eligibility of individuals (see Part 3),

• the types of shares that may be awarded (see Part 4),

• free shares (see Part 5),

• partnership shares (see Part 6),

• matching shares (see Part 7),

• cash dividends and dividend shares (see Part 8), and

• the trustees (see Part 9).

[F74 (4) Sub-paragraph (A1) is subject to Part 10 of this Schedule which—

(a) requires notice of a plan to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the plan to be a Schedule 2 SIP (see paragraph 81A(1)),

(b) provides for a plan in relation to which such notice is given to be a Schedule 2 SIP (see paragraph 81A(4)), and

(c) gives power to HMRC to enquire into a plan and to decide that the plan should not be a Schedule 2 SIP (see paragraphs 81F to 81I).]

Textual Amendments

F73 Sch. 2 para. 1(A1) substituted for Sch. 2 para. 1(1)(2) (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 16(2), 89 (with Sch. 8 paras. 90-96)

F74 Sch. 2 para. 1(4) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 16(3), 89 (with Sch. 8 paras. 90-96)

SIPs: free shares and partnership shares U.K.

2 (1) In the SIP code a “share incentive plan” (or “SIP” for short) means (in accordance with section 488(4)) a plan established by a company providing— U.K.

(a) for shares to be appropriated to employees without payment (“free shares”), or

(b) for shares to be acquired on behalf of employees out of sums deducted from their salary (“partnership shares”).

(2) In the SIP code, in relation to a SIP—

• “the company” means the company which established the plan;

• “plan requirements” means requirements applying to the plan;

• “the trustees” means the body of persons established under Part 9 to exercise functions in connection with the plan.

Matching shares U.K.

3 (1) A SIP that provides for partnership shares may also provide for shares to be appropriated without payment to employees in proportion to the partnership shares acquired by them (“matching shares”). U.K.

(2) If a SIP contains provision for all, or more than one, of the following—

• free shares,

• partnership shares, and

• matching shares,

the plan may provide for the company to decide when the provisions relating to each kind of share are to have effect.

Group plans U.K.

4 (1) A SIP established by a company that controls other companies (a “parent company”) may extend to all or any of those other companies. U.K.

(2) In the SIP code a SIP established by a parent company which so extends is referred to as a “group plan”.

(3) In relation to a group plan a “constituent company” means—

(a) the parent company, or

(b) any other company to which for the time being the plan is expressed to extend.

(4) Paragraph 91 deals with jointly owned companies and companies controlled by them.

Meaning of “award of shares”, “participant” etc. U.K.

5 (1) For the purposes of the SIP code an “award of shares” is made under a SIP on each occasion when in accordance with the plan— U.K.

(a) free or matching shares are appropriated to employees, or

(b) partnership shares are acquired on behalf of employees.

(2) Accordingly, references to shares awarded to an individual under a SIP are to—

(a) free or matching shares appropriated to the individual, or

(b) partnership shares acquired on the individual’s behalf,

under the plan.

(3) For the purposes of the SIP code an individual participates in an award of free, matching or partnership shares under a SIP if shares included in that award are—

(a) in the case of an award of free or matching shares, appropriated to the individual, or

(b) in the case of an award of partnership shares, acquired on the individual’s behalf.

(4) In the SIP code, in relation to a SIP, “participant” means an individual to whom shares have been awarded under the plan.

Part 2 U.K. General requirements

General requirements F75 ...: introduction U.K.

Textual Amendments

F75 Words in Sch. 2 para. 6 cross-heading omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 17, 89 (with Sch. 8 paras. 90-96)

6 [F76 (1)] A SIP must meet the plan requirements contained in— U.K.

• paragraph 7 (the purpose of the plan),

• paragraph 8 (all-employee nature of plan),

• paragraph 9 (participation on same terms),

• paragraph 10 (no preferential treatment for directors and senior employees),

• paragraph 11 (no further conditions), and

• paragraph 12 (no loan arrangements).

[F77 (2) The requirements of this Part are also to be taken to include the requirements of paragraphs 89 and 90 (plan termination notices etc).]

Textual Amendments

F76 Sch. 2 para. 6 renumbered as Sch. 2 para. 6(1) (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 18(1), 89 (with Sch. 8 paras. 90-96)

F77 Sch. 2 para. 6(2) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 18(2), 89 (with Sch. 8 paras. 90-96)

The purpose of the plan U.K.

7 (1) The purpose of the plan must be to provide[F78 , in accordance with this Schedule,] benefits to employees in the [F79 form] of shares in a company which give them a continuing stake in that company. U.K.

[F80 (1A) The plan must not provide benefits to employees otherwise than in accordance with this Schedule.

(1B) For example, the plan must not provide cash to employees as an alternative to shares.

(1C) Sub-paragraph (1A) does not prohibit an employee receiving a benefit from a company as a result of any shares in that company being held on the employee's behalf under the plan where the employee would have received the same benefit from the company had the shares been acquired by the employee otherwise than by virtue of the plan.]

F81 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F78 Words in Sch. 2 para. 7(1) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 19(2)(a), 89 (with Sch. 8 paras. 90-96)

F79 Word in Sch. 2 para. 7(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 19(2)(b), 89 (with Sch. 8 paras. 90-96)

F80 Sch. 2 para. 7(1A)-(1C) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 19(3), 89 (with Sch. 8 paras. 90-96)

F81 Sch. 2 para. 7(2) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 19(4), 89 (with Sch. 8 paras. 90-96)

All-employee nature of plan U.K.

8 (1) The plan must provide that every employee who— U.K.

(a) meets the requirements of Part 3 of this Schedule (eligibility of individuals) in relation to an award of shares under the plan, and

(b) is a UK resident taxpayer,

is eligible to participate in the award, and is invited to do so.

[F82 (2) An employee is a UK resident taxpayer if—

(a) the employee's earnings from the employment by reference to which the employee meets the employment requirement are (or would be if there were any) general earnings to which section 15 applies (earnings for year when employee UK resident) F83 ...

F83 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The plan] must not contain any feature which has or is likely to have the effect of discouraging any description of employees within sub-paragraph (1) from participating in an award of shares under the plan.

(4) Sub-paragraph (3) does not apply to any provision required or authorised by this Schedule.

(5) The plan may provide that an employee who—

(a) meets the requirements of Part 3 of this Schedule (eligibility of individuals) in relation to an award of shares under the plan, but

(b) is not a UK resident taxpayer (see sub-paragraph (2)),

is eligible to participate in the award, and may be invited to do so.

(6) For the purposes of the SIP code an individual is a “qualifying employee”, in relation to an award of shares, if the individual—

(a) is eligible to participate in it under sub-paragraph (1), or

(b) is eligible to participate in it under sub-paragraph (5) and has been invited to do so.

Textual Amendments

F82 Sch. 2 para. 8(2) substituted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 41

F83 Sch. 2 para. 8(2)(b) and word omitted (with effect in accordance with Sch. 46 para. 72 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 40(1) (with Sch. 46 para. 40(2))

Participation on same terms U.K.

9 (1) The requirement of this paragraph is that— U.K.

(a) every employee who is invited to participate in an award must be invited to participate on the same terms, and

(b) those who do participate must actually do so on the same terms.

(2) The requirement of this paragraph is infringed by the awarding of free shares by reference to factors other than those mentioned in sub-paragraph (3).

(3) The requirement of this paragraph is not infringed by the awarding of free shares by reference to—

(a) an employee’s remuneration,

(b) an employee’s length of service, or

(c) hours worked by an employee;

but this is subject to sub-paragraph (4).

(4) If the awarding of free shares is by reference to more than one of the factors mentioned in sub-paragraph (3), the requirement of this paragraph is infringed unless—

(a) each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and

(b) the total entitlement is the sum of those separate entitlements.

(5) In the case of an award of free shares which provides for performance allowances, this paragraph has effect as provided in—

(a) paragraph 41 (performance allowances: method one), or

(b) paragraph 42 (performance allowances: method two).

(6) In sub-paragraph (5) “performance allowances” has the meaning given in paragraph 34(4).

(7) In the case of an award of partnership shares, the requirement of this paragraph is not infringed by the operation of any percentage limit specified in or under paragraph 46(2) or (3) (maximum amount of deductions) so far as the application of that limit to employees with different levels of remuneration results in deductions of different amounts or in the award of different numbers of shares.

No preferential treatment for directors and senior employees U.K.

10 (1) The first requirement of this paragraph is that no feature of the plan has or is likely to have the effect of conferring benefits wholly or mainly— U.K.

(a) on directors, or

(b) on employees receiving the higher or highest levels of remuneration.

(2) The second requirement of this paragraph applies only if the plan is established by a company that is a member of a group.

(3) The requirement is that the identity of the company (or, if it is a group plan, the constituent companies) must not be such that the plan has or is likely to have the effect of conferring benefits wholly or mainly—

(a) on employees of companies that are members of the group who receive the higher or highest levels of remuneration, or

(b) on directors of such companies.

(4) The requirements of this paragraph are not infringed by the awarding of free shares in circumstances where (as a result of paragraph 9(3) and (4)) that would not constitute an infringement of the requirements of paragraph 9.

No further conditions U.K.

11 U.K. No conditions apart from those required or authorised by this Schedule may be imposed on an employee’s participation in an award of shares under the plan.

No loan arrangements U.K.

12 (1) The arrangements for the plan must not make any provision, or be associated in any way with any provision made, for loans to some or all of the employees of— U.K.

(a) the company, or

(b) in the case of a group plan, of any constituent company.

(2) The operation of the plan must not be associated in any way with such loans.

(3) In sub-paragraph (1) “arrangements” includes any scheme, agreement, undertaking or understanding, whether or not legally enforceable.

Part 3 U.K. Eligibility of individuals

Eligibility of individuals: introduction U.K.

13 U.K. A SIP must meet the plan requirements contained in—

• paragraph 14 (time of eligibility to participate),

• paragraph 15 (the employment requirement),

• [F84 paragraph 18 (requirement not to participate simultaneously in connected SIPs), [F85 and] paragraph 18A (successive participation in connected SIPs)]

• F86 ...

Textual Amendments

F84 Words in Sch. 2 para. 13 substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 3

F85 Word in Sch. 2 para. 13 inserted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 34(a)

F86 Words in Sch. 2 para. 13 omitted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 34(b)

Time of eligibility to participate U.K.

14 (1) The plan must provide that an individual may only participate in an award of shares if the individual is eligible to participate in the award at the appropriate time mentioned below. U.K.

(2) In the case of an award of free shares, the appropriate time is the time when the award is made.

(3) In the case of an award of partnership shares where the plan does not provide for an accumulation period, the appropriate time is the time of the deduction of the partnership share money relating to the award.

(4) In the case of an award of partnership shares where the plan does provide for an accumulation period, the appropriate time is the time of the first deduction of partnership share money relating to the award.

(5) In the case of an award of matching shares where the plan does not provide for an accumulation period, the appropriate time is the time of the deduction of the partnership share money relating to the award of partnership shares to which the matching shares relate.

(6) In the case of an award of matching shares where the plan does provide for an accumulation period, the appropriate time is the time of the first deduction of partnership share money relating to the award of partnership shares to which the matching shares relate.

(7) For the purposes of this paragraph an individual is eligible to participate in an award of shares under the plan if and only if the requirements of the plan are met as to—

(a) employment (see paragraph 15),

[F87 (b) not participating simultaneously in connected SIPs (see paragraph 18), [F88 and]

(ba) successive participation in connected SIPs (see paragraph 18A), F89 ...]

F89 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(8) In the case of an individual within paragraph 8(5) (all-employee nature of plan: non-UK resident taxpayer), the individual is not eligible to participate in an award of shares under the plan unless (in addition to the requirements mentioned in sub-paragraph (7)) any further eligibility requirements of the plan are met.

Textual Amendments

F87 Sch. 2 para. 14(7)(b)(ba) substituted for Sch. 2 para. 14(7)(b) (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 4

F88 Word in Sch. 2 para. 14(7)(b) inserted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 35(a)

F89 Sch. 2 para. 14(7)(c) and word omitted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 35(b)

The employment requirement U.K.

15 (1) The plan must provide that an individual is not eligible to participate in an award of shares unless the individual meets the requirement in sub-paragraph (2). U.K.

(2) The requirement is that the individual—

(a) is an employee of—

(i) the company, or

(ii) in the case of a group plan, a constituent company, and

(b) if the plan provides for a qualifying period, has at all times during that period been an employee of a qualifying company.

(3) In the SIP code “the employment requirement” means the requirement in sub-paragraph (2).

(4) This paragraph is supplemented—

(a) as regards qualifying periods, by paragraph 16, and

(b) as regards the meaning of “qualifying company”, by paragraph 17.

Qualifying periods U.K.

16 (1) This paragraph applies if the plan provides for a qualifying period in relation to an award. U.K.

(2) In the case of an award of free shares, the qualifying period must be a period of not more than 18 months ending with the date on which the award is made.

(3) In the case of an award of partnership shares where the plan does not provide for an accumulation period, the qualifying period must be a period of not more than 18 months ending with the deduction of partnership share money relating to the award.

(4) In the case of an award of partnership shares where the plan does provide for an accumulation period, the qualifying period must be a period of not more than 6 months ending with the start of the accumulation period relating to the award.

(5) In the case of an award of matching shares where the plan does not provide for an accumulation period, the qualifying period must be a period of not more than 18 months ending with the deduction of partnership share money relating to the award of partnership shares to which the matching shares relate.

(6) In the case of an award of matching shares where the plan does provide for an accumulation period, the qualifying period must be a period of not more than 6 months ending with the start of the accumulation period relating to the award of partnership shares to which the matching shares relate.

(7) In relation to an award, the same qualifying period must apply in relation to all employees—

(a) of the company, or

(a) in the case of a group plan, of the constituent companies.

(8) The plan may authorise the company to specify different qualifying periods in respect of different awards of shares, but the requirements in sub-paragraphs (2) to (7) apply to periods so specified.

Meaning of “qualifying company” U.K.

17 (1) For the purposes of paragraph 15(2) “qualifying company” has the meaning given by this paragraph. U.K.

(2) Except in the case of a group plan, “qualifying company” means—

(a) the company, or

(b) a company that, when the individual was employed by it, was an associated company—

(i) of the company, or

(ii) of another company qualifying under this paragraph.

(3) In the case of a group plan, “qualifying company” means—

(a) a company that is a constituent company at the end of the qualifying period mentioned in paragraph 15(2),

(b) a company that, when the individual was employed by it, was a constituent company, or

(c) a company that, when the individual was employed by it, was an associated company of—

(i) (i)a company qualifying under paragraph (a) or (b), or

(ii) another company qualifying under this paragraph.

Requirement not to participate in other SIPs U.K.

18 (1) The plan must provide that an individual is not eligible to participate in an award of free, matching or partnership shares under the plan in a tax year if the individual— U.K.

F90 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) is at the same time to participate, in an award of shares under another [F91 Schedule 2] SIP established by the company or a connected company.

(2) For the purposes of this paragraph an individual is to be treated as having participated in an award of free shares under a SIP if the individual would have participated in that award but for the individual’s failure to obtain a performance allowance (see paragraph 34).

(3) In this paragraph “connected company” means— (a)a company which controls or is controlled by the company or which is controlled by a company which also controls the company, or (b)a company which is a member of a consortium owning the company or which is owned in part by the company as a member of a consortium.

Textual Amendments

F90 Sch. 2 para. 18(1)(a) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 5, Sch. 43 Pt. 3(3)

F91 Words in Sch. 2 para. 18(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 20, 89 (with Sch. 8 paras. 90-96)

[F92 Participation in more than one connected SIP in a tax year U.K.

Textual Amendments

F92 Sch. 2 para. 18A and cross-heading inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 2

18A (1) The plan must provide that, if an individual participates in an award of shares under the plan in a tax year in which he has already participated in an award of shares under one or more other [F93 Schedule 2] SIPs established by the company or a connected company— U.K.

(a) paragraph 35 (maximum annual award of free shares),

(b) paragraph 46 (maximum amount of partnership share money deductions), and (c)paragraph 64 (limit on amount reinvested), apply as if the plan and the other plan or plans were a single plan.

(2) In this paragraph “connected company” has the same meaning as in paragraph 18.]

Textual Amendments

F93 Words in Sch. 2 para. 18A(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 21, 89 (with Sch. 8 paras. 90-96)

The “no material interest” requirement U.K.

F94 19 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F94 Sch. 2 paras. 19-24 omitted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 36

Meaning of “material interest” U.K.

F94 20 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F94 Sch. 2 paras. 19-24 omitted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 36

Material interest: options and interests in SIPs U.K.

F94 21 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F94 Sch. 2 paras. 19-24 omitted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 36

Meaning of “associate” U.K.

F94 22 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F94 Sch. 2 paras. 19-24 omitted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 36

Meaning of “associate”: trustees of employee benefit trust U.K.

F94 23 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F94 Sch. 2 paras. 19-24 omitted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 36

Meaning of “associate”: trustees of discretionary trust U.K.

F94 24 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F94 Sch. 2 paras. 19-24 omitted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 36

Part 4 U.K. Types of shares that may be awarded

Types of share that may be awarded: introduction U.K.

25 (1) The requirements of the following paragraphs must be met with respect to any shares that may be awarded under a SIP— U.K.

• paragraph 26 (shares must be part of ordinary share capital of certain companies),

• paragraph 27 (requirement as to listing etc.),

• paragraph 28 (shares must be fully paid up and not redeemable), [F95 and]

• paragraph 29 (prohibited shares)

• F96 ...

(2) In this Part of this Schedule “eligible shares” means shares that may be awarded under the plan.

Textual Amendments

F95 Word in Sch. 2 para. 25(1) inserted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 47(a)

F96 Words in Sch. 2 para. 25(1) omitted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 47(b)

Shares must be part of ordinary share capital of certain companies U.K.

26 U.K. Eligible shares must form part of the ordinary share capital of—

(a) the company,

(b) a company which has control of the company, or

(c) a company which either is, or has control of, a company which is a member of a consortium owning either the company or a company having control of the company.

Requirement as to listing etc. U.K.

27 (1) Eligible shares must be— U.K.

(a) shares of a class listed on a recognised stock exchange,

(b) shares in a company which is not under the control of another company, F97 ...

[F98 (ba) shares in a company which is subject to an employee-ownership trust, or]

(c) shares in a company which is under the control of a listed company.

(2) A “listed company” is a company whose shares are listed on a recognised stock exchange, other than—

(a) a close company, or

(b) a company that would be a close company if resident in the United Kingdom.

[F99 (3) But a company is not a close company for the purposes of sub-paragraph (2) if it is subject to an employee-ownership trust.

(4) A company (“C”) is “subject to an employee-ownership trust” if—

(a) C meets the trading requirement set out in section 312D,

(b) C meets the indirect employee-ownership requirement,

(c) neither C, nor any other company which is a member of the same group of companies as C, is a service company, and

(d) C is not under the control of another company (ignoring for this purpose another company acting in its capacity as the trustee of the settlement by virtue of which C meets the indirect employee-ownership requirement).

(5) Section 312E (the indirect employee-ownership requirement) applies for the purposes of sub-paragraph (4), subject to the following modifications—

(a) subsection (3) of that section has effect as if—

(i) the words “during the qualifying period” were omitted, and

(ii) in paragraph (a) for “10 December 2013” there were substituted “ 1 October 2014 ”, and

(b) subsection (4) has effect as if for paragraph (b) there were substituted—

“(b) section 236L of that Act applies as if the reference in subsection (1)(c) of that section to the period of 12 months ending with the time in question were a reference to any time on or after 1 October 2014.”

(6) Section 312G (meaning of “service company”) applies for the purposes of sub-paragraph (4)(c), subject to the following modifications—

(a) in subsection (3)(b), the reference to the company which makes the payment is to be read as a reference to C,

(b) in subsection (4)(a), the reference to the time the payment is made is to be read as a reference to any time, and

(c) in subsection (4)(b), the reference to any time before the time the payment is made is to be read as a reference to any time.]

Textual Amendments

F97 Word in Sch. 2 para. 27(1)(b) omitted (1.10.2014) by virtue of Finance Act 2014 (c. 26), Sch. 37 para. 19(2)(4)

F98 Sch. 2 para. 27(1)(ba) inserted (1.10.2014) by Finance Act 2014 (c. 26), Sch. 37 para. 19(2)(4)

F99 Sch. 2 para. 27(3)-(6) inserted (1.10.2014) by Finance Act 2014 (c. 26), Sch. 37 para. 19(3)(4)

Shares must be fully paid up and not redeemable U.K.

28 (1) Eligible shares must be— U.K.

(a) fully paid up, and

(b) not redeemable.

(2) For the purposes of sub-paragraph (1)(a) shares are not to be regarded as fully paid up if there is an undertaking to pay cash at a future date to the company whose shares they are.

(3) For the purposes of sub-paragraph (1)(b) “redeemable” shares include shares that may become redeemable at a future date.

(4) Sub-paragraph (1)(b) does not apply to shares in [F100 a registered co-operative society].

[F101 (5) In sub-paragraph (4) “registered co-operative society” means—

(a) a society registered as a co-operative society under the Co-operative and Community Benefit Societies Act 2014,

(b) a pre-commencement society (within the meaning of that Act) that is a co-operative society within the meaning of section 2 of that Act,

(c) a society registered or deemed to be registered under the Industrial and Provident Societies Act (Northern Ireland) 1969 that is a co-operative society within the meaning of section 1 of that Act , or

(d) an SCE formed in accordance with Council Regulation (EC) No 1435/2003 on the Statute for a European Cooperative Society.]

Textual Amendments

F100 Words in Sch. 2 para. 28(4) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 82(2) (with Sch. 5)

F101 Sch. 2 para. 28(5) substituted (1.8.2014) by Co-operative and Community Benefit Societies Act 2014 (c. 14), s. 154, Sch. 4 para. 82(3) (with Sch. 5) (as amended by Finance Act 2014 (c. 26), Sch. 39 paras. 8, 15)

Prohibited shares U.K.

29 (1) Eligible shares must not be shares in— U.K.

(a) a service company, or

(b) a company that—

(i) has control of a service company, and

(ii) is under the control of a person or persons who fall within sub-paragraph (2)(b)(i) or (ii) as it applies to a service company.

(2) For the purposes of this paragraph a company is a “service company” if—

(a) the business carried on by it consists substantially in the provision of the services of persons employed by it, and

(b) the majority of those services are provided to—

(i) a person who has control of the company,

(ii) two or more persons who together have control of the company, or

(iii) a company associated with the company.

(3) For the purposes of sub-paragraph (2)(b)(iii) a company is associated with another company if both companies are under the control of the same person or persons.

(4) For the purposes of sub-paragraphs (1) to (3)—

(a) a partnership is to be treated as a single person; and

(b) where a partner (alone or together with others) has control of a company, the partnership is to be treated as having (in the same way) control of that company.

(5) For the purposes of this paragraph the question whether a person controls a company is to be determined in accordance with [F102 sections 450 and 451 of CTA 2010].

Textual Amendments

F102 Words in Sch. 2 para. 29(5) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 396(3) (with Sch. 2)

Only certain kinds of restriction allowed U.K.

F103 30 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F103 Sch. 2 paras. 30-33 omitted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 48

Permitted restrictions: voting rights U.K.

F103 31 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F103 Sch. 2 paras. 30-33 omitted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 48

Permitted restrictions: provision for forfeiture U.K.

F103 32 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F103 Sch. 2 paras. 30-33 omitted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 48

Permitted restrictions: pre-emption conditions U.K.

F103 33 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F103 Sch. 2 paras. 30-33 omitted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 48

Part 5 U.K. Free shares

Free shares: introduction U.K.

34 (1) If a SIP provides for free shares, it must meet the plan requirements contained in— U.K.

• paragraph 35 (maximum annual award), and

• paragraph 36 (the holding period).

(2) If a SIP provides for free shares and for performance allowances, the requirements of the following paragraphs also apply—

• paragraph 38 (performance allowances: general application),

• paragraph 39 (performance allowances: targets and measures),

• paragraph 40 (performance allowances: information to be given to employees), and

• either paragraph 41 or 42 (performance allowances: methods of awarding shares).

(3) The plan must meet any plan requirements contained in those paragraphs.

(4) For the purpose of the SIP code a plan provides for performance allowances if it provides for—

(a) whether or not free shares will be awarded to an individual, or

(b) the number or value of free shares awarded,

to be conditional on performance targets being met.

Maximum annual award U.K.

35 (1) The plan must provide that the initial market value of the free shares awarded to a participant in a tax year is not to exceed [F104 £3,600] . U.K.

(2) The “initial market value” of shares means their market value on the date on which they are awarded.

[F105 (2A) The Treasury may by order amend sub-paragraph (1) by substituting for any amount for the time being specified there an amount specified in the order.]

F106 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F106 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F104 Word in Sch. 2 para. 35(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), s. 49(2)(4)

F105 Sch. 2 para. 35(2A) inserted (17.7.2014) by Finance Act 2014 (c. 26), s. 50(2)

F106 Sch. 2 para. 35(3)(4) omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 49

The holding period U.K.

36 (1) The plan must require the company in respect of each award of free shares to specify a period (“the holding period”) during which a participant is bound by contract with the company— U.K.

(a) to permit the free shares awarded to the participant to remain in the hands of the trustees, and

(b) not to assign, charge or otherwise dispose of the beneficial interest in the shares.

(2) The holding period—

(a) must be a period of at least 3 years but not more than 5 years, beginning with the date on which the shares in question are awarded to the participant, and

(b) must be the same for all shares in the same award.

(3) The plan—

(a) may authorise the company to specify different holding periods from time to time, but

(b) must prevent the company from increasing the holding period specified in respect of free shares that have been awarded under the plan.

(4) The participant’s obligations with respect to the holding period are subject to—

(a) paragraph 37 (power to authorise trustees to accept general offers etc.),

(b) paragraph 79 (meeting by trustees of PAYE obligations), and

(c) paragraph 90(5) (termination of plan: early removal of shares with participant’s consent).

(5) If at any time in the holding period the participant ceases to be in relevant employment, the participant’s obligations with respect to that period come to an end.

Holding period: power of participant to direct trustees to accept general offers etc. U.K.

37 (1) A participant may direct the trustees to do any of the following during the holding period. U.K.

(2) The participant may direct the trustees to accept an offer for any of the participant’s free shares (“the original shares”) if the acceptance or agreement will result in a new holding being equated with the original shares for the purposes of capital gains tax.

(3) The participant may direct the trustees to agree to a transaction affecting the participant’s free shares, or such of them as are of a particular class, if the transaction would be entered into as a result of a compromise, arrangement or scheme applicable to or affecting—

(a) all the ordinary share capital of the company or, as the case may be, all the shares of the class in question, or

(b) all the shares, or all the shares of the class in question, which are held by a class of shareholders identified otherwise than by reference to their employment or their participation in [F107 a Schedule 2] SIP.

(4) The participant may direct the trustees to accept an offer for the participant’s free shares of—

(a) cash, with or without other assets, or

(b) a qualifying corporate bond (whether alone or with other assets or cash or both),

if the offer forms part of a general offer falling within sub-paragraph (5).

(5) A general offer falls within this sub-paragraph if—

(a) it is made to holders of shares of the same class as the participant’s or to holders of shares in the same company, and

(b) it is made in the first instance on a condition such that if it is satisfied the person making the offer will have control of that company.

(6) In sub-paragraph (5) “control” has the meaning given by [F108 sections 450 and 451 of CTA 2010].

[F109 (7) For the purposes of sub-paragraph (5) it does not matter if the general offer is made to different shareholders by different means.

(8) If in the case of a takeover offer (as defined in section 974 of the Companies Act 2006) there arises a right under section 983 of that Act to require the offeror to acquire the participant's free shares, or such of them as are of a particular class, the participant may direct the trustees to exercise that right.]

Textual Amendments

F107 Words in Sch. 2 para. 37(3)(b) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 22, 89 (with Sch. 8 paras. 90-96)

F108 Words in Sch. 2 para. 37(6) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 396(4) (with Sch. 2)

F109 Sch. 2 para. 37(7)(8) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 20(1) (with Sch. 2 para. 20(2))

Performance allowances: general application U.K.

38 U.K. A plan that provides for performance allowances in relation to an award must make provision for such allowances for all qualifying employees in relation to that award.

Performance allowances: targets and measures U.K.

39 (1) A plan that provides for performance allowances must comply with the following requirements with respect to performance targets and performance measures. U.K.

(2) The performance targets must be set for performance units comprising one or more employees.

(3) The performance measures used must—

(a) be based on business results or other objective criteria, and

(b) be fair and objective measures of the performance of the units to which they are or may be applied.

(4) For the purposes of an award of free shares under the plan an employee must not be a member of more than one performance unit.

Performance allowances: information to be given to employees U.K.

40 (1) A plan that provides for performance allowances in relation to an award of shares must require the company— U.K.

(a) to notify each qualifying employee who has accepted an invitation to participate in the award of the performance targets and measures which, under the plan, will be used to determine the number or value of free shares awarded to the employee, and

(b) to notify all qualifying employees—

(i) of the company, or

(ii) in the case of a group plan, of any constituent company,

in general terms, of the performance measures to be used to determine the number or value of free shares to be awarded to each employee participating in the award.

(2) The notices must be given as soon as reasonably practicable.

(3) The company may exclude from the notice mentioned in sub-paragraph (1)(b) any information whose disclosure the company reasonably considers would prejudice commercial confidentiality.

Performance allowances: method one U.K.

41 (1) The requirements of this paragraph are those contained in sub-paragraph (2). U.K.

(2) In the case of an award in relation to which the plan provides for performance allowances—

(a) at least 20% of the shares in the award must be awarded without reference to performance in accordance with the requirement of paragraph 9 (participation on same terms),

(b) the remaining shares must be awarded by reference to performance, and

(c) the highest number of shares within paragraph (b) awarded to an individual must not be more than four times the highest number of shares within paragraph (a) awarded to an individual.

(3) In determining for the purposes of sub-paragraph (2)(a) whether the requirement of paragraph 9 is met, the shares to which sub-paragraph (2)(a) applies are to be treated as a separate award of free shares.

(4) If the plan meets the requirements of this paragraph, the requirement of paragraph 9 does not apply to any provision of the plan relating to the awarding of shares within sub-paragraph (2)(b).

(5) If free shares of different classes are awarded, the requirements of this paragraph apply separately in relation to each class.

Performance allowances: method two U.K.

42 (1) The requirements of this paragraph are those contained in sub-paragraphs (2) and (3). U.K.

(2) In the case of an award in relation to which the plan provides for performance allowances—

(a) some or all of the shares in the award must be awarded by reference to performance, and

(b) the awarding of the shares to qualifying employees who are members of the same performance unit must meet the requirement of paragraph 9 (participation on same terms).

(3) The performance targets set in connection with such an award must be consistent targets (see sub-paragraph (6)).

(4) In determining for the purposes of sub-paragraph (2)(b) whether the requirement of paragraph 9 is met, the free shares awarded in respect of each performance unit are to be treated as a separate award of free shares.

(5) If this method is used, nothing in paragraph 9 requires the awarding of shares to members of different performance units to be on the same terms.

(6) In sub-paragraph (3) “consistent targets” means targets which, at the time when they are set in accordance with the plan, can reasonably be viewed as being comparable in terms of the likelihood of their being met by the performance units to which they apply.

Part 6 U.K. Partnership shares

Partnership shares: introduction U.K.

43 (1) If a SIP provides for partnership shares, the following paragraphs apply— U.K.

• paragraph 44 (partnership share agreements),

• paragraph 45 (deductions from salary),

• paragraph 46 (maximum amount of deductions),

• paragraph 47 (minimum amount of deductions),

• paragraph 48 (notice of possible effect of deductions on benefit entitlement),

• paragraph 49 (partnership share money held for employee),

• paragraph 50 (application of money deducted where no accumulation periods),

• paragraph 51 (accumulation periods),

• paragraph 52 (application of money deducted in accumulation period),

• paragraph 53 (restriction on number of shares awarded),

• paragraph 54 (stopping and re-starting deductions),

• paragraph 55 (withdrawal from partnership share agreement),

• paragraph 56 (repayment of partnership share money on withdrawal of approval or termination), and

• paragraph 57 (access to partnership shares).

(2) The plan must meet any plan requirements contained in those paragraphs.

[F110 (2A) The plan must provide that partnership shares are not to be subject to any provision for forfeiture.]

[F111 (2B) Partnership shares may (notwithstanding sub-paragraph (2A) if relevant) be subject to provision requiring partnership shares acquired on behalf of an employee to be offered for sale but only if the requirement of sub-paragraph (2C) is met.

(2C) The consideration at which the shares are required to be offered for sale must be at least equal to—

(a) the amount of partnership share money applied in acquiring the shares on behalf of the employee, or

(b) if lower, the market value of the shares at the time they are offered for sale.]

(3) References in the SIP code to the trustees acquiring partnership shares on behalf of an employee include their appropriating to an employee shares already held by them.

(4) In the SIP code references to an employee’s “salary” are to be read as follows—

(a) in the case of an individual within the scope of the charge to tax under Part 2 of this Act, they are to be read as references to such of the earnings of the eligible employment—

(i) as are liable to be paid under deduction of tax under PAYE regulations, after deducting any amounts included by virtue of the benefits code, or

(ii) as would be liable to be so paid apart from the SIP code;

(b) in the case of an individual not within the scope of the charge to tax under Part 2 of this Act, they are to be read as references to such of the earnings of the eligible employment as would have fallen within sub-paragraph (i) or (ii) of paragraph (a) if the individual had been within the scope of that charge to tax.

(5) In sub-paragraph (4) “the eligible employment” means the employment by reference to which the employee is eligible to participate in the plan.

Textual Amendments

F110 Sch. 2 para. 43(2A) inserted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 50

F111 Sch. 2 para. 43(2B)(2C) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 23, 89 (with Sch. 8 paras. 90-96)

Partnership share agreements U.K.

44 (1) The plan must provide for qualifying employees to enter into agreements with the company (“company A”) under which— U.K.

(a) the employee authorises the employer company to deduct part of the employee’s salary for the purchase of partnership shares, and

(b) company A undertakes to arrange for partnership shares to be awarded to the employee in accordance with the plan.

(2) Such agreements are referred to in the SIP code as “partnership share agreements”.

(3) In sub-paragraph (1) “the employer company” means the company by reference to which the employee meets the employment requirement in relation to the plan.

Deductions from salary U.K.

45 (1) The plan must provide for a partnership share agreement to be given effect by deductions from the employee’s salary. U.K.

(2) Amounts so deducted are referred to in the SIP code as “partnership share money”.

(3) The partnership share agreement must specify—

(a) what amounts are to be deducted, and

(b) at what intervals;

but this does not prevent the employee and the company agreeing to vary those amounts or intervals.

(4) For the purposes of sub-paragraph (3)(a) the agreement may specify a percentage of the employee’s salary.

(5) The plan must require the employer company to calculate the amounts and intervals having regard to paragraph 46 (maximum amount of deductions from salary).

(6) In sub-paragraph (5) “the employer company” means the company by reference to which the employee meets the employment requirement in relation to the plan.

Maximum amount of deductions U.K.

46 (1) The amount of partnership share money deducted from an employee’s salary must not exceed [F112 £1,800] in any tax year. U.K.

(2) The amount of partnership share money deducted from an employee’s salary [F113 for any tax year must not exceed 10% of the employee’s salary for the tax year.]

(3) The plan may authorise the company to specify lower limits than those specified in sub-paragraphs (1) and (2).

(4) If it does so, different limits may be specified in relation to different awards of shares.

[F114 (4A) A limit lower than that specified in sub-paragraph (2) may be framed—

(a) as a proposition substituting a percentage lower than that so specified, or

(b) as a proposition that a particular description of earnings is not to be regarded as forming part of an employee’s salary for the purposes of that sub-paragraph.]

(5) Any amount deducted in excess of that allowed by sub-paragraph (1) or (2), or any lower limit in the plan, must be paid over to the employee as soon as practicable.

[F115 (6) The Treasury may by order amend sub-paragraph (1) by substituting for any amount for the time being specified there an amount specified in the order.]

Textual Amendments

F112 Word in Sch. 2 para. 46(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), s. 49(3)(4)

F113 Words in Sch. 2 para. 46(2) substituted (with effect in accordance with Sch. 21 para. 7(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 21 para. 7(3)

F114 Sch. 2 para. 46(4A) inserted (10.7.2003) by virtue of Finance Act 2003 (c. 14), Sch. 21 para. 7(4)

F115 Sch. 2 para. 46(6) inserted (17.7.2014) by Finance Act 2014 (c. 26), s. 50(3)

Minimum amount of deductions U.K.

47 (1) The plan may provide that the amount to be deducted under a partnership share agreement [F116 on any occasion] must not be less than a minimum amount specified in the plan. U.K.

(2) The specified minimum amount must not be greater than £10.

F117 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F116 Words in Sch. 2 para. 47 substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 8(a)

F117 Sch. 2 para. 47(3) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 8(b), Sch. 43 Pt. 3(3)

Notice of possible effect of deductions on benefit entitlement U.K.

48 (1) The plan must provide that the company may not enter into a partnership share agreement with an employee unless the agreement contains a notice under this paragraph. U.K.

(2) A notice under this paragraph is a notice in a prescribed form containing prescribed information as to the possible effect of deductions on an employee’s entitlement to social security benefits, statutory sick pay and statutory maternity pay.

(3) In this paragraph “prescribed” means prescribed by regulations made by [F21 the Commissioners for Her Majesty’s Revenue and Customs].

Textual Amendments

F21 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(2); S.I. 2005/1126, art. 2(2)(h)

Partnership share money held for employee U.K.

49 (1) The plan must provide that partnership share money deducted under a partnership share agreement is— U.K.

(a) paid to the trustees as soon as practicable, and

(b) held by them on behalf of the employee until such time as it is applied by them in acquiring partnership shares on the employee’s behalf.

(2) Sub-paragraph (1) is subject to paragraphs 50(5)(b) and 52(6)(b) and (7) (obligations to pay money to the employee).

(3) The plan must provide for the trustees to keep any money required to be held by them under this paragraph in an account (interest bearing or otherwise) with—

(a) a person falling within [F118 section 991(2)(b) of ITA 2007] (certain institutions permitted to accept deposits),

(b) a building society, or

(c) a firm falling within [F119 section 991(2)(c) of ITA 2007] (EEA firms permitted to accept deposits).

(4) The plan must provide for the trustees to account to an employee for the interest if the partnership share money held on behalf of the employee is held in an interest bearing account.

Textual Amendments

F118 Words in Sch. 2 para. 49(3)(a) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(2)(a) (with Sch. 2)

F119 Words in Sch. 2 para. 49(3)(c) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(2)(b) (with Sch. 2)

Application of money deducted where no accumulation periods U.K.

50 (1) If the plan does not provide for an accumulation period, it must provide for partnership share money to be applied by the trustees in acquiring partnership shares on behalf of the employee on the acquisition date. U.K.

(2) The number of shares awarded to each employee must be determined in accordance with the market value of the shares on the acquisition date.

(3) Sub-paragraphs (1) and (2) are subject to paragraph 53 (restriction on number of shares awarded).

(4) In those sub-paragraphs “the acquisition date” means the date set by the trustees in relation to the award of partnership shares, which must be not later than 30 days after the last date on which the partnership share money to be applied in acquiring the shares was deducted.

(5) Any surplus partnership share money remaining after the acquisition of shares by the trustees—

(a) may with the agreement of the employee be carried forward and added to the amount of the next deduction, and

(b) in any other case must be paid over to the employee as soon as practicable.

Accumulation periods U.K.

51 (1) The plan may provide for accumulation periods not exceeding 12 months. U.K.

(2) If the plan does so, the following provisions apply.

(3) The partnership share agreements—

(a) must specify when each accumulation period begins and ends;

(b) may specify that an accumulation period comes to an end on the occurrence of a specified event.

(4) However—

(a) the beginning of the first accumulation period must not be later than the date on which the first deduction of partnership share money is made; and

(b) the accumulation period which applies in relation to each award of partnership shares must be the same for all individuals entering into the partnership share agreements.

(5) The plan may also provide that if—

(a) during an accumulation period, a transaction occurs in relation to any of the shares (“the original holding”) to be acquired under a partnership share agreement which results in a new holding of shares being equated with the original holding for the purposes of capital gains tax, and

(b) the employee consents,

the partnership share agreement is to have effect after the time of the transaction as if it were an agreement for the purchase of the shares comprised in the new holding.

Application of money deducted in accumulation period U.K.

52 (1) This paragraph applies if the plan provides for one or more accumulation periods. U.K.

(2) The plan must provide for the partnership share money deducted in each accumulation period under a partnership share agreement to be applied by the trustees in acquiring partnership shares on behalf of the employee on the acquisition date.

[F120 (2A) The number of shares awarded to the employee must be determined in accordance with one of sub-paragraphs (3), (3A) and (3B) and the partnership share agreement must specify which one of those sub-paragraphs is to apply for the purposes of the agreement.]

(3) [F121 If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the] employee must be determined in accordance with the lower of—

(a) the market value of the shares at the beginning of the accumulation period, and

(b) the market value of the shares on the acquisition date.

[F122 (3A) If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares at the beginning of the accumulation period.

(3B) If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares on the acquisition date.]

(4) Sub-paragraphs (2) [F123 to (3B)] are subject to sub-paragraphs (7) and (8) and to paragraph 53 (restriction on number of shares awarded).

(5) In sub-paragraphs (2) [F123 to (3B)] “the acquisition date” means the date set by the trustees in relation to the award of partnership shares, which must be not later than 30 days after the end of the accumulation period which applies in relation to the award.

(6) Any surplus partnership share money remaining after the acquisition of shares by the trustees—

(a) may with the agreement of the employee be carried forward to the next accumulation period, and

(b) in any other case must be paid over to the employee as soon as practicable.

(7) The plan must provide that where the employee ceases to be in relevant employment during an accumulation period, any partnership share money deducted in the period is to be paid over to the individual as soon as practicable.

(8) The partnership share agreement may provide that, where an accumulation period comes to an end on the occurrence of a specified event, the partnership share money deducted in that period must be paid over to the individual as soon as practicable instead of being applied in acquiring shares.

Textual Amendments

F120 Sch. 2 para. 52(2A) inserted (with effect in accordance with Sch. 2 para. 81 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 79(2)

F121 Words in Sch. 2 para. 52(3) substituted (with effect in accordance with Sch. 2 para. 81 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 79(3)

F122 Sch. 2 para. 52(3A)(3B) inserted (with effect in accordance with Sch. 2 para. 81 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 79(4)

F123 Words in Sch. 2 para. 52(4)(5) substituted (with effect in accordance with Sch. 2 para. 81 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 79(5)

Restriction on number of shares awarded U.K.

53 (1) The plan may authorise the company to specify the maximum number of shares (“the award maximum”) to be included in an award of partnership shares. U.K.

(2) If the plan does so—

(a) a different number may be specified by the company in relation to different awards, and

(b) the following provisions apply to the plan.

(3) The plan must require partnership share agreements to contain an undertaking by the company to notify the employee of any restriction on the number of shares to be included in an award.

(4) The plan must require the notice to be given—

(a) if there is no accumulation period, before the deduction of the partnership share money relating to the award, and

(b) if there is an accumulation period, before the beginning of the accumulation period relating to the award.

(5) The plan must provide that, where the award maximum in respect of an award of partnership shares is smaller than the number of shares which would otherwise be included in the award, the number of partnership shares acquired on behalf of each employee under paragraph 50(1) or 52(2) must be reduced proportionately.

Stopping and re-starting deductions U.K.

54 (1) The plan must provide that an employee may at any time give notice to the company to stop deductions under a partnership share agreement. U.K.

(2) The plan must provide that, unless a later date is specified in the notice, the company must, on receiving a notice within sub-paragraph (1), ensure within 30 days after receipt of the notice that no further deductions are made by it under the partnership share agreement.

(3) The plan must also provide that an employee who has stopped deductions—

(a) may subsequently give notice to the company to re-start deductions under the agreement, but

(b) may not make up deductions that have been missed.

(4) If the plan makes provision for one or more accumulation periods, it may prevent an employee re-starting deductions more than once in any accumulation period.

(5) The plan must provide that, unless a later date is specified in the notice, the company must, on receiving a notice within sub-paragraph (3), re-start deductions under the partnership share agreement not later than the re-start date.

(6) “The re-start date” means the date of the first deduction due under the partnership share agreement more than 30 days after receipt of the notice under sub-paragraph (3).

(7) In this paragraph “notice” means notice in writing.

Withdrawal from partnership share agreement U.K.

55 (1) The plan must provide that an employee may at any time give notice to the company of the employee’s withdrawal from a partnership share agreement. U.K.

(2) The plan must provide that, unless a later date is specified in the notice, a notice of withdrawal takes effect 30 days after it is received by the company.

(3) The plan must provide that, where an employee withdraws from a partnership share agreement, any partnership share money held on behalf of the employee is to be paid over to the employee as soon as practicable.

(4) In this paragraph “notice” means notice in writing.

Repayment of partnership share money on [F124 plan ceasing to be a Schedule 2 SIP] or termination U.K.

Textual Amendments

F124 Words in Sch. 2 para. 56 cross-heading substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 24, 89 (with Sch. 8 paras. 90-96)

56 (1) The plan must provide that, where the [F125 plan is not to be a Schedule 2 SIP by virtue of paragraph 81H or 81I], any partnership share money held on behalf of an employee is to be paid over to the employee. U.K.

(2) The plan must require the payment to be made as soon as practicable after [F126 the relevant day].

[F127 (2A) If the plan is not to be a Schedule 2 SIP by virtue of paragraph 81H, in sub-paragraph (2) “the relevant day” means—

(a) the last day of the period in which notice of an appeal under paragraph 81K(2)(a) may be given, or

(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.

(2B) If the plan is not to be a Schedule 2 SIP by virtue of paragraph 81I, in sub-paragraph (2) “the relevant day” means—

(a) the last day of the period in which notice of an appeal under paragraph 81K(3) may be given, or

(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.]

(3) The plan must provide that, where a plan termination notice is issued in respect of the plan (see paragraph 90), any partnership share money held on behalf of an employee is to be paid over to the employee.

(4) The plan must require the payment to be made as soon as practicable after the plan termination notice is notified to the trustees under paragraph 89(2).

Textual Amendments

F125 Words in Sch. 2 para. 56(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 25(2), 89 (with Sch. 8 paras. 90-96)

F126 Words in Sch. 2 para. 56(2) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 25(3), 89 (with Sch. 8 paras. 90-96)

F127 Sch. 2 para. 56(2A)(2B) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 25(4), 89 (with Sch. 8 paras. 90-96)

Access to partnership shares U.K.

57 (1) The plan must provide that when partnership shares have been awarded to an employee, the employee may at any time withdraw any or all of the partnership shares from the plan. U.K.

(2) If the employee does so, there may be a charge to tax by virtue of section 506 (charge on partnership shares ceasing to be subject to plan).

Part 7 U.K. Matching shares

Matching shares: introduction U.K.

58 U.K. If a SIP provides for matching shares it must meet the plan requirements contained in—

• paragraph 59 (general requirements for matching shares),

• paragraph 60 (ratio of matching shares to partnership shares), and

• paragraph 61 (holding period for matching shares).

General requirements for matching shares U.K.

59 (1) The plan must provide for the matching shares to be— U.K.

(a) shares of the same class and carrying the same rights as the partnership shares to which they relate;

(b) awarded on the same day as the partnership shares to which they relate are awarded; and

(c) awarded to all employees who participate in the award on exactly the same basis.

F128 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F128 Sch. 2 para. 59(2) omitted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 51

Ratio of matching shares to partnership shares U.K.

60 (1) The partnership share agreement must specify— U.K.

(a) the ratio of matching shares to partnership shares for the time being offered by the company, and

(b) the circumstances and manner in which the ratio may be changed by the company.

(2) The ratio must not exceed 2:1 and must be applied by reference to the number of shares.

(3) A partnership share agreement must provide for the employee to be informed by the company if the ratio offered by the company changes before partnership shares are awarded to the employee under the agreement.

[F129 (4) The Treasury may by order amend sub-paragraph (2) by substituting for any ratio for the time being specified there a ratio specified in the order.]

Textual Amendments

F129 Sch. 2 para. 60(4) inserted (17.7.2014) by Finance Act 2014 (c. 26), s. 50(4)

Holding period for matching shares U.K.

61 U.K. Paragraphs 36 and 37 (the holding period and related matters) apply in relation to matching shares as they apply in relation to free shares.

Part 8 U.K. Cash dividends and dividend shares

Reinvestment of cash dividends U.K.

62 (1) A SIP may provide that, where the company so directs, the trustees must apply [F130 some or all of the] cash dividends in respect of plan shares held on behalf of— U.K.

(a) all participants, or

(b) all participants who elect to reinvest their dividends,

in acquiring further shares on their behalf.

[F131 (1A) The company's direction must set out—

(a) the amount of the cash dividends to be applied as mentioned in sub-paragraph (1), or

(b) how that amount is to be determined.]

(2) Sub-paragraph (1) is subject to paragraph 63 (requirements to be met as regards cash dividends).

(3) In the SIP code—

(a) the application of cash dividends as mentioned in sub-paragraph (1) is referred to as “reinvestment”; and

(b) the further plan shares acquired are referred to as “dividend shares”.

(4) The company may [F132 modify or] revoke a direction requiring the reinvestment of cash dividends.

(5) References in the SIP code to the trustees acquiring dividend shares on behalf of a participant include their appropriating to a participant shares already held by them.

Textual Amendments

F130 Words in Sch. 2 para. 62(1) substituted (with effect in accordance with Sch. 2 para. 86 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 83(2)

F131 Sch. 2 para. 62(1A) inserted (with effect in accordance with Sch. 2 para. 86 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 83(3)

F132 Words in Sch. 2 para. 62(4) inserted (with effect in accordance with Sch. 2 para. 86 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 83(4)

Requirements to be met as regards cash dividends U.K.

63 (1) If a SIP makes the provision authorised by paragraph 62(1) (reinvestment of cash dividends), the following paragraphs apply— U.K.

• F133 ...

• paragraph 65 (general requirements as to dividend shares),

• paragraph 66 (acquisition of dividend shares),

• paragraph 67 (holding period for dividend shares), and

• paragraph 68 (reinvestment: amounts to be carried forward).

(2) The plan must meet any plan requirements contained in those paragraphs.

(3) A SIP must in any event meet the plan requirement contained in paragraph 69 (cash dividends not required to be reinvested).

Textual Amendments

F133 Words in Sch. 2 para. 63(1) omitted (with effect in accordance with Sch. 2 para. 89 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 87

Limit on amount reinvested U.K.

F134 64 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F134 Sch. 2 para. 64 omitted (with effect in accordance with Sch. 2 para. 89 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 88

General requirements as to dividend shares U.K.

65 [F135 (1)] The plan must provide that dividend shares are to be shares— U.K.

(a) which are in the same company and of the same class, and carry the same rights, as the shares in respect of which the dividend is paid, and

(b) which are not subject to any provision for forfeiture.

[F136 (2) Dividend shares may (notwithstanding sub-paragraph (1)(b) if relevant) be subject to provision requiring dividend shares acquired on behalf of an employee to be offered for sale but only if the requirement of sub-paragraph (3) is met.

(3) The consideration at which the shares are required to be offered for sale must be at least equal to—

(a) the amount of the cash dividends applied in acquiring the shares on behalf of the employee, or

(b) if lower, the market value of the shares at the time they are offered for sale.]

Textual Amendments

F135 Sch. 2 para. 65 renumbered as Sch. 2 para. 65(1) (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 26(2), 89 (with Sch. 8 paras. 90-96)

F136 Sch. 2 para. 65(2)(3) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 26(3), 89 (with Sch. 8 paras. 90-96)

Acquisition of dividend shares U.K.

66 (1) The plan must provide that the trustees must treat participants fairly and equally in exercising their powers in relation to the acquisition of dividend shares. U.K.

(2) The plan must provide for the trustees to acquire dividend shares on behalf of participants on the acquisition date.

(3) The number of dividend shares acquired on behalf of each participant must be determined in accordance with the market value of the shares on the acquisition date.

(4) In this paragraph “the acquisition date” means the date set by the trustees for the acquisition of dividend shares and falling not later than 30 days after the dividend is received by them.

Holding period for dividend shares U.K.

67 U.K. Paragraphs 36 and 37 (the holding period and related matters) apply in relation to dividend shares as they apply in relation to free shares, except that the holding period must be 3 years.

Reinvestment: amounts to be carried forward U.K.

68 [F137 (1) This paragraph applies where an amount is not reinvested because it is not sufficient to acquire a share.] U.K.

(2) The amount may be retained by the trustees and carried forward to be added to the amount of the next cash dividend to be reinvested.

(3) If so retained, the trustees must hold the amount so as to be separately identifiable for the purposes of sub-paragraphs (4) and (5).

(4) An amount retained under this paragraph must be paid over to the participant—

F138 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) if F139 ... the participant ceases to be in relevant employment (see paragraph 95), or

(c) if F139 ... a plan termination notice is issued in respect of the plan (see paragraph 90).

(5) An amount required to be paid over to the participant under sub-paragraph (4) must be paid over as soon as practicable.

F140 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F137 Sch. 2 para. 68(1) substituted (with effect in accordance with Sch. 2 para. 86 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 84

F138 Sch. 2 para. 68(4)(a) and word omitted (with effect in accordance with Sch. 2 para. 90(4)(5) of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 90(2)(a)

F139 Words in Sch. 2 para. 68(4)(b)(c) omitted (with effect in accordance with Sch. 2 para. 90(4)(5) of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 90(2)(b)

F140 Sch. 2 para. 68(6) omitted (with effect in accordance with Sch. 2 para. 90(4)(5) of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 90(3)

Cash dividends where no requirement to reinvest U.K.

69 (1) The plan must require any distributable cash dividends in respect of plan shares held on behalf of a participant to be paid over to the participant as soon as practicable. U.K.

(2) “Distributable cash dividends” means cash dividends [F141 so far as they] are not required to be reinvested under the plan.

Textual Amendments

F141 Words in Sch. 2 para. 69(2) substituted (with effect in accordance with Sch. 2 para. 86 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 85

Part 9 U.K. Trustees

Requirements etc. relating to trustees: introduction U.K.

70 (1) A SIP must meet the plan requirements contained in— U.K.

• paragraph 71(1) and (2) (establishment of trustees), and

• paragraph 79 (meeting by trustees of PAYE obligations).

(2) The following provisions also relate to the trustees—

• paragraph 71(3) to (6) (the trust instrument and classes of trustees)

• paragraph 72 (duty to act in accordance with participant’s directions),

• paragraph 73 (duty not to dispose of plan shares),

• paragraph 74 (duty to make payments to participants),

• paragraph 75 (duty to give notice of award of shares etc.),

• paragraph 76 (power to borrow),

• paragraph 77 (power to raise funds to subscribe for rights issue), [F142 and]

• F143 ...

• paragraph 80 (other duties in relation to tax liabilities).

Textual Amendments

F142 Word in Sch. 2 para. 70(2) inserted (with effect in accordance with Sch. 2 para. 93(2) of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 92(a)

F143 Words in Sch. 2 para. 70(2) omitted (with effect in accordance with Sch. 2 para. 93(2) of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 92(b)

Establishment of trustees U.K.

71 (1) The plan must provide for the establishment of a body of trustees consisting of persons resident in the United Kingdom (“the trustees”). U.K.

(2) The plan must provide that the trustees are required—

(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.

(3) 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 (“the trust instrument”).

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

(5) The trust instrument may contain terms that—

(a) define who is a professional trustee and who is a non-professional trustee;

(b) require the trustees to include at least one person who is a professional trustee and at least two who are non-professional trustees;

(c) require at least half of the non-professional trustees to have been, before being appointed as trustees, selected in accordance with a specified process of selection;

(d) require the trustees so selected to be persons who are employees of the company or, in the case of a group plan, of a participating company.

(6) The terms mentioned in sub-paragraph (5) are to be regarded as reasonably incidental to complying with the requirements of this Part of this Schedule for the purposes of sub-paragraph (4).

[F144 Duty to monitor participants in connected schemes U.K.

Textual Amendments

F144 Sch. 2 para. 71A and cross-heading inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 6

71A U.K. The trust instrument must require the trustees to maintain records of participants who have participated in one or more other [F145 Schedule 2] SIPs established by the company or a connected company.]

Textual Amendments

F145 Words in Sch. 2 para. 71A substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 27, 89 (with Sch. 8 paras. 90-96)

Duty to act in accordance with participant’s directions U.K.

72 (1) The trust instrument must require the trustees— U.K.

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

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

only in accordance with a direction given by or on behalf of the participant.

(2) Sub-paragraph (1) is subject to—

(a) paragraph 73 (duty not to dispose of plan shares), and

(b) any provision in the plan made in accordance with paragraph 79 (meeting by trustees of PAYE obligations).

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

Duty not to dispose of plan shares U.K.

73 (1) This paragraph applies to a participant’s plan shares that are free, matching or dividend shares. U.K.

(2) The trust instrument must prohibit the trustees from disposing of any of those shares (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.

(3) Sub-paragraph (2) is subject to—

(a) paragraph 37 (holding period: power to direct trustees to accept general offers etc.),

(b) paragraph 77 (power of trustees to raise funds to subscribe for rights issue),

(c) paragraph 79 (meeting by trustees of PAYE obligations), and

(d) paragraph 90(5) (termination of plan: early removal of shares with participant’s consent).

Duty to make payments to participants U.K.

74 (1) The trust instrument must require the trustees to pay over to a participant as soon as practicable— U.K.

(a) any money received by them in respect of, or by reference to, any of the participant’s shares, or

(b) any money’s worth so received unless it consists of new shares within the meaning of paragraph 87 (company reconstructions).

(2) Sub-paragraph (1) is subject to—

(a) paragraphs 62 to 69 (cash dividends and dividend shares),

(b) the trustees' obligations under sections 510 to 514 (PAYE: shares ceasing to be subject to plan; capital receipts), and

(c) the trustees' PAYE obligations.

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

75 (1) The trust instrument must make the following provision regarding notices. U.K.

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

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

[F146 (aa) if the shares are subject to any restriction, giving details of the restriction,]

(b) stating their market value on the date on which they were awarded to the employee, 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 must give the employee notice of the award—

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

[F147 (aa) if the shares are subject to any restriction, giving details of the restriction,]

(b) stating the amount of partnership share money applied by the trustees in acquiring the shares on behalf of the employee, and

[F148 (c) stating the market value in accordance with which the number of shares awarded to the employee was determined.]

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

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

(b) stating their market value on the acquisition date (as defined by paragraph 66(4)),

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

(d) informing the participant of any amount carried forward under paragraph 68 (reinvestment: amounts to be carried forward).

(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 must give the participant notice of the amount of any foreign tax deducted from the dividend before it was paid.

(6) In sub-paragraph (5) “foreign cash dividend” means a cash dividend paid in respect of plan shares in a company not resident in the United Kingdom.

Textual Amendments

F146 Sch. 2 para. 75(2)(aa) inserted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 52

F147 Sch. 2 para. 75(3)(aa) inserted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 52

F148 Sch. 2 para. 75(3)(c) substituted (with effect in accordance with Sch. 2 para. 81 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 80

Power of trustees to borrow U.K.

76 U.K. 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.

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

77 (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. U.K.

(2) The power conferred by sub-paragraph (1) is subject to paragraph 72 (duty to act in accordance with participant’s directions).

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

F149 78 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F149 Sch. 2 para. 78 omitted (with effect in accordance with Sch. 2 para. 93(2) of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 93(1)

Meeting by trustees of PAYE obligations U.K.

79 (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— U.K.

(a) by disposing of any of those shares, or

(b) if there are any remaining plan shares of the participant, by disposing of any of those shares, or

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

(2) A “PAYE obligation” includes an obligation under any of sections 510 to 512 (PAYE: shares ceasing to be subject to the plan).

(3) For the purposes of sub-paragraph (1) any reference to the trustees disposing of shares includes a reference to their acquiring the shares as 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)(b) may give rise to a charge to tax under—

• section 505 (charge on free or matching shares ceasing to be subject to plan),

• section 506 (charge on partnership shares ceasing to be subject to plan), or

• [F150 Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.) as a result of section 394(2) or 407(2) of that Act (distribution or dividend payment when dividend shares cease to be subject to plan).]

Textual Amendments

F150 Words in Sch. 2 para. 79(4) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 617(3) (with Sch. 2)

Other duties of trustees in relation to tax liabilities U.K.

80 (1) The trust instrument must require the trustees to maintain such records as may be necessary for the purposes of— U.K.

(a) their own PAYE obligations, or

(b) the PAYE obligations of the employer company so far as they relate to the plan.

(2) In sub-paragraph (1)—

• “PAYE obligations”, in relation to the trustees, includes obligations under sections 510 to 514 (PAYE: shares ceasing to be subject to plan and capital receipts);

• “the employer company” has the same meaning as in section 513.

(3) The trust instrument must require the trustees, where the participant becomes liable to income tax under—

(a) this Act, or

(b) [F151 Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.)],

by reason of the occurrence of any event, to inform the participant of any facts relevant to determining that liability.

(4) [F152 Sections 1105 to 1108 of CTA 2010 (information relating to distributions to be provided by nominee) apply] in relation to—

(a) the balance of any cash dividend paid over to the participant under paragraph 64(3),

(b) any amount paid over to a participant under paragraph 68(4) (dividend retained for reinvestment and later paid out), or

(c) any relevant dividend (see sub-paragraph (5)),

as if it were a payment to which [F153 section 1105(1)(b) of that Act] applied (and, in the case of an amount within paragraph (b) above, as if the cash dividend had been paid at the time of the payment to the participant under paragraph 68(4)).

(5) In a case where dividend shares cease to be subject to the plan before the end of the period of 3 years beginning with the date on which they were acquired on a participant’s behalf, the cash dividend applied to acquire dividend shares on the participant’s behalf is a “relevant dividend” for the purposes of sub-paragraph (4)(c).

Textual Amendments

F151 Words in Sch. 2 para. 80(3)(b) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 617(4) (with Sch. 2)

F152 Words in Sch. 2 para. 80(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 396(5)(a) (with Sch. 2)

F153 Words in Sch. 2 para. 80(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 396(5)(b) (with Sch. 2)

[F154 PART 10 U.K. Notification of plans, annual returns and enquiries

Textual Amendments

F154 Sch. 2 Pt. 10 substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 28, 89 (with Sch. 8 paras. 90-96)

Notice of SIP to be given to HMRC U.K.

81A (1) For a SIP to be a Schedule 2 SIP, notice of the SIP must be given to Her Majesty's Revenue and Customs (“HMRC”). U.K.

(2) The notice must—

(a) be given by the company,

(b) contain, or be accompanied by, such information as HMRC may require, and

(c) contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.

(3) A declaration within this sub-paragraph is a declaration—

(a) that the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP, and

(b) if the declaration is made after the first date on which awards of shares are made under the SIP (“the first award date”), that those requirements—

(i) were met in relation to those awards of shares, and

(ii) have otherwise been met in relation to the SIP at all times on or after the first award date when shares appropriated to, or acquired on behalf of, individuals under the SIP have been held under the SIP.

(4) If notice is given under this paragraph in relation to a SIP, for the purposes of the SIP code the SIP is to be a Schedule 2 SIP at all times on and after the relevant date (but not before that date).

(5) But if the notice is given after the initial notification deadline, the SIP is to be a Schedule 2 SIP only from the beginning of the relevant tax year.

(6) For the purposes of this Part—

• “the initial notification deadline” is 6 July in the tax year following that in which the first award date falls,

• “the relevant date” is—

  (a)

  the date on which the declaration within sub-paragraph (3) is made, or

  (b)

  if that declaration is made after the first award date, the first award date, and

• “the relevant tax year” is—

  (a)

  the tax year in which the notice under this paragraph is given, or

  (b)

  if that notice is given on or before 6 July in that tax year, the preceding tax year.

(7) Sub-paragraph (4) is subject to the following paragraphs of this Part.

Annual returns U.K.

81B (1) This paragraph applies if notice is given in relation to a SIP under paragraph 81A. U.K.

(2) The company must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).

(3) If paragraph 81A(5) applies in relation to the SIP, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.

(4) A return for a tax year must—

(a) contain, or be accompanied by, such information as HMRC may require, and

(b) be given on or before 6 July in the following tax year.

(5) The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—

(a) any person who has participated in the SIP, or

(b) any other person whose liability to tax the operation of the SIP is relevant to.

(6) If during a tax year an alteration is made in a key feature of—

(a) the SIP, or

(b) the plan trust,

the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.

(7) A declaration within this sub-paragraph is a declaration that the alteration has not caused the requirements of Parts 2 to 9 of this Schedule not to be met in relation to the SIP.

(8) For the purposes of sub-paragraph (6) a “key feature” of a SIP or plan trust is a provision of the SIP or plan trust which is necessary in order for the requirements of Parts 2 to 9 of this Schedule to be met in relation to the SIP.

(9) A return is not required for any tax year following that in which the termination condition is met in relation to the SIP.

(10) For the purposes of this Part “the termination condition” is met in relation to a SIP when—

(a) a plan termination notice has been issued in relation to it under paragraph 89, and

(b) all the requirements under paragraphs 56(3), 68(4)(c) and 90 have been met by the trustees.

(11) If the company becomes aware that—

(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,

(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or

(c) any other error or inaccuracy has occurred in relation to a return for a tax year,

the company must give an amended return correcting the position to HMRC without delay.

81C (1) This paragraph applies if the company fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 81B(4)(b) (“the date for delivery”). U.K.

(2) The company is liable for a penalty of £100.

(3) If the company's failure continues after the end of the period of 3 months beginning with the date for delivery, the company is liable for a further penalty of £300.

(4) If the company's failure continues after the end of the period of 6 months beginning with the date for delivery, the company is liable for a further penalty of £300.

(5) The company is liable for a further penalty under this sub-paragraph if—

(a) the company's failure continues after the end of the period of 9 months beginning with the date for delivery,

(b) HMRC decide that such a penalty should be payable, and

(c) HMRC give notice to the company specifying the period in respect of which the penalty is payable.

(The company may be liable for more than one penalty under this sub-paragraph.)

(6) The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).

(7) The period specified in the notice under sub-paragraph (5)(c)—

(a) may begin earlier than the date on which the notice is given, but

(b) may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.

(8) Liability for a penalty under this paragraph does not arise if the company satisfies HMRC (or, on an appeal under paragraph 81K, the tribunal) that there is a reasonable excuse for its failure.

(9) For the purposes of sub-paragraph (8)—

(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the company's control,

(b) where the company relies on any other person to do anything, that is not a reasonable excuse unless the company took reasonable care to avoid the failure, and

(c) where the company had a reasonable excuse for the failure but the excuse ceased, the company is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

Notices and returns to be given electronically etc U.K.

81D (1) A notice under paragraph 81A, and any information accompanying the notice, must be given electronically. U.K.

(2) A return under paragraph 81B, and any information accompanying the return, must be given electronically.

(3) But, if HMRC consider it appropriate to do so, HMRC may allow the company to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.

(4) The Commissioners for Her Majesty's Revenue and Customs—

(a) must prescribe how notices, returns and accompanying information are to be given electronically;

(b) may make different provision for different cases or circumstances.

81E (1) This paragraph applies if a return under paragraph 81B, or any information accompanying such a return— U.K.

(a) is given otherwise than in accordance with paragraph 81D, or

(b) contains a material inaccuracy—

(i) which is careless or deliberate, or

(ii) which is not corrected as required by paragraph 81B(11).

(2) The company is liable for a penalty of an amount decided by HMRC.

(3) The penalty must not exceed £5,000.

(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the company to take reasonable care.

Enquiries U.K.

81F (1) This paragraph applies if notice is given in relation to a SIP under paragraph 81A. U.K.

(2) HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than—

(a) 6 July in the tax year following the tax year in which the initial notification deadline falls, or

(b) if the notice under paragraph 81A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.

(3) HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 81B(7) is given to HMRC.

(4) Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 9 of this Schedule—

(a) are not met in relation to the SIP, or

(b) have not been met in relation to the SIP.

(5) HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so.

(6) Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition has been met in relation to the SIP.

81G (1) An enquiry under paragraph 81F(2), (3) or (5) is completed when HMRC give the company a notice (a “closure notice”) stating— U.K.

(a) that HMRC have completed the enquiry, and

(b) that—

(i) paragraph 81H is to apply,

(ii) paragraph 81I is to apply, or

(iii) neither paragraph 81H nor paragraph 81I is to apply.

(2) If the company receives notice under paragraph 81F(2), (3) or (5), the company may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.

(3) The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).

(4) The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.

81H (1) This paragraph applies if HMRC decide— U.K.

(a) that requirements of Parts 2 to 9 of this Schedule—

(i) are not met in relation to the SIP, or

(ii) have not been met in relation to the SIP, and

(b) that the situation is, or was, so serious that this paragraph should apply.

(2) If this paragraph applies—

(a) the SIP is not to be a Schedule 2 SIP with effect from—

(i) such relevant time as is specified in the closure notice, or

(ii) if no relevant time is specified, the time of the giving of the closure notice, and

(b) the company is liable for a penalty of an amount decided by HMRC.

(3) Sub-paragraph (2)(a) does not affect the operation of the SIP code in relation to shares appropriated to, or acquired on behalf of, an individual under the SIP before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(4) In particular, if the SIP was a Schedule 2 SIP when the shares were appropriated to, or acquired on behalf of, the individual, the SIP is to continue to be a Schedule 2 SIP in relation to those shares.

(5) The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a) the total income tax for which participants in the SIP have not been liable, or will not be liable in the future, and

(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the SIP having been a Schedule 2 SIP at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(6) The liabilities covered by sub-paragraph (5) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraphs (3) and (4).

(7) In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 9 of this Schedule were not met in relation to the SIP.

81I (1) This paragraph applies if HMRC decide— U.K.

(a) that requirements of Parts 2 to 9 of this Schedule—

(i) are not met in relation to the SIP, or

(ii) have not been met in relation to the SIP, but

(b) that the situation is not, or was not, so serious that paragraph 81H should apply.

(2) If this paragraph applies, the company—

(a) is liable for a penalty of an amount decided by HMRC, and

(b) must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP.

(3) The penalty under sub-paragraph (2)(a) must not exceed £5,000.

(4) In sub-paragraph (2)(b) “the relevant day” means—

(a) the last day of the period in which notice of an appeal under paragraph 81K(2)(b) may be given, or

(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.

(5) Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the SIP before the giving of the closure notice or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).

(6) If the company fails to comply with sub-paragraph (2)(b), HMRC may give the company a notice stating that that is the case (a “default notice”).

(7) If the company is given a default notice—

(a) the SIP is not to be a Schedule 2 SIP with effect from—

(i) such relevant time as is specified in the default notice, or

(ii) if no relevant time is specified, the time of the giving of the default notice, and

(b) the company is liable for a further penalty of an amount decided by HMRC.

(8) Sub-paragraph (7)(a) does not affect the operation of the SIP code in relation to shares appropriated to, or acquired on behalf of, an individual under the SIP before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(9) In particular, if the SIP was a Schedule 2 SIP when the shares were appropriated to, or acquired on behalf of, the individual, the SIP is to continue to be a Schedule 2 SIP in relation to those shares.

(10) The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a) the total income tax for which participants in the SIP have not been liable, or will not be liable in the future, and

(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the SIP having been a Schedule 2 SIP at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(11) The liabilities covered by sub-paragraph (10) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraphs (8) and (9).

(12) In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 9 of this Schedule were not met in relation to the SIP.

Assessment of penalties U.K.

81J (1) This paragraph applies if the company is liable for a penalty under this Part. U.K.

(2) HMRC must assess the penalty and notify the company of the assessment.

(3) Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the company becomes liable for the penalty.

(4) In the case of a penalty under paragraph 81E(1)(b), the assessment must be made no later than—

(a) 12 months after the date on which HMRC become aware of the inaccuracy, and

(b) 6 years after the date on which the company becomes liable for the penalty.

(5) In the case of a penalty under paragraph 81H(2)(b) or 81I(2)(a) or (7)(b) where notice of appeal is given under paragraph 81K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.

(6) A penalty payable under this Part must be paid—

(a) no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the company, or

(b) if notice of appeal is given against the penalty under paragraph 81K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.

(7) The penalty may be enforced as if it were corporation tax or, if the company is not within the charge to corporation tax, income tax charged in an assessment and due and payable.

(8) Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

Appeals U.K.

81K (1) The company may appeal against a decision of HMRC that the company is liable for a penalty under paragraph 81C or 81E. U.K.

(2) The company may appeal against—

(a) a decision of HMRC mentioned in paragraph 81H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;

(b) a decision of HMRC mentioned in paragraph 81I(1).

(3) The company may appeal against a decision of HMRC—

(a) to give the company a default notice under paragraph 81I;

(b) to specify, or not to specify, a relevant time in the default notice.

(4) The company may appeal against a decision of HMRC as to the amount of a penalty payable by the company under this Part.

(5) The company may appeal against a decision of an officer of Revenue and Customs to give a direction under section 998 of CTA 2009 (withdrawal of corporation tax deductions in relation to a Schedule 2 SIP).

(6) Notice of appeal must be given to HMRC no later than 30 days after the date on which—

(a) in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 81J(2) is given to the company;

(b) in the case of an appeal under sub-paragraph (2), the closure notice is given;

(c) in the case of an appeal under sub-paragraph (3), the default notice is given;

(d) in the case of an appeal under sub-paragraph (5), notice of the officer's decision is given to the company.

(7) On an appeal under sub-paragraph (1), (3)(a) or (5) which is notified to the tribunal, the tribunal may affirm or cancel the decision.

(8) On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—

(a) affirm or cancel the decision, or

(b) substitute for the decision another decision which HMRC had power to make.

(9) On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—

(a) affirm the amount of the penalty decided, or

(b) substitute another amount for that amount.

(10) Subject to this paragraph and paragraph 81J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the company is not within the charge to corporation tax, income tax.]

Part 11 U.K. Supplementary provisions

Company reconstructions U.K.

86 (1) In this Part of this Schedule a “company reconstruction” means a transaction to which this paragraph applies. U.K.

(2) This paragraph applies to a transaction which occurs in relation to any of a participant’s plan shares (“the original holding”) and—

(a) results in a new holding being equated with the original holding for the purposes of capital gains tax, or

(b) would have that result but for the fact that what would be the new holding consists of or includes a qualifying corporate bond.

(3) But where an excluded issue of shares is made—

(a) that issue of shares does not by itself count as a transaction within sub-paragraph (2); and

(b) if made as part of a transaction within that sub-paragraph (that is, as part of a company reconstruction), the shares issued are to be regarded as not forming part of the new holding.

(4) An “excluded issue of shares” means an issue of shares of any of the following descriptions (in respect of which a charge to income tax arises)—

(a) redeemable shares or securities issued as mentioned in [F155 paragraph C or D in section 1000(1) of CTA 2010] (distributions);

(b) share capital issued in circumstances such that [F156 section 1022(3) of CTA 2010] (bonus issues) applies;

(c) share capital to which [F157 section 410 of ITTOIA 2005 (stock dividends) applies that is issued in a case where subsection (2) or (3) of that section applies.]

Textual Amendments

F155 Words in Sch. 2 para. 86(4)(a) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 396(6)(a) (with Sch. 2)

F156 Words in Sch. 2 para. 86(4)(b) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 396(6)(b) (with Sch. 2)

F157 Words in Sch. 2 para. 86(4)(c) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 396(6)(c) (with Sch. 2)

Consequences of company reconstructions U.K.

87 (1) In the SIP code references to a participant’s plan shares in relation to a SIP are to be read, after the time of a company reconstruction— U.K.

(a) as referring to the new shares, or

(b) as including those shares,

as the case may be.

This is subject to the following provisions of this paragraph.

(2) For the purposes of the SIP code—

(a) a company reconstruction is to be treated as not involving a disposal of the shares comprised in the original holding;

(b) new shares are to be treated as having been awarded to the participant on the date on which the corresponding old shares were awarded;

(c) the conditions in Part 4 of this Schedule (types of share that may be awarded) are to be treated as fulfilled with respect to any new shares if they were (or were treated as) fulfilled with respect to the corresponding old shares; and

(d) the provisions of—

(i) sections 489 to 514 (SIPs: income tax advantages and charges under this Act),

[F158 (ii) sections 392 to 395 and 405 to 408 of ITTOIA 2005 (SIPs: special rules for charges under Chapters 3 and 4 of Part 4 of that Act (dividends etc. from UK or non-UK resident companies etc.)) and section 770 of that Act (exemption for amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment),]

(iii) sections 686B and 686C of ICTA (SIPs: income tax advantages for trustees), and

(iv) Part 1 of Schedule 7D to TCGA 1992 (SIPs: capital gains tax),

apply in relation to the new shares as they would have applied in relation to the corresponding old shares.

(3) If the corresponding old shares were dividend shares, the reference in sub-paragraph (2)(b) to the corresponding old shares being awarded is a reference to those shares being acquired on behalf of the participant.

(4) Sub-paragraphs (1) to (3) are subject to paragraph 88 (treatment of shares acquired under rights issue).

(5) For the purposes of the SIP code if, as part of a company reconstruction, trustees become entitled to a capital receipt, their entitlement to the capital receipt is to be taken to arise before the new holding comes into being.

(6) In the SIP code, in the context of a new holding, “shares” includes securities and rights of any description which form part of the new holding for the purposes of Chapter 2 of Part 4 of TCGA 1992 (reorganisation of share capital etc.).

(7) In this paragraph—

(a) “new shares” means shares comprised in the new holding which were issued in respect of, or otherwise represent, shares comprised in the original holding;

(b) “the new holding” and “the original holding” mean respectively the new and original holdings mentioned in paragraph 86(2);

(c) “corresponding old shares”, in relation to any new shares, means the shares in respect of which the new shares are issued or which the new shares otherwise represent.

Textual Amendments

F158 Sch. 2 para. 87(2)(d)(ii) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 617(6) (with Sch. 2)

Treatment of shares acquired under rights issue U.K.

88 (1) This paragraph applies for the purposes of the SIP code where the trustees exercise rights arising under a rights issue and conferred in respect of a participant’s plan shares. U.K.

(2) In such a case, any shares or securities or rights allotted are to be treated as if they were plan shares—

(a) identical to the shares in respect of which the rights were conferred, and

(b) appropriated to, or acquired on behalf of, the participant under the plan in the same way and at the same time as those shares.

(3) If, however, either of the conditions set out in sub-paragraph (4) is met, sub-paragraph (5) applies instead.

(4) The conditions are—

(a) that the funds used by the trustees to exercise the rights are not provided by the exercise of the trustees' powers under paragraph 77 (trustees' powers to raise funds to subscribe for rights issue);

(b) that similar rights are not conferred in respect of all ordinary shares in the company.

(5) If either of those conditions is met—

(a) any shares, securities or rights allotted are not plan shares, and

(b) sections 127 to 130 of TCGA 1992 (reorganisation of share capital etc.) do not apply in relation to them.

Termination of plan U.K.

89 (1) The plan may provide for the company to issue a plan termination notice in respect of the plan in circumstances specified in the plan. U.K.

(2) The plan must provide that, where a plan termination notice is issued, a copy of the notice must be given, without delay, to—

F159 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the trustees,

(c) each individual who has plan shares, and

(d) each individual who has entered into a partnership share agreement which was in force immediately before the notice was issued.

Textual Amendments

F159 Sch. 2 para. 89(2)(a) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 29, 89 (with Sch. 8 paras. 90-96)

Effect of plan termination notice U.K.

90 (1) This paragraph applies if the company has issued a plan termination notice under paragraph 89. U.K.

(2) No further shares may be [F160 appropriated to, or acquired on behalf of,] individuals under the plan.

(3) The trustees must remove the plan shares from the plan as soon as practicable after whichever is the later of—

(a) the end of the notice period, or

(b) the first date on which the shares may be removed from the plan without giving rise to a charge to income tax under sections 501 to 507 (SIPs: tax charges) on the participant on whose behalf they are held.

(4) In sub-paragraph (3) “the notice period” means the period of 3 months beginning with the date on which the requirements imposed by the plan in accordance with paragraph 89(2) are met in respect of the plan termination notice.

(5) The trustees may remove a participant’s shares from the plan at an earlier date with the participant’s consent.

(6) Any consent given by the participant before receiving a copy of the plan termination notice is to be disregarded for the purposes of sub-paragraph (5).

(7) As soon as practicable after the plan termination notice is issued, the trustees must pay any money held on an individual’s behalf to the individual.

(8) In this paragraph references to the trustees removing the plan shares from the plan are to their doing the following in the case of each participant—

(a) transferring the shares to the participant on behalf of whom they are held, or to another person, at the participant’s direction, or

(b) disposing of the shares and accounting (or holding themselves ready to account) for the proceeds to the participant or to another person at the participant’s direction.

(9) Where a participant has died, the references in this paragraph to a participant are to the participant’s personal representatives.

Textual Amendments

F160 Words in Sch. 2 para. 90(2) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 30, 89 (with Sch. 8 paras. 90-96)

Jointly owned companies U.K.

91 (1) This paragraph applies for the purposes of the provisions of the SIP code relating to group plans. U.K.

(2) Each joint owner of a jointly owned company is to be treated as controlling every company within sub-paragraph (3).

(3) The companies within this sub-paragraph are—

(a) the jointly owned company, and

(b) any company controlled by that company.

(4) However, no company within sub-paragraph (3) may be—

(a) a constituent company in more than one group plan, or

(b) a constituent company in a particular group plan if another company within that sub-paragraph is a constituent company in a different group plan.

(5) In this paragraph a “jointly owned company” means a company—

(a) of which 50% of the issued share capital is owned by one person and 50% by another, and

(b) which is not controlled by any one person.

(6) This paragraph does not apply for the purposes of paragraph 27(1)(b) (requirement that plan shares are in a company not under another company’s control).

Determination of market value U.K.

92 (1) For the purposes of the SIP code the “market value” of shares has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act. U.K.

[F161 (2) For the purposes of this Schedule the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.]

(3) Where the market value of shares on any date has to be determined for the purposes of the SIP code, [F162 an officer of Revenue and Customs] and the trustees may agree that it is to be determined by reference—

(a) to a date or dates, or

(b) to an average of the values on a number of dates,

stated in the agreement.

Textual Amendments

F161 Sch. 2 para. 92(2) substituted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 55

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

Modifications etc. (not altering text)

C1 Sch. 2 para. 92(2) applied by 2005 c. 5, s. 407(3C) (as inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 63(3), 89 (with Sch. 8 paras. 90-96))

C2 Sch. 2 para. 92(2) applied by 2005 c. 5, s. 394(3C) (as inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 57(3), 89 (with Sch. 8 paras. 90-96))

Power to require information U.K.

93 [F163 (1) An officer of Revenue and Customs may by notice require a person to provide the officer with any information— U.K.

(a) which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the SIP code, and

(b) which the person to whom the notice is addressed has or can reasonably obtain.]

(2) The power conferred by this paragraph extends, in particular, to—

(a) information to enable [F162 an officer of Revenue and Customs] —

[F164 (i) to check anything contained in a notice under paragraph 81A or a return under paragraph 81B or to check any information accompanying such a notice or return, or”, and]

(ii) to determine the liability to tax, including capital gains tax, of any person who has participated in a plan [F165 or any other person whose liability to tax the operation of a plan is relevant to], and

(b) information about the administration of a plan and any proposed alteration of the terms of a plan.

(3) The notice must require the information to be provided within a specified period, which must not end earlier than 3 months after the date when the notice is given.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F163 Sch. 2 para. 93(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 31(2), 89 (with Sch. 8 paras. 90-96)

F164 Sch. 2 para. 93(2)(a)(i) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 31(3)(a), 89 (with Sch. 8 paras. 90-96)

F165 Words in Sch. 2 para. 93(2)(a)(ii) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 31(3)(b), 89 (with Sch. 8 paras. 90-96)

Meaning of “associated company” U.K.

94 (1) For the purposes of the SIP code one company is an “associated company” of another company at a given time if— U.K.

(a) one has control of the other, or

(b) both are under the control of the same person or persons.

(2) Sub-paragraph (1) does not, however, apply for the purposes of paragraph 29 (prohibited shares).

(3) For the purposes of sub-paragraph (1) the question whether a person controls a company is to be determined in accordance with [F166 sections 450 and 451 of CTA 2010].

Textual Amendments

F166 Words in Sch. 2 para. 94(3) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 396(7) (with Sch. 2)

Meaning of participant ceasing to be in relevant employment U.K.

95 (1) This paragraph explains what is meant, for the purposes of the SIP code, by a participant ceasing to be in relevant employment. U.K.

(2) For the purposes of the SIP code “relevant employment” means employment by the company or any associated company.

(3) A participant who remains in the employment of the company or any associated company does not cease to be in relevant employment.

Meaning of shares being withdrawn from plan U.K.

96 (1) For the purposes of the SIP code plan shares are withdrawn from a SIP when— U.K.

(a) they are transferred by the trustees to the participant, or another person, on the direction of the participant,

(b) the participant assigns, charges or otherwise disposes of the beneficial interest in the shares, or

(c) they are disposed of by the trustees, on the direction of the participant, in circumstances where the trustees account (or hold themselves ready to account) for the proceeds to the participant or to another person.

(2) Where the participant has died, the references in sub-paragraph (1) to the participant are to the participant’s personal representatives.

Meaning of shares ceasing to be subject to plan U.K.

97 (1) For the purposes of the SIP code plan shares cease to be subject to a SIP when— U.K.

(a) they are withdrawn from the plan,

(b) the participant to whom the shares were awarded ceases to be in relevant employment at a time when the shares are subject to the plan, or

(c) the trustees dispose of the shares under provision made in accordance with paragraph 79 (meeting by trustees of PAYE obligations).

(2) If an individual—

(a) participates in an award of partnership shares, and

(b) ceases to be in relevant employment at any time during the acquisition period relating to that award,

the individual is to be treated for the purposes of this paragraph as ceasing to be in relevant employment immediately after the shares are awarded.

(3) In sub-paragraph (2) “the acquisition period” in relation to an award means—

(a) where there was no accumulation period, the period beginning with the deduction of the partnership share money and ending with the acquisition date (as defined by paragraph 50(4)), and

(b) where there was an accumulation period, the period beginning with the end of that period and ending immediately before the acquisition date (as defined by paragraph 52(5)).

(4) If a participant ceases to be in relevant employment, the participant’s plan shares are to be treated as ceasing to be subject to the plan on the date of leaving.

Meaning of “the specified retirement age” U.K.

F167 98 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F167 Sch. 2 para. 98 omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 5 (with Sch. 2 para. 17)

Minor definitions U.K.

99 (1) In the SIP code— U.K.

• “articles of association”, in relation to a company, includes any other written agreement between the shareholders of the company;

• “company” means a body corporate;

• “group of companies” means a company and any other companies of which it has control, and “group company” has a corresponding meaning;

• “participant’s plan shares”, in relation to a SIP, means plan shares that have been awarded to an individual participant;

• “PAYE obligations” means (subject to paragraphs 79(2) and 80(2)) obligations of any person under—

  (a)

  Part 11 of this Act, or

  (b)

  PAYE regulations;

• “plan shares”, in relation to a SIP, means—

  (a)

  free, partnership or matching shares which have been awarded to participants under the plan,

  (b)

  dividend shares which have been acquired on behalf of participants under the plan, and

  (c)

  shares in relation to which paragraph 87(1) applies (company reconstructions: new shares),

  and which (in each case) remain subject to the plan;

• “provision for forfeiture” means a provision to the effect that a participant ceases to be beneficially entitled to shares on the occurrence of certain events, and “forfeiture” is to be read accordingly;

• “qualifying corporate bond” has the meaning given by section 117 of TCGA 1992;

• “redundancy” has the same meaning as in ERA 1996 or ER(NI)O 1996;

• “rights arising under a rights issue” means 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.

(2) For the purposes of the SIP code references to “shares” include fractions of shares forming part of the share capital of a company registered in a foreign country the law of which recognises such fractions.

(3) For the purposes of the SIP code a company is a member of a consortium owning another company if it is one of a number of companies—

(a) which between them beneficially own not less than 75% of the other company’s ordinary share capital, and

(b) each of which beneficially owns not less than 5% of that capital.

[F168 (4) For the purposes of the SIP code—

(a) shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

(b) the “restriction” is that provision.]

Textual Amendments

F168 Sch. 2 para. 99(4) inserted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 56

Index of defined expressions U.K.

100 U.K. In the SIP code the following expressions are defined or otherwise explained by the provisions indicated below:

accumulation period	paragraph 51
F169 . . .	F169 . . .
articles of association	paragraph 99(1)
associated company	paragraph 94 (and see paragraph 29(3))
award of shares	paragraph 5(1)
F170 . . .	. . .
building society	[F171 section 989 of ITA 2007]
ceasing to be in relevant employment (in relation to a participant)	paragraph 95
ceasing to be subject to plan (in relation to shares)	paragraph 97
child	[F172 section 721(6)]
close company	[F173 section 989 of ITA 2007] F174 ...
company	paragraph 99(1)
the company (in relation to a SIP)	paragraph 2(2)
company reconstruction (in Part 11 of this Schedule)	paragraph 86(1)
connected person	section 718
consortium (member of)	paragraph 99(3)
constituent company	paragraph 4(3)
control	section 719 (and see paragraphs 29(5), 37(6) and 94(3))
distribution	[F175 section 989 of ITA 2007]
dividend shares	paragraph 62(3)(b)
earnings	section 62 and see section 721(7)
eligible shares (in Part 4 of this Schedule)	paragraph 25(2)
employee, employed, employer and employment	section 4
the employment requirement	paragraph 15(3)
forfeiture, provision for	paragraph 99(1)
free shares	paragraph 2(1)(a)
group company	paragraph 99(1)
group of companies	paragraph 99(1)
group plan	paragraph 4(2)
holding period	paragraph 36 (and see paragraph 67)
F170 . . .
market value (of shares)	paragraph 92
matching shares	paragraph 3(1)
notice (except in paragraph 54 or 55)	[F176 section 989 of ITA 2007]
ordinary share capital	[F177 section 989 of ITA 2007]
parent company	paragraph 4(1)
participant (in relation to a SIP)	paragraph 5(4)
participant’s plan shares	paragraph 99(1) (and see paragraph 87(1))
participation in an award of shares	paragraph 5(3)
partnership share agreement	paragraph 44
partnership share money	paragraph 45(2)
partnership shares	paragraph 2(1)(b)
PAYE deduction	section 488(4)
PAYE obligations	paragraph 99(1)
PAYE regulations	section 684(8)
performance allowances	paragraph 34(4)
personal representatives	[F178 section 989 of ITA 2007]
plan requirements (in relation to a SIP)	paragraph 2(2)
plan shares (in relation to a SIP)	paragraph 99(1) (and see paragraphs 86 to 88)
the plan trust	paragraph 71(3)
provision for forfeiture	paragraph 99(1)
qualifying corporate bond	paragraph 99(1)
qualifying employee	paragraph 8(6)
recognised stock exchange	[F179 section 1005 of ITA 2007]
redundancy	paragraph 99(1)
reinvestment	paragraph 62(3)(a)
relevant employment	paragraph 95(2)
[F180 restriction (in relation to shares)	paragraph 99(4)]
rights arising under a rights issue	paragraph 99(1)
salary	paragraph 43(4)
share incentive plan (“SIP”)	section 488(4)
[F181 Schedule 2 SIP	paragraph 1 and Part 10 of this Schedule]
shares	paragraph 99(2) (and in the context of a new holding, paragraph 87(6))
the SIP code	section 488(3)
F182 . . .	F182 . . .
F183 . . .	F183 . . .
tax	[F184 section 989 of ITA 2007]
[F185 tribunal	section 989 of ITA 2007]
tax year	[F186 section 4(2) of ITA 2007 (as applied by section 989 of that Act)]
the trustees	paragraphs 2(2), 71(1)
the trust instrument	paragraph 71(3)
withdrawal of shares from plan	paragraph 96(1)

Textual Amendments

F169 Words in Sch. 2 para. 100 Table omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 32(a), 89 (with Sch. 8 paras. 90-96)

F170 Sch. 2 para. 100 entry repealed (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 121(e), Sch. 5; S.I. 2005/1126, art. 2(2)(h)(i)

F171 Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(a) (with Sch. 2)

F172 Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(b) (with Sch. 2)

F173 Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(c) (with Sch. 2)

F174 Words in Sch. 2 para. 100 Table omitted (with effect in accordance with Sch. 2 para. 38 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 37

F175 Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(d) (with Sch. 2)

F176 Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(e) (with Sch. 2)

F177 Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(f) (with Sch. 2)

F178 Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(g) (with Sch. 2)

F179 Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(h) (with Sch. 2)

F180 Words in Sch. 2 para. 100 Table inserted (with effect in accordance with Sch. 2 para. 58 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 57

F181 Words in Sch. 2 para. 100 Table inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 32(b), 89 (with Sch. 8 paras. 90-96)

F182 Words in Sch. 2 para. 100 Table omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 343(2)

F183 Words in Sch. 2 para. 100 Table omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 6 (with Sch. 2 para. 17)

F184 Words in Sch. 2 para. 100 substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 396(8) (with Sch. 2)

F185 Words in Sch. 2 para. 100 Table inserted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 343(3)

F186 Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(j) (with Sch. 2)

Section 516

SCHEDULE 3 U.K. F187 ... SAYE option schemes

Textual Amendments

F187 Word in Sch. 3 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 103, 146 (with Sch. 8 paras. 147-157)

Part 1 U.K. Introduction

[F188 Introduction to Schedule 3] SAYE option schemes U.K.

Textual Amendments

F188 Words in Sch. 3 para. 1 cross-heading substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 104, 146 (with Sch. 8 paras. 147-157)

1 [F189 (A1) For the purposes of the SAYE code an SAYE option scheme is a Schedule 3 SAYE option scheme if the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme.] U.K.

(3) The requirements consist of general requirements (see Part 2) and requirements as to—

• the eligibility of individuals to participate in a scheme (see Part 3),

• the shares to which schemes can apply (see Part 4),

• the existence of a linked [F190 savings arrangement] (see Part 5),

• the share options that may be granted under the scheme (see Part 6), and

• the exchange of share options (see Part 7).

[F191 (4) Sub-paragraph (A1) is subject to Part 8 of this Schedule which—

(a) requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 3 SAYE option scheme (see paragraph 40A(1)),

(b) provides for a scheme in relation to which such notice is given to be a Schedule 3 SAYE option scheme (see paragraph 40A(4)), and

(c) gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 3 SAYE option scheme (see paragraphs 40F to 40I).]

Textual Amendments

F189 Sch. 3 para. 1(A1) substituted for Sch. 3 para. 1(1)(2) (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 105(2), 146 (with Sch. 8 paras. 147-157)

F190 Words in Sch. 3 para. 1(3) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(2) (with Sch. 2)

F191 Sch. 3 para. 1(4) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 105(3), 146 (with Sch. 8 paras. 147-157)

SAYE option schemes U.K.

2 (1) In the SAYE code an “SAYE option scheme” means (in accordance with section 516(4)) a scheme established by a company which provides— U.K.

(a) for share options to be granted to employees and directors, and

(b) for the shares acquired by the exercise of the share options to be paid for in the way mentioned in paragraph 24 (payments for shares to be linked to approved [F192 savings arrangements]).

(2) In the SAYE code, in relation to an SAYE option scheme—

• “participant” means an individual who has been granted (but has not yet exercised) share options under the scheme (“the options”);

• “participate” means obtain and exercise share options under the scheme;

• “the scheme organiser” means the company which has established the scheme.

Textual Amendments

F192 Words in Sch. 3 para. 2(1)(b) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(3) (with Sch. 2)

Group schemes U.K.

3 (1) An SAYE option scheme established by a company that controls one or more other companies (a “parent scheme company”) may extend to all or any of those other companies. U.K.

(2) In the SAYE code an SAYE option scheme established by a parent scheme company which so extends is called a “group scheme”.

(3) In relation to a group scheme a “constituent company” means—

(a) the parent scheme company, or

(b) any other company to which for the time being the scheme is expressed to extend.

(4) Paragraph 46 deals with jointly owned companies and companies controlled by them.

Part 2 U.K. General requirements F193 ...

Textual Amendments

F193 Words in Sch. 3 Pt. 2 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 106, 146 (with Sch. 8 paras. 147-157)

General requirements F194 ...: introduction U.K.

Textual Amendments

F194 Words in Sch. 3 para. 4 cross-heading omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 107, 146 (with Sch. 8 paras. 147-157)

4 U.K. An SAYE option scheme must meet the requirements of—

• paragraph 5 (general restriction on contents of scheme),

• paragraph 6 (all-employee nature of scheme),

• paragraph 7 (participation on similar terms), and

• paragraph 8 (no preferential treatment for directors and senior employees).

General restriction on contents of scheme U.K.

[F195 5 (1) The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options. U.K.

(2) The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.

(3) For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.]

Textual Amendments

F195 Sch. 3 para. 5 substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 108, 146 (with Sch. 8 paras. 147-157)

All-employee nature of scheme U.K.

6 (1) The scheme must provide that every person who meets the conditions in sub-paragraph (2) is eligible to participate in the scheme. U.K.

(2) A person (“E”) meets the conditions in this sub-paragraph if—

(a) E is an employee or a full-time director of the scheme organiser or (in the case of a group scheme) of a constituent company,

(b) E has been such an employee or director at all times during a qualifying period of not more than 5 years,

[F196 (c) E's earnings from the office or employment within paragraph (a) are (or would be if there were any) general earnings to which section 15 applies (earnings for year when employee UK resident), [F197 and]

F198 (ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

(d) E is not ineligible under paragraph 11 (the “no material interest” requirement).

(3) The scheme must not contain any feature which has or is likely to have the effect of discouraging any description of persons who—

(a) meet the conditions in sub-paragraph (2), or

(b) met those conditions before ceasing to be persons within sub-paragraph (2)(a),

from actually participating in the scheme.

(4) Sub-paragraph (3) does not apply to any provision required or authorised by a provision of this Schedule.

Textual Amendments

F196 Sch. 3 para. 6(2)(c)(ca) substituted for Sch. 3 para. 6(2)(c) (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 42

F197 Word in Sch. 3 para. 6(2)(c) inserted (with effect in accordance with Sch. 46 para. 72 of the amending Act) by Finance Act 2013 (c. 29), Sch. 46 para. 41(1)(a) (with Sch. 46 para. 41(2))

F198 Sch. 3 para. 6(2)(ca) omitted (with effect in accordance with Sch. 46 para. 72 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 41(1)(b) (with Sch. 46 para. 41(2))

Participation on similar terms U.K.

7 (1) The requirements of this paragraph are— U.K.

(a) that every person who meets the conditions in paragraph 6(2) (all-employee nature of scheme) must be eligible to participate in the scheme on similar terms, and

(b) that every person who participates in the scheme must actually do so on similar terms.

(2) The requirements of this paragraph are not infringed by the fact that the rights of those participating in the scheme to obtain and exercise share options vary according to—

(a) the levels of their remuneration,

(b) the length of their service, or

(c) any similar factors.

No preferential treatment for directors and senior employees U.K.

8 (1) The requirement of this paragraph is that, if the scheme organiser is a member of a group of companies, the scheme does not and is not likely to have the effect of conferring benefits wholly or mainly— U.K.

(a) on directors of companies in the group, or

(b) on employees of companies in the group who receive the higher or highest levels of remuneration.

(2) “A group of companies” means a company and any other companies of which it has control.

Part 3 U.K. Eligibility of individuals to participate in scheme

Requirements relating to the eligibility of individuals: introduction U.K.

9 U.K. An SAYE option scheme must meet the requirements of—

• paragraph 10 (the employment requirement),

• F199 ...

Textual Amendments

F199 Words in Sch. 3 para. 9 omitted (with effect in accordance with Sch. 2 para. 43 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 40

The employment requirement U.K.

10 (1) The scheme must ensure that an individual is not eligible to participate in the scheme at a particular time unless the individual is then a director or employee of— U.K.

(a) the scheme organiser, or

(b) in the case of a group scheme, a constituent company.

(2) The requirement of this paragraph is not infringed by a provision of the scheme required or authorised by a provision of this Schedule.

The “no material interest” requirement U.K.

F200 11 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F200 Sch. 3 paras. 11-16 omitted (with effect in accordance with Sch. 2 para. 43 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 41

Meaning of “material interest” U.K.

F200 12 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F200 Sch. 3 paras. 11-16 omitted (with effect in accordance with Sch. 2 para. 43 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 41

Material interest: options and interests in SIPs U.K.

F200 13 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F200 Sch. 3 paras. 11-16 omitted (with effect in accordance with Sch. 2 para. 43 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 41

Meaning of “associate” U.K.

F200 14 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F200 Sch. 3 paras. 11-16 omitted (with effect in accordance with Sch. 2 para. 43 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 41

Meaning of “associate”: trustees of employee benefit trust U.K.

F200 15 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F200 Sch. 3 paras. 11-16 omitted (with effect in accordance with Sch. 2 para. 43 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 41

Meaning of “associate”: trustees of discretionary trust U.K.

F200 16 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F200 Sch. 3 paras. 11-16 omitted (with effect in accordance with Sch. 2 para. 43 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 41

Part 4 U.K. Shares to which schemes can apply

Requirements relating to shares that may be subject to share options: introduction U.K.

17 (1) An SAYE option scheme must meet the requirements of— U.K.

• paragraph 18 (shares must be ordinary shares of certain companies),

• paragraph 19 (requirements as to listing),

• paragraph 20 (shares must be fully paid up and not redeemable), [F201 and]

• F202 ...

• paragraph 22 (requirements as to other shareholdings).

[F203 (1A) Sub-paragraph (1) and the other paragraphs of this Part are subject to paragraph 37(6B).]

(2) In this Part “eligible shares” means shares which may be acquired by the exercise of share options under the scheme.

Textual Amendments

F201 Word in Sch. 3 para. 17(1) inserted (with effect in accordance with Sch. 2 para. 67 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 60(a)

F202 Words in Sch. 3 para. 17(1) omitted (with effect in accordance with Sch. 2 para. 67 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 60(b)

F203 Sch. 3 para. 17(1A) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 109, 146 (with Sch. 8 paras. 147-157)

Shares must be ordinary shares of certain companies U.K.

18 U.K. Eligible shares must form part of the ordinary share capital of—

(a) the scheme organiser,

(b) a company which has control of the scheme organiser, or

(c) a company which either is, or has control of, a company which is a member of a consortium owning either the scheme organiser or a company having control of the scheme organiser.

Requirements as to listing U.K.

19 (1) Eligible shares must be— U.K.

(a) shares of a class listed on a recognised stock exchange,

(b) shares in a company which is not under the control of another company, F204 ...

[F205 (ba) shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2), or]

(c) shares in a company which is under the control of a listed company.

(2) A “listed company” is a company whose shares are listed on a recognised stock exchange, other than—

(a) a close company, or

(b) a company that would be a close company if resident in the United Kingdom.

[F206 (3) But a company is not a close company for the purposes of sub-paragraph (2) if it is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).]

Textual Amendments

F204 Word in Sch. 3 para. 19(1)(b) omitted (1.10.2014) by virtue of Finance Act 2014 (c. 26), Sch. 37 para. 20(2)(4)

F205 Sch. 3 para. 19(1)(ba) inserted (1.10.2014) by Finance Act 2014 (c. 26), Sch. 37 para. 20(2)(4)

F206 Sch. 3 para. 19(3) inserted (1.10.2014) by Finance Act 2014 (c. 26), Sch. 37 para. 20(3)(4)

Shares must be fully paid up and not redeemable U.K.

20 U.K. Eligible shares must be—

(a) fully paid up, and

(b) not redeemable.

Only certain kinds of restriction allowed U.K.

F207 21 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F207 Sch. 3 para. 21 omitted (with effect in accordance with Sch. 2 para. 67 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 61

Requirements as to other shareholdings U.K.

22 (1) The majority of the issued shares of the same class as the eligible shares must be— U.K.

(a) employee-control shares, or

(b) open market shares,

unless the eligible shares are shares in a company whose ordinary share capital consists of shares of one class only.

(2) Shares in a company are “employee-control shares” if—

(a) the persons holding the shares are, by virtue of their holding, together able to control the company, and

(b) those persons are or have been employees or directors of the company or of another company which is under the control of the company.

(3) Shares in a company are “open market shares” if the persons holding the shares are not—

(a) persons who acquired their shares as a result of a right conferred on them or an opportunity afforded to them as a director or employee of the scheme organiser or any other company, and not as a result of an offer to the public, or

(b) trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in paragraph (a), or

(c) in the case of shares which—

(i) are not of a class listed on a recognised stock exchange, and

(ii) are in a company which is under the control of a listed company (as defined by paragraph 19(2)),

companies which have control of the company whose shares are in question or of which that company is an associated company.

Part 5 U.K. Requirement for linked savings [F208 arrangement]

Textual Amendments

F208 Word in Sch. 3 Pt. 5 heading substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(5)(a) (with Sch. 2)

Requirements as to linked savings [F209 arrangement] : introduction U.K.

Textual Amendments

F209 Word in Sch. 3 para. 23 heading substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(5)(a) (with Sch. 2)

23 U.K. An SAYE option scheme must meet the requirements of—

• paragraph 24 (payments for shares to be linked to approved [F210 savings arrangements]), and

• paragraph 25 (requirements as to contributions to [F210 savings arrangements]).

Textual Amendments

F210 Words in Sch. 3 para. 23 substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(5)(b) (with Sch. 2)

Payments for shares to be linked to approved savings [F211 arrangements] U.K.

Textual Amendments

F211 Word in Sch. 3 para. 24 heading substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(6)(a) (with Sch. 2)

24 (1) The scheme must provide for shares acquired by the exercise of share options granted under the scheme to be paid for with money not exceeding the amount of repayments made and any interest paid under a [F212 certified SAYE savings arrangement] which has been approved by [F162 an officer of Revenue and Customs] for the purposes of this Schedule [F213 (“the approved savings arrangement”)]. U.K.

F214 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F212 Words in Sch. 3 para. 24(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(6)(b) (with Sch. 2)

F213 Words in Sch. 3 para. 24(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(6)(c) (with Sch. 2)

F214 Sch. 3 para. 24(2) repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(7), Sch. 3 (with Sch. 2)

Requirements as to contributions to savings [F215 arrangements] U.K.

Textual Amendments

F215 Word in Sch. 3 para. 25 heading substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(8)(a) (with Sch. 2)

25 (1) The scheme must provide for a person’s contributions under the [F216 the approved savings arrangement] to be of an amount that will secure, as nearly as possible, repayment of an amount equal to the option price. U.K.

(2) The “option price” means the amount payable, on exercising share options granted under the scheme, in order to acquire the maximum number of shares that may be acquired under them (see paragraph 28).

(3) The scheme must neither—

(a) permit the aggregate amount of a person’s contributions under [F217 certified SAYE savings arrangements linked to [F218 Schedule 3] SAYE option schemes] to exceed [F219 £500] per month, nor

(b) impose a minimum on the amount of a person’s contributions which exceeds £10 per month.

(4) The Treasury may by order amend sub-paragraph (3) by substituting for any amount for the time being specified there an amount specified in the order.

Textual Amendments

F216 Words in Sch. 3 para. 25(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(8)(b) (with Sch. 2)

F217 Words in Sch. 3 para. 25(3)(a) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(8)(c) (with Sch. 2)

F218 Words in Sch. 3 para. 25(3)(a) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 110, 146 (with Sch. 8 paras. 147-157)

F219 Sum in Sch. 3 para. 25(3)(a) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Income Tax (Earnings and Pensions) Act 2003 (Amendment to SAYE Option Schemes Contributions Limit) Order 2014 (S.I. 2014/402), arts. 1(1), 2(2)

Repayments under a savings [F220 arrangement] : whether bonuses included U.K.

Textual Amendments

F220 Word in Sch. 3 para. 26 heading substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(9)(a) (with Sch. 2)

26 (1) For the purposes of this Schedule repayments under a [F221 certified SAYE savings arrangement] may be taken as including, or as not including, a bonus. U.K.

(2) The bonus may either be the maximum bonus under that [F222 arrangement] or a lesser bonus.

(3) An SAYE option scheme must require the question whether repayments are to be taken as including bonuses to be determined at the time when share options are granted.

Textual Amendments

F221 Words in Sch. 3 para. 26(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(9)(b) (with Sch. 2)

F222 Word in Sch. 3 para. 26(2) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(9)(c) (with Sch. 2)

Part 6 U.K. Requirements etc. relating to share options

Requirements etc. relating to share options: introduction U.K.

27 (1) An SAYE option scheme must meet the requirements of— U.K.

• paragraph 28 (requirements as to price for acquisition of shares),

• paragraph 29 (share options must not be transferable),

• paragraph 30 (time for exercising options: general),

• F223 ...

• paragraph 32 (exercise of options: death), [F224 and]

• F225 ...

• paragraph 34 (exercise of options: scheme-related employment ends).

(2) An SAYE option scheme may make any provision authorised by—

• paragraph 36 (exercise of options: employment in associated company at bonus date), and

• paragraph 37 (exercise of options: company events).

Textual Amendments

F223 Words in Sch. 3 para. 27(1) omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 8(a) (with Sch. 2 paras. 16, 17)

F224 Word in Sch. 3 para. 27(1) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 8(b) (with Sch. 2 paras. 16, 17)

F225 Words in Sch. 3 para. 27(1) omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 8(c) (with Sch. 2 paras. 16, 17)

Requirements as to price for acquisition of shares U.K.

28 (1) The price at which shares may be acquired by the exercise of a share option granted under the scheme— U.K.

(a) must be stated at the time when the option is granted, and

(b) must not be manifestly less than 80% of the market value of shares of the same class at that time.

This is subject to sub-paragraphs (2) and (3).

(2) [F162 An officer of Revenue and Customs] and the scheme organiser may agree in writing that sub-paragraph (1)(b) is to apply as if the reference to the time when the option is granted were to an earlier time or times stated in the agreement.

(3) The scheme may provide for one or more of the following—

(a) the price at which shares may be acquired by the exercise of a share option granted under the scheme,

(b) the number of shares which may be so acquired, or

(c) the description of shares which may be so acquired,

to be varied so far as necessary to take account of a variation in the share capital of which the shares form part.

[F226 (3A) If the scheme makes provision under sub-paragraph (3), the variation or variations made under that provision to take account of a variation in any share capital must (in particular) secure—

(a) that the total market value of the shares which may be acquired by the exercise of the share option is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations, and

(b) that the total price at which those shares may be acquired is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations.

(3B) Sub-paragraph (3) does not authorise any variation which would result in the requirements of the other paragraphs of this Schedule not being met in relation to the share option.]

F227 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F228 (5) At the time a share option is granted—

(a) it must be stated whether or not the shares which may be acquired by the exercise of the option may be subject to any restriction, and

(b) if so, the details of the restriction must also be stated.

(6) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.]

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F226 Sch. 3 para. 28(3A)(3B) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 111(2), 146 (with Sch. 8 paras. 147-157)

F227 Sch. 3 para. 28(4) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 111(3), 146 (with Sch. 8 paras. 147-157)

F228 Sch. 3 para. 28(5)(6) inserted (with effect in accordance with Sch. 2 para. 67 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 62

Share options must not be transferable U.K.

29 (1) The scheme must ensure that share options granted to a participant are not capable of being transferred by the participant. U.K.

(2) Paragraph 32 provides for the exercise of the options where the participant has died.

Time for exercising options: general U.K.

30 (1) The scheme must ensure that share options granted under it must not be capable of being exercised— U.K.

(a) before the bonus date, or

(b) later than 6 months after that date.

(2) However, in sub-paragraph (1)—

(a) paragraph (a) is subject to paragraphs [F229 32,] 34 and 37 (exercise of options in the event of death, F230 ... scheme-related employment ending or certain events occurring in relation to the company), and

(b) paragraph (b) is subject to paragraph 32.

(3) In the SAYE code “the bonus date” means the date on which repayments under [F231 the approved savings arrangement] are due.

(4) For this purpose repayments are to be regarded as due as follows—

(a) if the repayments are to be taken as including the maximum bonus (see paragraph 26(2)), on the earliest date on which that bonus is payable, and

(b) in any other case, on the earliest date on which a bonus is payable.

Textual Amendments

F229 Word in Sch. 3 para. 30(2)(a) substituted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 9(a) (with Sch. 2 paras. 16, 17)

F230 Words in Sch. 3 para. 30(2)(a) omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 9(b) (with Sch. 2 paras. 16, 17)

F231 Words in Sch. 3 para. 30(3) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(10) (with Sch. 2)

Requirement to have a “specified age” U.K.

F232 31 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F232 Sch. 3 para. 31 omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 10 (with Sch. 2 paras. 16, 17)

Exercise of options: death U.K.

32 U.K. The scheme must provide that, if a participant dies before exercising the options, they may be exercised [F233 at any time] on or after the date of death but not later than—

(a) 12 months after the date of death, in a case where the participant dies before the bonus date, or

(b) 12 months after the bonus date, in a case where the participant dies on or within 6 months after that date.

Textual Amendments

F233 Words in Sch. 3 para. 32 inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 112, 146 (with Sch. 8 paras. 147-157)

Exercise of options: reaching specified age without retiring U.K.

F234 33 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F234 Sch. 3 para. 33 omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 11 (with Sch. 2 para. 17)

Exercise of options: scheme-related employment ends U.K.

34 (1) The scheme must provide that, if a participant (“P”) no longer holds scheme-related employment (see paragraph 35), the options are exercisable as set out in sub-paragraphs (2) to (4). U.K.

(2) In a case where P ceases to hold the scheme-related employment because of—

(a) injury or disability or redundancy within the meaning of ERA 1996 [F235 or ER(NI)O 1996 ], F236 ...

(b) retirement F237 ...,

[F238 (c) a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006, or

(d) if P holds office or is employed in a company which is an associated company (as defined in paragraph 35(4)) of the scheme organiser, that company ceasing to be an associated company of the scheme organiser by reason of a change of control (as determined in accordance with sections 450 and 451 of CTA 2010),]

the options may only be exercised within 6 months after the termination date.

(3) In a case where P ceases to hold the scheme-related employment for any other reason, share options granted more than 3 years before the termination date either—

(a) may not be exercised, or

(b) may only be exercised within 6 months after the termination date,

according to which of these alternatives is specified in the scheme.

(4) Subject to any provision made under sub-paragraph (5), in a case where P ceases to hold the scheme-related employment for any reason other than one within sub-paragraph (2)(a) [F239 to (d)], share options granted 3 years or less before the termination date may not be exercised at all.

(5) The scheme may [F240 make provision about the time when the options may be exercised] in a case where P ceases to hold the scheme-related employment only because—

F241 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) it relates to a business or part of a business which is transferred to a person who is not an associated company of the scheme organiser [F242 where the transfer is not a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006].

F243 ...

[F244 (5A) If the scheme makes provision by virtue of sub-paragraph (5), the provision must be either—

(a) that the options may be exercised within 6 months after the termination date, or

(b) that the options may be exercised within 6 months after the date (if any) when P ceases to hold the employment which (before the termination date) was the scheme-related employment for a reason within sub-paragraph (2)(a) [F245 to (d)].]

(6) This paragraph has effect subject to paragraph 30(1)(b) (options must not be capable of being exercised later than 6 months after bonus date).

(7) In this paragraph—

• “scheme-related employment” means the office or employment by reference to which the person satisfies the condition in paragraph 10(1) (“the employment requirement”);

• “the termination date” means the date when P ceases to hold the scheme-related employment (see paragraph 35).

Textual Amendments

F235 Words in Sch. 3 para. 34(2)(a) inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 11(2)

F236 Word in Sch. 3 para. 34(2) omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 23(2)(a) (with Sch. 2 para. 23(4))

F237 Words in Sch. 3 para. 34(2)(b) omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 12 (with Sch. 2 para. 17)

F238 Sch. 3 para. 34(2)(c)(d) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 23(2)(b) (with Sch. 2 para. 23(4))

F239 Words in Sch. 3 para. 34(4) substituted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 23(3) (with Sch. 2 para. 23(4))

F240 Words in Sch. 3 para. 34(5) substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 11(3)(a)

F241 Sch. 3 para. 34(5)(a) and word omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 113(a), 146 (with Sch. 8 paras. 147-157)

F242 Words in Sch. 3 para. 34(5)(b) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 113(b), 146 (with Sch. 8 paras. 147-157)

F243 Words in Sch. 3 para. 34(5) repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 11(3)(b), Sch. 43 Pt. 3(3)

F244 Sch. 3 para. 34(5A) inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 11(4)

F245 Words in Sch. 3 para. 34(5A)(b) substituted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 23(3) (with Sch. 2 para. 23(4))

Time when scheme-related employment ends U.K.

35 (1) This paragraph applies for the purposes of paragraph 34 (exercise of options: scheme-related employment ends). U.K.

(2) Unless sub-paragraph (3) applies, a participant (“P”) is to be regarded as ceasing to hold scheme-related employment on the date when the office or employment in question terminates.

(3) If—

(a) P’s scheme-related employment terminates, but

(b) P continues to hold an office or employment in the scheme organiser or any associated company,

P is to be regarded as ceasing to hold the scheme-related employment on the date when P no longer holds any office or employment within paragraph (b), and not at any earlier time.

(4) For the purposes of sub-paragraph (3) one company is an “associated company” of another company if—

(a) one has control of the other, or

(b) both are under the control of the same person or persons;

and for this purpose the question of whether a person controls a company is to be determined in accordance with [F246 sections 450 and 451 of CTA 2010] (“control” in the context of close companies).

(5) Nothing in paragraph 34 or this paragraph applies where a person’s scheme-related employment terminates on that person’s death (see instead paragraph 32).

(6) In this paragraph “scheme-related employment” has the same meaning as in paragraph 34.

Textual Amendments

F246 Words in Sch. 3 para. 35(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 397(4) (with Sch. 2)

Exercise of options: employment in associated company at bonus date U.K.

36 U.K. The scheme may provide that if at the bonus date a participant holds an office or employment in a company which is—

(a) an associated company of the scheme organiser, but

(b) not a constituent company,

the options may be exercised within 6 months after that date.

Exercise of options: company events U.K.

37 (1) The scheme may provide that share options relating to shares in a company may be exercised within 6 months after the relevant date for the purposes of sub-paragraph (2), (4)[F247 , (4A)] or (5). U.K.

(2) The relevant date for the purposes of this sub-paragraph is the date when—

(a) a person has obtained control of the company as a result of making an offer falling within sub-paragraph (3), and

(b) any condition subject to which the offer is made has been satisfied.

(3) An offer falls within this sub-paragraph if it is—

(a) a general offer to acquire the whole of the issued ordinary share capital of the company, which is made on a condition such that, if it is met, the person making the offer will have control of the company, or

(b) a general offer to acquire all the shares in the company which are of the same class as the shares in question obtained under the scheme.

[F248 (3A) In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(3B) For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.]

(4) The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under [F249 section 899 of the Companies Act 2006 (court sanction for compromise or arrangement)] a compromise or arrangement [F250 applicable to or affecting—

(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in [F251 a Schedule 3] SAYE option scheme.]

[F252 (4A) The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—

(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 3 SAYE option scheme,

becomes binding on the shareholders covered by it.]

(5) The relevant date for the purposes of this sub-paragraph is the date when the company passes a resolution for voluntary winding up.

(6) The scheme may provide that share options relating to shares in a company may be exercised at any time when any person is bound or entitled to acquire shares in the company under [F253 sections 979 to 982 [F254 or 983 to 985] of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder [F255 etc] )].

[F256 (6A) Sub-paragraphs (6B) to (6F) apply if the scheme makes provision under sub-paragraph (1) or (6).

(6B) The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (6) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.

(6C) In sub-paragraph (6B) “relevant event” means—

(a) a person obtaining control of the company as mentioned in sub-paragraph (2)(a);

(b) a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (4);

(c) a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (4A);

(d) a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6) obtaining control of the company.

(6D) Provision made under sub-paragraph (6B) may not authorise the exercise of a share option, as the case may be—

(a) at a time outside the 6 month period mentioned in sub-paragraph (1), or

(b) at a time not covered by sub-paragraph (6).

(6E) The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—

(a) the relevant date for the purposes of sub-paragraph (2), (4) or (4A), or

(b) the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6),

is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (6) (as the case may be).

(6F) If the scheme makes provision under sub-paragraph (6E) it must also provide that if—

(a) a share option is exercised in reliance on that provision in anticipation of—

(i) an event mentioned in sub-paragraph (2), (4) or (4A) occurring, or

(ii) a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6), but

(b) as the case may be—

(i) the relevant date for the purposes of sub-paragraph (2), (4) or (4A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or

(ii) the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,

the exercise of the share option is to be treated as having had no effect.]

(7) For the purposes of this paragraph—

(a) “share options” means share options granted under the scheme; and

(b) a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.

(8) This paragraph has effect subject to paragraph 30(1)(b) (options must not be capable of being exercised later than 6 months after bonus date).

Textual Amendments

F247 Words in Sch. 3 para. 37(1) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 114(2), 146 (with Sch. 8 paras. 147-157)

F248 Sch. 3 para. 37(3A)(3B) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 24(2) (with Sch. 2 para. 24(3))

F249 Words in Sch. 3 para. 37(4) substituted for Sch. 3 para. 37(4)(a)(b) (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 32(2) (with art. 4)

F250 Words in Sch. 3 para. 37(4) substituted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 24(4) (with Sch. 2 para. 24(5))

F251 Words in Sch. 3 para. 37(4)(b) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 114(3), 146 (with Sch. 8 paras. 147-157)

F252 Sch. 3 para. 37(4A) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 114(4), 146 (with Sch. 8 paras. 147-157)

F253 Words in Sch. 3 para. 37(6) substituted for Sch. 3 para. 37(6)(a)(b) (6.4.2007) by The Companies Act 2006 (Commencement No. 2, Consequential Amendments, Transitional Provisions and Savings) Order 2007 (S.I. 2007/1093), Sch. 3 para. 3 (with art. 11(1))

F254 Words in Sch. 3 para. 37(6) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 24(6)(a) (with Sch. 2 para. 24(7))

F255 Word in Sch. 3 para. 37(6) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 24(6)(b) (with Sch. 2 para. 24(7))

F256 Sch. 3 para. 37(6A)-(6F) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 114(5), 146 (with Sch. 8 paras. 147-157)

Part 7 U.K. Exchange of share options

Exchange of options on company reorganisation U.K.

38 (1) An SAYE option scheme may provide that if— U.K.

(a) there is a company reorganisation affecting a scheme company (that is, a company whose shares may be acquired by the exercise of share options obtained under the scheme: see paragraph 18), and

(b) a participant has obtained share options under the scheme which are to acquire shares of the scheme company (“the old options”),

the participant may agree with the acquiring company to release the old options in consideration of the participant being granted new share options.

(2) For the purposes of this paragraph there is a company reorganisation affecting a scheme company if another company (“the acquiring company”)—

(a) obtains control of the scheme company—

(i) as a result of making a general offer to acquire the whole of the issued ordinary share capital of the scheme company which is made on a condition such that, if it is met, the person making the offer will have control of that company, or

(ii) as a result of making a general offer to acquire all the shares in the scheme company which are of the same class as those subject to the old options;

[F257 (b) obtains control of the scheme company as a result of a compromise or arrangement sanctioned by the court under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement); F258 ...

[F259 (ba) obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or]

(c) becomes bound or entitled to acquire shares in the scheme company under sections 979 to 982 [F260 or 983 to 985] of that Act (takeover offers: right of offeror to buy out minority shareholder [F261 etc] ).]

[F262 (2A) In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.

(2B) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.]

(3) A scheme that makes provision under sub-paragraph (1) must require the agreement referred to in that sub-paragraph to be made—

(a) where control is obtained in the way set out in sub-paragraph (2)(a)(i) or (ii), within the period of 6 months beginning with the time when the acquiring company obtains control and any condition subject to which the offer is made is met,

(b) where control is obtained in the way set out in sub-paragraph (2)(b), within the period of 6 months beginning with the time when the court sanctions the compromise or arrangement, F263 ...

[F264 (ba) where control is obtained in the way set out in sub-paragraph (2)(ba), within the period of 6 months beginning with the date on which the non-UK company reorganisation arrangement becomes binding on the shareholders covered by it, and]

(c) where sub-paragraph (2)(c) applies, within the period during which the acquiring company remains bound or entitled as mentioned in that provision.

Textual Amendments

F257 Sch. 3 para. 38(2)(b)(c) substituted (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 32(3) (with art. 4)

F258 Word in Sch. 3 para. 38(2) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 115(2), 146 (with Sch. 8 paras. 147-157)

F259 Sch. 3 para. 38(2)(ba) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 115(2), 146 (with Sch. 8 paras. 147-157)

F260 Words in Sch. 3 para. 38(2)(c) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 25(2)(a) (with Sch. 2 para. 25(4))

F261 Word in Sch. 3 para. 38(2)(c) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 25(2)(b) (with Sch. 2 para. 25(4))

F262 Sch. 3 para. 38(2A)(2B) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 25(3) (with Sch. 2 para. 25(4))

F263 Word in Sch. 3 para. 38(3) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 115(3), 146 (with Sch. 8 paras. 147-157)

F264 Sch. 3 para. 38(3)(ba) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 115(3), 146 (with Sch. 8 paras. 147-157)

Requirements about share options granted in exchange U.K.

39 (1) This paragraph applies to a scheme that makes provision under paragraph 38 (exchange of options on company reorganisation). U.K.

(2) The scheme must require the new share options to relate to shares in a company which—

(a) is different from the company whose shares are subject to the old options, and

(b) is either the acquiring company itself or some other company within sub-paragraph (b) or (c) of paragraph 18 (shares must be ordinary shares of certain companies), namely—

(i) a company which has control of the scheme organiser, or

(ii) a company which is, or has control of a company which is, a member of a consortium owning either the scheme organiser or a company having control of the scheme organiser.

For this purpose the control in question may be through the medium of the acquiring company.

(3) The scheme must also require the new share options to be equivalent to the old options.

(4) For the new options to be regarded as equivalent to the old options—

(a) the shares to which they relate must meet the conditions in paragraphs 18 to 22 (types of share that may be used),

(b) they must be exercisable in the same manner as the old options and subject to the provisions of the scheme as it had effect immediately before the release of the old options,

(c) the total market value of the shares subject to the old options immediately before the release of those options by the participant must [F265 be substantially the same as] the total market value, immediately after the grant of the new options to the participant, of the shares subject to those options, and

(d) the total amount payable by the participant for the acquisition of shares under the new options must be [F266 substantially the same as] the total amount that would have been so payable under the old options.

(5) For the purposes of the SAYE code, new share options granted under the terms of a provision included in a scheme under paragraph 38 are to be treated as having been granted at the time when the corresponding old options were granted.

(6) This also applies for the purposes of the provisions of the scheme in their operation, after the grant of the new options, by virtue of a condition complying with sub-paragraph (4)(b).

[F267 (7) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.]

[F268 (8) For the purposes of this paragraph the market value of any shares is to be determined using a methodology agreed by Her Majesty's Revenue and Customs.]

Textual Amendments

F265 Words in Sch. 3 para. 39(4)(c) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 116(2)(a), 146 (with Sch. 8 paras. 147-157)

F266 Words in Sch. 3 para. 39(4)(d) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 116(2)(b), 146 (with Sch. 8 paras. 147-157)

F267 Sch. 3 para. 39(7) inserted (with effect in accordance with Sch. 2 para. 67 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 63

F268 Sch. 3 para. 39(8) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 116(3), 146 (with Sch. 8 paras. 147-157)

[F269 PART 8 U.K. Notification of schemes, annual returns and enquiries

Textual Amendments

F269 Sch. 3 Pt. 8 substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 117, 146 (with Sch. 8 paras. 147-157)

Notice of scheme to be given to HMRC U.K.

40A (1) For an SAYE option scheme to be a Schedule 3 SAYE option scheme, notice of the scheme must be given to Her Majesty's Revenue and Customs (“HMRC”).

(2) The notice must—

(a) be given by the scheme organiser,

(b) contain, or be accompanied by, such information as HMRC may require, and

(c) contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.

(3) A declaration within this sub-paragraph is a declaration—

(a) that the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme, and

(b) if the declaration is made after the first date on which share options are granted under the scheme (“the first grant date”), that those requirements—

(i) were met in relation to those grants of share options, and

(ii) have otherwise been met in relation to the scheme at all times on or after the first grant date when share options granted under the scheme are outstanding.

(4) If notice is given under this paragraph in relation to an SAYE option scheme, for the purposes of the SAYE code the scheme is to be a Schedule 3 SAYE option scheme at all times on and after the relevant date (but not before that date).

(5) But if the notice is given after the initial notification deadline, the scheme is to be a Schedule 3 SAYE option scheme only from the beginning of the relevant tax year.

(6) For the purposes of this Part—

• “the initial notification deadline” is 6 July in the tax year following that in which the first grant date falls,

• “outstanding”, in relation to a share option, means that the option—

  (a)

  has not been exercised, but

  (b)

  is capable of being exercised in accordance with the scheme (whether on the meeting of any condition or otherwise),

• “the relevant date” is—

  (a)

  the date on which the declaration within sub-paragraph (3) is made, or

  (b)

  if that declaration is made after the first grant date, the first grant date, and

• “the relevant tax year” is—

  (a)

  the tax year in which the notice under this paragraph is given, or

  (b)

  if that notice is given on or before 6 July in that tax year, the preceding tax year.

(7) Sub-paragraph (4) is subject to the following paragraphs of this Part.

Annual returns U.K.

40B (1) This paragraph applies if notice is given in relation to an SAYE option scheme under paragraph 40A.

(2) The scheme organiser must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).

(3) If paragraph 40A(5) applies in relation to the scheme, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.

(4) A return for a tax year must—

(a) contain, or be accompanied by, such information as HMRC may require, and

(b) be given on or before 6 July in the following tax year.

(5) The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—

(a) any person who has participated in the scheme, or

(b) any other person whose liability to tax the operation of the scheme is relevant to.

(6) If during a tax year—

(a) an alteration is made in a key feature of the scheme, or

(b) variations are made under a provision made under paragraph 28(3) to take account of a variation in any share capital,

the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.

(7) A declaration within this sub-paragraph is a declaration, as the case may be—

(a) that the alteration has, or

(b) that the variations have,

not caused the requirements of Parts 2 to 7 of this Schedule not to be met in relation to the scheme.

(8) For the purposes of sub-paragraph (6)(a) a “key feature” of a scheme is a provision of the scheme which is necessary in order for the requirements of Parts 2 to 7 of this Schedule to be met in relation to the scheme.

(9) A return is not required for any tax year following that in which the termination condition is met in relation to the scheme.

(10) For the purposes of this Part “the termination condition” is met in relation to a scheme when—

(a) all share options granted under the scheme—

(i) have been exercised, or

(ii) are no longer capable of being exercised in accordance with the scheme (because, for example, they have lapsed or been cancelled), and

(b) no more share options will be granted under the scheme.

(11) If the scheme organiser becomes aware that—

(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,

(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or

(c) any other error or inaccuracy has occurred in relation to a return for a tax year,

the scheme organiser must give an amended return correcting the position to HMRC without delay.

40C (1) This paragraph applies if the scheme organiser fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 40B(4)(b) (“the date for delivery”). U.K.

(2) The scheme organiser is liable for a penalty of £100.

(3) If the scheme organiser's failure continues after the end of the period of 3 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.

(4) If the scheme organiser's failure continues after the end of the period of 6 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.

(5) The scheme organiser is liable for a further penalty under this sub-paragraph if—

(a) the scheme organiser's failure continues after the end of the period of 9 months beginning with the date for delivery,

(b) HMRC decide that such a penalty should be payable, and

(c) HMRC give notice to the scheme organiser specifying the period in respect of which the penalty is payable.

(The scheme organiser may be liable for more than one penalty under this sub-paragraph.)

(6) The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).

(7) The period specified in the notice under sub-paragraph (5)(c)—

(a) may begin earlier than the date on which the notice is given, but

(b) may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.

(8) Liability for a penalty under this paragraph does not arise if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 40K, the tribunal) that there is a reasonable excuse for its failure.

(9) For the purposes of sub-paragraph (8)—

(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the scheme organiser's control,

(b) where the scheme organiser relies on any other person to do anything, that is not a reasonable excuse unless the scheme organiser took reasonable care to avoid the failure, and

(c) where the scheme organiser had a reasonable excuse for the failure but the excuse ceased, the scheme organiser is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

Notices and returns to be given electronically etc U.K.

40D (1) A notice under paragraph 40A, and any information accompanying the notice, must be given electronically.

(2) A return under paragraph 40B, and any information accompanying the return, must be given electronically.

(3) But, if HMRC consider it appropriate to do so, HMRC may allow the scheme organiser to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.

(4) The Commissioners for Her Majesty's Revenue and Customs—

(a) must prescribe how notices, returns and accompanying information are to be given electronically;

(b) may make different provision for different cases or circumstances.

40E (1) This paragraph applies if a return under paragraph 40B, or any information accompanying such a return— U.K.

(a) is given otherwise than in accordance with paragraph 40D, or

(b) contains a material inaccuracy—

(i) which is careless or deliberate, or

(ii) which is not corrected as required by paragraph 40B(11).

(2) The scheme organiser is liable for a penalty of an amount decided by HMRC.

(3) The penalty must not exceed £5,000.

(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the scheme organiser to take reasonable care.

Enquiries U.K.

40F (1) This paragraph applies if notice is given in relation to an SAYE option scheme under paragraph 40A.

(2) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than—

(a) 6 July in the tax year following the tax year in which the initial notification deadline falls, or

(b) if the notice under paragraph 40A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.

(3) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 40B(7) is given to HMRC.

(4) Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 7 of this Schedule—

(a) are not met in relation to the scheme, or

(b) have not been met in relation to the scheme.

(5) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so.

(6) Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition is met in relation to the scheme.

40G (1) An enquiry under paragraph 40F(2), (3) or (5) is completed when HMRC give the scheme organiser a notice (a “closure notice”) stating— U.K.

(a) that HMRC have completed the enquiry, and

(b) that—

(i) paragraph 40H is to apply,

(ii) paragraph 40I is to apply, or

(iii) neither paragraph 40H nor paragraph 40I is to apply.

(2) If the scheme organiser receives notice under paragraph 40F(2), (3) or (5), the scheme organiser may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.

(3) The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).

(4) The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.

40H (1) This paragraph applies if HMRC decide— U.K.

(a) that requirements of Parts 2 to 7 of this Schedule—

(i) are not met in relation to the scheme, or

(ii) have not been met in relation to the scheme, and

(b) that the situation is, or was, so serious that this paragraph should apply.

(2) If this paragraph applies—

(a) the scheme is not to be a Schedule 3 SAYE option scheme with effect from—

(i) such relevant time as is specified in the closure notice, or

(ii) if no relevant time is specified, the time of the giving of the closure notice, and

(b) the scheme organiser is liable for a penalty of an amount decided by HMRC.

(3) Sub-paragraph (4) applies in relation to a share option granted under the scheme if the option—

(a) is granted at a time before that mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be) when the scheme is a Schedule 3 SAYE option scheme, but

(b) is exercised at or after the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(4) For the purposes of section 519 (exemption in respect of exercise of share option) in its application to the option, the scheme is to be taken still to be a Schedule 3 SAYE option scheme at the time of the exercise of the option.

(5) The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a) the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and

(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the scheme having been a Schedule 3 SAYE option scheme at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(6) The liabilities covered by sub-paragraph (5) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraph (4).

(7) In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 7 of this Schedule were not met in relation to the scheme.

40I (1) This paragraph applies if HMRC decide— U.K.

(a) that requirements of Parts 2 to 7 of this Schedule—

(i) are not met in relation to the scheme, or

(ii) have not been met in relation to the scheme, but

(b) that the situation is not, or was not, so serious that paragraph 40H should apply.

(2) If this paragraph applies, the scheme organiser—

(a) is liable for a penalty of an amount decided by HMRC, and

(b) must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme.

(3) The penalty under sub-paragraph (2)(a) must not exceed £5,000.

(4) In sub-paragraph (2)(b) “the relevant day” means—

(a) the last day of the period in which notice of an appeal under paragraph 40K(2)(b) may be given, or

(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.

(5) Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the scheme before the closure notice was given or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).

(6) If the scheme organiser fails to comply with sub-paragraph (2)(b), HMRC may give the scheme organiser a notice stating that that is the case (a “default notice”).

(7) If the scheme organiser is given a default notice—

(a) the scheme is not to be a Schedule 3 SAYE option scheme with effect from—

(i) such relevant time as is specified in the default notice, or

(ii) if no relevant time is specified, the time of the giving of the default notice, and

(b) the scheme organiser is liable for a further penalty of an amount decided by HMRC.

(8) Sub-paragraph (9) applies in relation to a share option granted under the scheme if the option—

(a) is granted at a time before that mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be) when the scheme is a Schedule 3 SAYE option scheme, but

(b) is exercised at or after the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(9) For the purposes of section 519 (exemption in respect of exercise of share option) in its application to the option, the scheme is to be taken still to be a Schedule 3 SAYE option scheme at the time of the exercise of the option.

(10) The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a) the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and

(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the scheme having been a Schedule 3 SAYE option scheme at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(11) The liabilities covered by sub-paragraph (10) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraph (9).

(12) In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 7 of this Schedule were not met in relation to the scheme.

Assessment of penalties U.K.

40J (1) This paragraph applies if the scheme organiser is liable for a penalty under this Part.

(2) HMRC must assess the penalty and notify the scheme organiser of the assessment.

(3) Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the scheme organiser becomes liable for the penalty.

(4) In the case of a penalty under paragraph 40E(1)(b), the assessment must be made no later than—

(a) 12 months after the date on which HMRC become aware of the inaccuracy, and

(b) 6 years after the date on which the scheme organiser becomes liable for the penalty.

(5) In the case of a penalty under paragraph 40H(2)(b) or 40I(2)(a) or (7)(b) where notice of appeal is given under paragraph 40K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.

(6) A penalty payable under this Part must be paid—

(a) no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the scheme organiser, or

(b) if notice of appeal is given against the penalty under paragraph 40K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.

(7) The penalty may be enforced as if it were corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax charged in an assessment and due and payable.

(8) Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

Appeals U.K.

40K (1) The scheme organiser may appeal against a decision of HMRC that the scheme organiser is liable for a penalty under paragraph 40C or 40E.

(2) The scheme organiser may appeal against—

(a) a decision of HMRC mentioned in paragraph 40H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;

(b) a decision of HMRC mentioned in paragraph 40I(1).

(3) The scheme organiser may appeal against a decision of HMRC—

(a) to give the scheme organiser a default notice under paragraph 40I;

(b) to specify, or not to specify, a relevant time in the default notice.

(4) The scheme organiser may appeal against a decision of HMRC as to the amount of a penalty payable by the scheme organiser under this Part.

(5) Notice of appeal must be given to HMRC no later than 30 days after the date on which—

(a) in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 40J(2) is given to the scheme organiser;

(b) in the case of an appeal under sub-paragraph (2), the closure notice is given;

(c) in the case of an appeal under sub-paragraph (3), the default notice is given.

(6) On an appeal under sub-paragraph (1) or (3)(a) which is notified to the tribunal, the tribunal may affirm or cancel the decision.

(7) On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—

(a) affirm or cancel the decision, or

(b) substitute for the decision another decision which HMRC had power to make.

(8) On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—

(a) affirm the amount of the penalty decided, or

(b) substitute another amount for that amount.

(9) Subject to this paragraph and paragraph 40J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax.]

Part 9 U.K. Supplementary provisions

Power to require information U.K.

45 [F270 (1) An officer of Revenue and Customs may by notice require a person to provide the officer with any information— U.K.

(a) which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the SAYE code, and

(b) which the person to whom the notice is addressed has or can reasonably obtain.

(2) The power conferred by this paragraph extends, in particular, to—

(a) information to enable [F162 an officer of Revenue and Customs] —

[F271 (i) to check anything contained in a notice under paragraph 40A or a return under paragraph 40B or to check any information accompanying such a notice or return, or”, and]

(ii) to determine the liability to tax, including capital gains tax, of any person who has participated in a scheme [F272 or any other person whose liability to tax the operation of a scheme is relevant to], and

(b) information about the administration of a scheme and any alteration of the terms of a scheme.

(3) The notice must require the information to be provided within a specified time, which must not end earlier than 3 months after the date when the notice is given.]

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F270 Sch. 3 para. 45(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 118(2), 146 (with Sch. 8 paras. 147-157)

F271 Sch. 3 para. 45(2)(a)(i) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 118(3)(a), 146 (with Sch. 8 paras. 147-157)

F272 Words in Sch. 3 para. 45(2)(a)(ii) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 118(3)(b), 146 (with Sch. 8 paras. 147-157)

Jointly owned companies U.K.

46 (1) This paragraph applies for the purposes of the provisions of the SAYE code relating to group schemes. U.K.

(2) Each joint owner of a jointly owned company is to be treated as controlling every company within sub-paragraph (3).

(3) The companies within this sub-paragraph are—

(a) the jointly owned company, and

(b) any company controlled by that company.

(4) However, no company within sub-paragraph (3) may be—

(a) a constituent company in more than one group scheme, or

(b) a constituent company in a particular group scheme if another company within that sub-paragraph is a constituent company in a different group scheme.

(5) In this paragraph a “jointly owned company” means a company which (apart from sub-paragraph (2)) is not controlled by any one person and—

(a) of which 50% of the issued share capital is owned by one person and 50% by another, or

(b) which is otherwise controlled by two persons taken together.

(6) In this paragraph “joint owner” means one of the persons mentioned in sub-paragraph (5)(a) or (b).

Meaning of “associated company” U.K.

47 (1) For the purposes of the SAYE code, except in paragraph 35(3) (time when “scheme-related employment” ends), one company is an “associated company” of another company at a given time if, at that time or at any other time within one year previously— U.K.

(a) one has control of the other, or

(b) both are under the control of the same person or persons.

(2) For the purposes of sub-paragraph (1) the question whether a person controls a company is to be determined in accordance with [F273 sections 450 and 451 of CTA 2010].

Textual Amendments

F273 Words in Sch. 3 para. 47(2) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 397(5) (with Sch. 2)

[F274 Non-UK company reorganisation arrangements U.K.

Textual Amendments

F274 Sch. 3 para. 47A and cross-heading inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 119, 146 (with Sch. 8 paras. 147-157)

47A (1) For the purposes of the SAYE code a “non-UK company reorganisation arrangement” is an arrangement made in relation to a company under the law of a territory outside the United Kingdom— U.K.

(a) which gives effect to a reorganisation of the company's share capital by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both of those methods, and

(b) which is approved by a resolution of members of the company.

(2) A resolution does not count for the purposes of sub-paragraph (1)(b) unless the members who vote in favour of approving the arrangement represent more than 50% of the total voting rights of all the members having the right to vote on the issue.]

Minor definitions U.K.

48 (1) In the SAYE code— U.K.

• “ [F275 certified SAYE savings arrangement] ” has the meaning given in [F276 section 703(1) of ITTOIA 2005];

• “company” means a body corporate;

• “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

(2) For the purposes of the SAYE code a company is a member of a consortium owning another company if it is one of a number of companies—

(a) which between them beneficially own not less than 75% of the other company’s ordinary share capital, and

(b) each of which beneficially owns not less than 5% of that capital.

[F277 (3) For the purposes of the SAYE code—

(a) shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

(b) the “restriction” is that provision.]

Textual Amendments

F275 Words in Sch. 3 para. 48(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(11)(a) (with Sch. 2)

F276 Words in Sch. 3 para. 48(1) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(11)(b) (with Sch. 2)

F277 Sch. 3 para. 48(3) inserted (with effect in accordance with Sch. 2 para. 67 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 65

Index of defined expressions U.K.

49 U.K. In the SAYE code the following expressions are defined or otherwise explained by the provisions indicated below:

F278 . . .	F278 . . .
associated company	paragraph 47(1)
the bonus date	paragraph 30(3)
[F279 certified SAYE savings arrangement]	paragraph 48(1)
child	[F280 section 721(6)]
close company	[F281 section 989 of ITA 2007] F282 ...
company	paragraph 48(1)
connected person	section 718
constituent company	paragraph 3(3)
control	section 719 (and see paragraphs 35(4) and 47(2))
distribution	[F283 section 989 of ITA 2007]
earnings	section 62 and see section 721(7)
eligible shares (in Part 4 of this Schedule)	paragraph 17(2)
employee and employment	section 4
group scheme	paragraph 3(2) (and see paragraph 46)
F284 . . .	F284 . . .
F285 . . .	F285 . . .
market value	paragraph 48(1)
member of a consortium	paragraph 48(2)
[F286 non-UK company reorganisation arrangement	paragraph 47A ]
notice	[F287 section 989 of ITA 2007]
the options (in relation to a participant)	paragraph 2(2)
ordinary share capital	[F288 section 989 of ITA 2007]
participant	paragraph 2(2)
participate	paragraph 2(2)
personal representatives	[F289 section 989 of ITA 2007]
recognised stock exchange	[F290 section 1005 of ITA 2007]
[F291 restriction (in relation to shares)	paragraph 48(3)]
the SAYE code	section 516(3)
SAYE option scheme	section 516(4)
[F286 Schedule 3 SAYE option scheme	paragraph 1 and Part 8 of this Schedule]
the scheme organiser	paragraph 2(2)
share option	section 516(4)
shares	section 516(4)
F292 . . .	F292 . . .
F293 . . .	paragraph 31
tax	[F294 section 989 of ITA 2007]
[F295 tribunal	section 989 of ITA 2007]
F296 . . .	F296 . . .

Textual Amendments

F278 Words in Sch. 3 para. 49 Table omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 120(a), 146 (with Sch. 8 paras. 147-157)

F279 Words in Sch. 3 para. 49 substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(12) (with Sch. 2)

F280 Words in Sch. 3 para. 49 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 448(a) (with Sch. 2)

F281 Words in Sch. 3 para. 49 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 448(b) (with Sch. 2)

F282 Words in Sch. 3 para. 49 Table omitted (with effect in accordance with Sch. 2 para. 43 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 42

F283 Words in Sch. 3 para. 49 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 448(c) (with Sch. 2)

F284 Sch. 3 para. 49 entry repealed (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 122(f), Sch. 5; S.I. 2005/1126, art. 2(2)(h)(i)

F285 Sch. 3 para. 49 Table entry repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 448(d), Sch. 3 Pt. 1 (with Sch. 2)

F286 Words in Sch. 3 para. 49 Table inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 120(b), 146 (with Sch. 8 paras. 147-157)

F287 Words in Sch. 3 para. 49 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 448(e) (with Sch. 2)

F288 Words in Sch. 3 para. 49 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 448(f) (with Sch. 2)

F289 Words in Sch. 3 para. 49 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 448(g) (with Sch. 2)

F290 Words in Sch. 3 para. 49 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 448(h) (with Sch. 2)

F291 Words in Sch. 3 para. 49 Table inserted (with effect in accordance with Sch. 2 para. 67 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 66

F292 Words in Sch. 3 para. 49 Table omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 347(2)

F293 Words in Sch. 3 para. 49 Table omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 13 (with Sch. 2 paras. 16, 17)

F294 Words in Sch. 3 para. 49 Table substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 397(6) (with Sch. 2)

F295 Words in Sch. 3 para. 49 Table inserted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 347(3)

F296 Sch. 3 para. 49 Table entry repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 448(j), Sch. 3 Pt. 1 (with Sch. 2)

Section 521

SCHEDULE 4 U.K. F297 ... CSOP schemes

Textual Amendments

F297 Word in Sch. 4 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 164, 204 (with Sch. 8 paras. 205-215)

Part 1 U.K. Introduction

[F298 Introduction to Schedule 4] CSOP schemes U.K.

Textual Amendments

F298 Words in Sch. 4 para. 1 cross-heading substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 165, 204 (with Sch. 8 paras. 205-215)

1 [F299 (A1) For the purposes of the CSOP code a CSOP scheme is a Schedule 4 CSOP scheme if the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme.] U.K.

(3) The requirements consist of general requirements (see Part 2) and requirements as to—

• the eligibility of individuals to participate in a scheme (see Part 3),

• the shares to which a scheme can apply (see Part 4),

• the share options which may be granted under a scheme (see Part 5), and

• the exchange of share options (see Part 6).

[F300 (4) Sub-paragraph (A1) is subject to Part 7 of this Schedule which—

(a) requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 4 CSOP scheme (see paragraph 28A(1)),

(b) provides for a scheme in relation to which such notice is given to be a Schedule 4 CSOP scheme (see paragraph 28A(4)), and

(c) gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 4 CSOP scheme (see paragraphs 28F to 28I).]

Textual Amendments

F299 Sch. 4 para. 1(A1) substituted for Sch. 4 para. 1(1)(2) (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 166(2), 204 (with Sch. 8 paras. 205-215)

F300 Sch. 4 para. 1(4) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 166(3), 204 (with Sch. 8 paras. 205-215)

CSOP schemes U.K.

2 (1) In the CSOP code a “CSOP scheme” means (in accordance with section 521(4)) a scheme which— U.K.

(a) is established by a company,

(b) provides for share options to be granted to employees and directors, and

(c) is not an SAYE option scheme (within the meaning of the SAYE code: see section 516(4)).

(2) In the CSOP code, in relation to a CSOP scheme—

• “participant” means an individual who has been granted (but has not yet exercised) share options under the scheme (“the options”);

• “participate” means obtain and exercise share options under the scheme;

• “the scheme organiser” means the company which has established the scheme.

Group schemes U.K.

3 (1) A CSOP scheme established by a company that controls one or more other companies (a “parent scheme company”) may extend to all or any of those other companies. U.K.

(2) In the CSOP code a CSOP scheme established by a parent scheme company which so extends is called a “group scheme”.

(3) In relation to a group scheme a “constituent company” means—

(a) the parent scheme company, or

(b) any other company to which for the time being the scheme is expressed to extend.

(4) Paragraph 34 deals with jointly owned companies and companies controlled by them.

Part 2 U.K. General requirements F301 ...

Textual Amendments

F301 Words in Sch. 4 Pt. 2 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 167, 204 (with Sch. 8 paras. 205-215)

General requirements F302 ...: introduction U.K.

Textual Amendments

F302 Words in Sch. 4 para. 4 cross-heading omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 168, 204 (with Sch. 8 paras. 205-215)

4 U.K. A CSOP scheme must meet the requirements of—

• paragraph 5 (general restriction on contents of scheme), and

• paragraph 6 (limit on value of shares subject to options).

General restriction on contents of scheme U.K.

[F303 5 (1) The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options. U.K.

(2) The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.

(3) For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.]

Textual Amendments

F303 Sch. 4 para. 5 substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 169, 204 (with Sch. 8 paras. 205-215)

Limit on value of shares subject to options U.K.

6 (1) The scheme must provide that an individual may not be granted share options under it which would at the time when they are granted cause the aggregate market value of the shares which the individual may acquire by exercising share options granted under— U.K.

(a) the scheme, or

(b) any other [F304 Schedule 4] CSOP scheme established by the scheme organiser or an associated company of the scheme organiser,

to exceed or further exceed £30,000.

(2) For the purposes of sub-paragraph (1) share options that have already been exercised are to be left out of account.

(3) For the purposes of sub-paragraph (1) the market value of shares is to be calculated as at—

(a) the time when the options relating to them were granted, or

(b) if an agreement relating to them has been made under paragraph 22 (requirements as to price for acquisition of shares) the earlier time or times stated in the agreement.

[F305 (4) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.]

Textual Amendments

F304 Words in Sch. 4 para. 6(1)(b) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 170, 204 (with Sch. 8 paras. 205-215)

F305 Sch. 4 para. 6(4) inserted (with effect in accordance with Sch. 2 para. 77 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 68

Part 3 U.K. Eligibility of individuals to participate in scheme

Requirements relating to the eligibility of individuals: introduction U.K.

7 U.K. A CSOP scheme must meet the requirements of—

• paragraph 8 (the employment requirement), and

• paragraph 9 (the “no material interest” requirement).

The employment requirement U.K.

8 (1) The scheme must ensure that an individual is not eligible to be granted share options under the scheme at a particular time unless the individual is then a full-time director or a qualifying employee of— U.K.

(a) the scheme organiser, or

(b) in the case of a group scheme, a constituent company.

(2) A “qualifying employee”, in relation to a company, means an employee of the company other than one who is a director of—

(a) the company, or

(b) in the case of a group scheme, a constituent company.

The “no material interest” requirement U.K.

9 (1) The scheme must ensure that an individual is not eligible to participate in the scheme on any date if the individual has on that date, or has had within the 12 months preceding that date, a material interest in a close company— U.K.

(a) whose shares may be acquired as a result of exercising share options granted under the scheme, or

(b) which has control of a company whose shares may be acquired as a result of exercising share options granted under the scheme, or

(c) which is a member of a consortium which owns a company within paragraph (b).

(2) For the purposes of this paragraph an individual is to be regarded as having a material interest in a company if—

(a) the individual, or

(b) the individual together with one or more of the individual’s associates, or

(c) any such associate, with or without any other such associates,

has a material interest in the company.

(3) This paragraph is supplemented—

(a) as regards the meaning of “material interest”, by paragraphs 10 and 11, and

(b) as regards the meaning of “associate”, by paragraph 12 (read with paragraphs 13 and 14).

(4) In this paragraph and paragraph 10 “close company” includes a company that would be a close company but for—

(a) [F306 section 442(a) of CTA 2010] (exclusion of companies not resident in the United Kingdom), or

(b) [F307 sections 446 and 447 of CTA 2010] (exclusion of certain quoted companies).

Textual Amendments

F306 Words in Sch. 4 para. 9(4)(a) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 398(2)(a) (with Sch. 2)

F307 Words in Sch. 4 para. 9(4)(b) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 398(2)(b) (with Sch. 2)

Meaning of “material interest” U.K.

10 (1) In paragraph 9 (the “no material interest” requirement) references to a “material interes” in a company are to— U.K.

(a) a material interest in the share capital of the company, or

(b) a material interest in its assets.

(2) A material interest in the share capital of a company means—

(a) beneficial ownership of, or

(b) the ability to control (directly or through the medium of other companies or by any other indirect means),

more than [F308 30%] of the ordinary share capital of the company.

(3) A material interest in the assets of a company means—

(a) possession of, or

(b) an entitlement to acquire,

such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive more than [F308 30%] of the assets that would then be available for distribution among the participators.

(4) In this paragraph “participator” has the meaning given by [F309 section 454 of CTA 2010].

(5) This paragraph is supplemented by paragraph 11 (material interest: options etc.).

Textual Amendments

F308 Word in Sch. 4 para. 10(2)(3) substituted (with effect in accordance with Sch. 2 para. 44(2)(3) of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 44(1)

F309 Words in Sch. 4 para. 10(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 398(3) (with Sch. 2)

Material interest: options and interests in SIPs U.K.

11 (1) For the purposes of paragraph 10 (meaning of “material interest”) a right to acquire shares (however arising) is to be treated as a right to control them. U.K.

(2) Sub-paragraph (3) also applies for the purposes of paragraph 10 in a case where—

(a) the shares to be attributed to an individual consist of or include shares which the individual or another person has a right to acquire, and

(b) the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company would be contractually bound to issue in the event of the exercise of the right.

(3) In determining at any time prior to the exercise of the right whether the number of shares to be attributed to the individual exceeds [F310 30%] of the ordinary share capital of the company, that ordinary share capital is to be treated as increased by the number of unissued shares referred to in sub-paragraph (2)(b).

(4) The references in sub-paragraphs (2) and (3) to the shares to be attributed to an individual are to the shares which—

(a) for the purposes of paragraph 10(2) (material interest in share capital), and

(b) in accordance with paragraph 9(2) (material interest can consist of or include that of individual’s associates),

fall to be brought into account in the individual’s case so that it can be determined whether their number exceeds [F310 30%] of the company’s ordinary share capital.

(5) In applying paragraph 10 the following are to be disregarded—

(a) the interest of the trustees of any [F311 Schedule 2] SIP (within the meaning of the SIP code: see section 488(4)) in any shares which are held by them in accordance with the plan but which have not been appropriated to, or acquired on behalf of, an individual, and

(b) any rights exercisable by the trustees as a result of that interest.

Textual Amendments

F310 Word in Sch. 4 para. 11(3)(4) substituted (with effect in accordance with Sch. 2 para. 44(2)(3) of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 44(1)

F311 Words in Sch. 4 para. 11(5)(a) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 50, 89 (with Sch. 8 paras. 90-96)

Meaning of “associate” U.K.

12 (1) In paragraph 9(2) (the “no material interest” requirement) “associate”, in relation to an individual, means— U.K.

(a) any relative or partner of that individual,

(b) the trustee or trustees of any settlement in relation to which that individual, or any of the individual’s relatives (living or dead), is or was a settlor, or

(c) where that individual is interested in any shares or obligations of the company mentioned in paragraph 9(2) which are subject to any trust or are part of the estate of a deceased person—

(i) the trustee or trustees of the settlement concerned, or

(ii) the personal representatives of the deceased,

as the case may be.

(2) Sub-paragraph (1)(c) needs to be read with paragraphs 13 and 14 (which relate to employee benefit trusts and discretionary trusts).

(3) In this paragraph—

• “relative” means—

  (a)

  spouse [F312 or civil partner],

  (b)

  parent, child or remoter relation in the direct line, or

  (c)

  brother or sister;

• “settlor” and “settlement” have the same meaning as in [F313 Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)].

Textual Amendments

F312 Words in Sch. 4 para. 12(3) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 172

F313 Words in Sch. 4 para. 12(3) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 619 (with Sch. 2)

Meaning of “associate”: trustees of employee benefit trust U.K.

13 (1) This paragraph applies for the purposes of paragraph 12(1)(c) (meaning of “associate”: trustees of settlement) where the individual is interested as a beneficiary of an employee benefit trust in shares or obligations of the company mentioned in paragraph 9(2). U.K.

(2) The trustees of the employee benefit trust are not to be regarded as associates of the individual as a result only of the individual’s being so interested if neither—

(a) the individual, nor

(b) the individual together with one or more of the individual’s associates, nor

(c) any such associate, with or without any other such associates,

has at any time after 13th March 1989 been the beneficial owner of, or been able (directly or through the medium of other companies or by any other indirect means) to control, more than [F314 30%] of the ordinary share capital of the company.

(3) In sub-paragraph (2)(b) and (c) “associate” has the meaning given by paragraph 12(1), but does not include the trustees of an employee benefit trust as a result only of the individual’s having an interest in shares or obligations of the trust.

(4) Chapter 11 of Part 7 of this Act (which deals with the attribution of interests in companies to beneficiaries of employee benefit trusts) applies for the purposes of sub-paragraph (2).

(5) In this paragraph “employee benefit trust” has the same meaning as in that Chapter (see sections 550 and 551).

Textual Amendments

F314 Word in Sch. 4 para. 13(2) substituted (with effect in accordance with Sch. 2 para. 44(2)(3) of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 44(1)

Meaning of “associate”: trustees of discretionary trust U.K.

14 (1) This paragraph applies for the purposes of paragraph 12(1)(c) (meaning of “associate”: trustees of settlement) where— U.K.

(a) the individual (“the beneficiary”) is one of the objects of a discretionary trust,

(b) the property subject to the trust has at any time consisted of, or included, shares or obligations of the company mentioned in paragraph 9(2),

(c) the beneficiary has ceased to be eligible to benefit under the trust as a result of—

(i) an irrevocable disclaimer or release executed by the beneficiary, or

(ii) the irrevocable exercise by the trustees of a power to exclude the beneficiary from the objects of the trust,

(d) immediately after the beneficiary ceased to be so eligible, no associate of the beneficiary was interested in the shares or obligations of the company that were subject to the trust, and

(e) during the period of 12 months ending with the date on which the beneficiary ceased to be so eligible, neither the beneficiary nor any associate of the beneficiary received any benefit under the trust.

(2) The beneficiary is not, as a result only of the matters referred to in sub-paragraph (1)(a) and (b), to be regarded as having been interested in the shares or obligations of the company at any time during that period of 12 months.

(3) In sub-paragraph (1) “associate” has the meaning given by paragraph 12(1) but with the omission of paragraph (c).

Part 4 U.K. Shares to which schemes can apply

Requirements relating to shares that may be subject to share options: introduction U.K.

15 (1) A CSOP scheme must meet the requirements of— U.K.

• paragraph 16 (shares must be ordinary shares of certain companies),

• paragraph 17 (requirements as to listing),

• paragraph 18 (shares must be fully paid up and not redeemable), [F315 and]

• F316 ...

• paragraph 20 (requirements as to other shareholdings).

[F317 (1A) Sub-paragraph (1) and the other paragraphs of this Part are subject to paragraph 25A(7B).]

(2) In this Part “eligible shares” means shares which may be acquired by the exercise of share options under the scheme.

Textual Amendments

F315 Word in Sch. 4 para. 15 inserted (with effect in accordance with Sch. 2 para. 77 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 70(a)

F316 Words in Sch. 4 para. 15 omitted (with effect in accordance with Sch. 2 para. 77 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 70(b)

F317 Sch. 4 para. 15(1A) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 171, 204 (with Sch. 8 paras. 205-215)

Shares must be ordinary shares of certain companies U.K.

16 U.K. Eligible shares must form part of the ordinary share capital of—

(a) the scheme organiser,

(b) a company which has control of the scheme organiser, or

(c) a company which either is, or has control of, a company which is a member of a consortium owning either the scheme organiser or a company having control of the scheme organiser.

Requirements as to listing U.K.

17 (1) Eligible shares must be — U.K.

(a) shares of a class listed on a recognised stock exchange, F318 ...

(b) shares in a company which is not under the control of another company, F319 ...[F320 , or

(ba) shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).]

F321 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F322 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F318 Word in Sch. 4 para. 17(1) omitted (1.10.2014) by virtue of Finance Act 2014 (c. 26), Sch. 37 para. 21(1)(2)

F319 Word in Sch. 4 para. 17(1)(b) omitted (24.9.2010 with effect in accordance with s. 39(3)-(9) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 39(2)(a)(ii)(3)(a)

F320 Sch. 4 para. 17(1)(ba) and word inserted (1.10.2014) by Finance Act 2014 (c. 26), Sch. 37 para. 21(1)(2)

F321 Sch. 4 para. 17(1)(c) omitted (24.9.2010 with effect in accordance with s. 39(3)-(9) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 39(1)(3)(a)

F322 Sch. 4 para. 17(2) omitted (24.9.2010 with effect in accordance with s. 39(3)-(9) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 39(2)(a)(iii)(3)(a)

Shares must be fully paid up and not redeemable U.K.

18 U.K. Eligible shares must be—

(a) fully paid up, and

(b) not redeemable.

Only certain kinds of restriction allowed U.K.

F323 19 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F323 Sch. 4 para. 19 omitted (with effect in accordance with Sch. 2 para. 77 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 71

Requirements as to other shareholdings U.K.

20 (1) The majority of the issued shares of the same class as the eligible shares must be— U.K.

(a) employee-control shares, or

(b) open market shares,

unless the eligible shares are shares in a company whose ordinary share capital consists of shares of one class only.

(2) Shares in a company are “employee-control shares” if—

(a) the persons holding the shares are, by virtue of their holding, together able to control the company, and

(b) those persons are or have been employees or directors of the company or of another company which is under the control of the company.

(3) Shares in a company are “open market shares” if the persons holding the shares are not—

(a) persons who acquired their shares as a result of a right conferred on them or an opportunity afforded to them as a director or employee of the scheme organiser or any other company, and not as a result of an offer to the public, or

(b) trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in paragraph (a), F324 ...

F324 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F324 Sch. 4 para. 20(3)(c) and preceding word omitted (24.9.2010 with effect in accordance with s. 39(3)-(9) of the amending Act) by virtue of Finance Act 2010 (c. 13), s. 39(2)(b)(3)(a)

Part 5 U.K. Requirements etc. relating to share options

Requirements etc. relating to share options: introduction U.K.

21 (1) A CSOP scheme must meet the requirements of— U.K.

• [F325 paragraph 21A (general requirements as to terms of option),]

• paragraph 22 (requirements as to price for acquisition of shares), and

• paragraph 23 (share options may not be transferred).

(2) A CSOP scheme may make any provision authorised by—

• paragraph 24 (exercise of options: ceasing to be director or employee), F326 ...

• paragraph 25 (exercise of options: death) [F327 , or

• paragraph 25A (exercise of options: company events)]

Textual Amendments

F325 Words in Sch. 4 para. 21(1) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 172, 204 (with Sch. 8 paras. 205-215)

F326 Word in Sch. 4 para. 21(2) omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 28(a)

F327 Words in Sch. 4 para. 21(2) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 28(b)

[F328 General requirements as to terms of option U.K.

Textual Amendments

F328 Sch. 4 para. 21A and cross-heading inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 173, 204 (with Sch. 8 paras. 205-215)

21A (1) The following terms of a share option which is granted under the scheme must be stated at the time the option is granted— U.K.

(a) the price at which shares may be acquired by the exercise of the option,

(b) the number and description of the shares which may be acquired by the exercise of the option,

(c) the restrictions to which those shares may be subject,

(d) the times at which the option may be exercised (in whole or in part), and

(e) the circumstances under which the option will lapse or be cancelled (in whole or in part), including any conditions to which the exercise of the option is subject (in whole or in part).

(2) Terms stated as required by sub-paragraph (1) may be varied after the grant of the option, but—

(a) in the case of the price, only as provided for in paragraph 22,

(b) in the case of the number or description of shares, only as provided for in paragraph 22 or by way of a mechanism which is stated at the time the option is granted, and

(c) in any other case, only by way of a mechanism which is stated at the time the option is granted.

(3) Any mechanism stated for the purposes of sub-paragraph (2)(b) or (c) must be applied in a way that is fair and reasonable.

(4) Terms stated as required by sub-paragraph (1), and any mechanism stated for the purposes of sub-paragraph (2)(b) or (c), must be notified to the participant as soon as practicable after the grant of the option.]

Requirements as to price for acquisition of shares U.K.

22 (1) The price at which shares may be acquired by the exercise of a share option granted under the scheme— U.K.

F329 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) must not be manifestly less than the market value of shares of the same class at [F330 the time when the option is granted].

This is subject to sub-paragraphs (2) and (3).

(2) [F162 An officer of Revenue and Customs] and the scheme organiser may agree in writing that sub-paragraph (1)(b) is to apply as if the reference to the time when the option is granted were to an earlier time or times stated in the agreement.

(3) The scheme may provide for one or more of the following—

(a) the price at which shares may be acquired by the exercise of a share option granted under the scheme,

(b) the number of shares which may be so acquired, or

(c) the description of shares which may be so acquired,

to be varied so far as necessary to take account of a variation in the share capital of which the shares form part.

[F331 (3A) If the scheme makes provision under sub-paragraph (3), the variation or variations made under that provision to take account of a variation in any share capital must (in particular) secure—

(a) that the total market value of the shares which may be acquired by the exercise of the share option is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations, and

(b) that the total price at which those shares may be acquired is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations.

(3B) Sub-paragraph (3) does not authorise any variation which would result in the requirements of the other paragraphs of this Schedule not being met in relation to the share option.]

F332 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F333 [F334 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.]

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F329 Sch. 4 para. 22(1)(a) and word omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 174(2)(a), 204 (with Sch. 8 paras. 205-215)

F330 Words in Sch. 4 para. 22(1)(b) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 174(2)(b), 204 (with Sch. 8 paras. 205-215)

F331 Sch. 4 para. 22(3A)(3B) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 174(3), 204 (with Sch. 8 paras. 205-215)

F332 Sch. 4 para. 22(4) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 174(4), 204 (with Sch. 8 paras. 205-215)

F333 Sch. 4 para. 22(5) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 174(5), 204 (with Sch. 8 paras. 205-215)

F334 Sch. 4 para. 22(5)(6) inserted (with effect in accordance with Sch. 2 para. 77 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 72

Share options must not be transferable U.K.

23 (1) The scheme must ensure that share options granted to a participant are not capable of being transferred by the participant. U.K.

(2) Paragraph 25 provides for the exercise of the options where the participant has died.

Exercise of options: ceasing to be director or employee U.K.

24 (1) The scheme may provide that an individual may exercise share options under it after ceasing to be a full-time director or qualifying employee. U.K.

(2) “Qualifying employee” has the same meaning as in paragraph 8 (the employment requirement).

Exercise of options: death U.K.

25 [F335 (1)] The scheme may provide that, if a participant dies before exercising the options, they may be exercised on or after the date of death F336 .... U.K.

[F337 (2) Provision made under sub-paragraph (1) must permit the exercise of the options at any time on or after the date of death but not later than 12 months after that date.]

Textual Amendments

F335 Sch. 4 para. 25 renumbered as Sch. 4 para. 25(1) (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 175(2), 204 (with Sch. 8 paras. 205-215)

F336 Words in Sch. 4 para. 25(1) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 175(3), 204 (with Sch. 8 paras. 205-215)

F337 Sch. 4 para. 25(2) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 175(4), 204 (with Sch. 8 paras. 205-215)

[F338 Exercise of options: company events U.K.

Textual Amendments

F338 Sch. 4 para. 25A and cross-heading inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 29

25A (1) The scheme may provide that share options relating to shares in a company may be exercised within 6 months after the relevant date for the purposes of sub-paragraph (2)[F339 , (6) or (6A)]. U.K.

(2) The relevant date for the purposes of this sub-paragraph is the date when—

(a) a person has obtained control of the company as a result of making an offer falling within sub-paragraph (3), and

(b) any condition subject to which the offer is made has been satisfied.

(3) An offer falls within this sub-paragraph if it is—

(a) a general offer to acquire the whole of the issued ordinary share capital of the company which is made on a condition such that, if it is met, the person making the offer will have control of the company, or

(b) a general offer to acquire all the shares in the company which are of the same class as the shares to which the option relates.

(4) In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(5) For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

(6) The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement applicable to or affecting—

(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in [F340 a Schedule 4] CSOP scheme.

[F341 (6A) The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—

(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 4 CSOP scheme,

becomes binding on the shareholders covered by it.]

(7) The scheme may provide that share options relating to shares in a company may be exercised at any time when any person is bound or entitled to acquire shares in the company under sections 979 to 982 or 983 to 985 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder etc).

[F342 (7A) Sub-paragraphs (7B) to (7F) apply if the scheme makes provision under sub-paragraph (1) or (7).

(7B) The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (7) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.

(7C) In sub-paragraph (7B) “relevant event” means—

(a) a person obtaining control of the company as mentioned in sub-paragraph (2)(a);

(b) a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (6);

(c) a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (6A);

(d) a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7) obtaining control of the company.

(7D) Provision made under sub-paragraph (7B) may not authorise the exercise of a share option, as the case may be—

(a) at a time outside the 6 month period mentioned in sub-paragraph (1), or

(b) at a time not covered by sub-paragraph (7).

(7E) The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—

(a) the relevant date for the purposes of sub-paragraph (2), (6) or (6A), or

(b) the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7),

is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (7) (as the case may be).

(7F) If the scheme makes provision under sub-paragraph (7E) it must also provide that if—

(a) a share option is exercised in reliance on that provision in anticipation of—

(i) an event mentioned in sub-paragraph (2), (6) or (6A) occurring, or

(ii) a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7), but

(b) as the case may be—

(i) the relevant date for the purposes of sub-paragraph (2), (6) or (6A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or

(ii) the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,

the exercise of the share option is to be treated as having had no effect.]

(8) For the purposes of this paragraph a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.]

Textual Amendments

F339 Words in Sch. 4 para. 25A(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 176(2), 204 (with Sch. 8 paras. 205-215)

F340 Words in Sch. 4 para. 25A(6)(b) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 176(3), 204 (with Sch. 8 paras. 205-215)

F341 Sch. 4 para. 25A(6A) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 176(4), 204 (with Sch. 8 paras. 205-215)

F342 Sch. 4 paras. 25A(7A)-(7F) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 176(5), 204 (with Sch. 8 paras. 205-215)

Part 6 U.K. Exchange of share options

Exchange of options on company reorganisation U.K.

26 (1) A CSOP scheme may provide that if— U.K.

(a) there is a company reorganisation affecting a scheme company (that is, a company whose shares may be acquired by the exercise of share options obtained under the scheme: see paragraph 16), and

(b) a participant has obtained share options under the scheme which are to acquire shares of the scheme company (“the old options”),

the participant may agree with the acquiring company to release the old options in consideration of the participant being granted new share options.

(2) For the purposes of this paragraph there is a company reorganisation affecting a scheme company if another company (“the acquiring company”)—

(a) obtains control of the scheme company—

(i) as a result of making a general offer to acquire the whole of the issued ordinary share capital of the scheme company which is made on a condition such that, if it is met, the person making the offer will have control of that company, or

(ii) as a result of making a general offer to acquire all the shares in the scheme company which are of the same class as those subject to the old options;

[F343 (b) obtains control of the scheme company as a result of a compromise or arrangement sanctioned by the court under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement);]

[F344 (ba) obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or]

[F345 (c) becomes bound or entitled to acquire shares in the scheme company under sections 979 to 982 [F346 or 983 to 985] of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder [F347 etc]).]

[F348 (2A) In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.

(2B) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.]

(3) A scheme that makes provision under sub-paragraph (1) must require the agreement referred to in that sub-paragraph to be made—

(a) where control is obtained in the way set out in sub-paragraph (2)(a)(i) or (ii), within the period of 6 months beginning with the time when the acquiring company obtains control and any condition subject to which the offer is made is met,

(b) where control is obtained in the way set out in sub-paragraph (2)(b), within the period of 6 months beginning with the time when the court sanctions the compromise or arrangement, F349 ...

[F350 (ba) where control is obtained in the way set out in sub-paragraph (2)(ba), within the period of 6 months beginning with the date on which the non-UK company reorganisation arrangement becomes binding on the shareholders covered by it, and]

(c) where sub-paragraph (2)(c) applies, within the period during which the acquiring company remains bound or entitled as mentioned in that provision.

Textual Amendments

F343 Sch. 4 para. 26(2)(b) substituted (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 33 (with art. 4)

F344 Sch. 4 para. 26(2)(ba) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 177(2), 204 (with Sch. 8 paras. 205-215)

F345 Sch. 4 para. 26(2)(c) substituted (1.10.2007) by The Companies Act 2006 (Commencement No. 3, Consequential Amendments, Transitional Provisions and Savings) Order 2007 (S.I. 2007/2194), Sch. 4 para. 100 (with art. 12)

F346 Words in Sch. 4 para. 26(2)(c) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 30(2)(a) (with Sch. 2 para. 30(4))

F347 Word in Sch. 4 para. 26(2)(c) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 30(2)(b) (with Sch. 2 para. 30(4))

F348 Sch. 4 para. 26(2A)(2B) inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 30(3) (with Sch. 2 para. 30(4))

F349 Word in Sch. 4 para. 26(3) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 177(3), 204 (with Sch. 8 paras. 205-215)

F350 Sch. 4 para. 26(3)(ba) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 177(3), 204 (with Sch. 8 paras. 205-215)

Requirements about share options granted in exchange U.K.

27 (1) This paragraph applies to a scheme that makes provision under paragraph 26 (exchange of options on company reorganisation). U.K.

(2) The scheme must require the new share options to relate to shares in a company which—

(a) is different from the company whose shares are subject to the old options, and

(b) is either the acquiring company itself or some other company within sub-paragraph (b) or (c) of paragraph 16 (shares must be ordinary shares of certain companies), namely—

(i) a company which has control of the scheme organiser, or

(ii) a company which is, or has control of a company which is, a member of a consortium owning either the scheme organiser or a company having control of the scheme organiser.

For this purpose the control in question may be through the medium of the acquiring company.

(3) The scheme must also require the new share options to be equivalent to the old options.

(4) For the new options to be regarded as equivalent to the old options—

(a) the shares to which they relate must meet the conditions in paragraphs 16 to 20 (types of share that may be used),

(b) they must be exercisable in the same manner as the old options and subject to the provisions of the scheme as it had effect immediately before the release of the old options,

(c) the total market value of the shares subject to the old options immediately before the release of those options by the participant must [F351 be substantially the same as] the total market value, immediately after the grant of the new options to the participant, of the shares subject to those options, and

(d) the total amount payable by the participant for the acquisition of shares under the new options must be [F352 substantially the same as] the total amount that would have been so payable under the old options.

(5) For the purposes of the CSOP code, new share options granted under the terms of a provision included in a scheme under paragraph 26 are to be treated as having been granted at the time when the corresponding old options were granted.

(6) This also applies for the purposes of the provisions of the scheme in their operation, after the grant of the new options, by virtue of a condition complying with sub-paragraph (4)(b).

[F353 (7) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.]

[F354 (8) For the purposes of this paragraph the market value of any shares is to be determined using a methodology agreed by Her Majesty's Revenue and Customs.]

Textual Amendments

F351 Words in Sch. 4 para. 27(4)(c) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 178(2)(a), 204 (with Sch. 8 paras. 205-215)

F352 Words in Sch. 4 para. 27(4)(d) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 178(2)(b), 204 (with Sch. 8 paras. 205-215)

F353 Sch. 4 para. 27(7) inserted (with effect in accordance with Sch. 2 para. 77 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 73

F354 Sch. 4 para. 27(8) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 178(3), 204 (with Sch. 8 paras. 205-215)

Modifications etc. (not altering text)

C3 Sch. 4 para. 27(5) excluded (24.9.2010 with effect in accordance with s. 39(3)-(9) of the amending Act) by Finance Act 2010 (c. 13), s. 39(8)

[F355 PART 7 U.K. Notification of schemes, annual returns and enquiries

Textual Amendments

F355 Sch. 4 Pt. 7 substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 179, 204 (with Sch. 8 paras. 205-215)

Notice of scheme to be given to HMRC U.K.

28A (1) For a CSOP scheme to be a Schedule 4 CSOP scheme, notice of the scheme must be given to Her Majesty's Revenue and Customs (“HMRC”). U.K.

(2) The notice must—

(a) be given by the scheme organiser,

(b) contain, or be accompanied by, such information as HMRC may require, and

(c) contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.

(3) A declaration within this sub-paragraph is a declaration—

(a) that the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme, and

(b) if the declaration is made after the first date on which share options are granted under the scheme (“the first grant date”), that those requirements—

(i) were met in relation to those grants of share options, and

(ii) have otherwise been met in relation to the scheme at all times on or after the first grant date when share options granted under the scheme are outstanding.

(4) If notice is given under this paragraph in relation to a CSOP scheme, for the purposes of the CSOP code the scheme is to be a Schedule 4 CSOP scheme at all times on and after the relevant date (but not before that date).

(5) But if the notice is given after the initial notification deadline, the scheme is to be a Schedule 4 CSOP scheme only from the beginning of the relevant tax year.

(6) For the purposes of this Part—

• “the initial notification deadline” is 6 July in the tax year following that in which the first grant date falls,

• “outstanding”, in relation to a share option, means that the option—

  (a)

  has not been exercised, but

  (b)

  is capable of being exercised in accordance with the scheme (whether on the meeting of any condition or otherwise),

• “the relevant date” is—

  (a)

  the date on which the declaration within sub-paragraph (3) is made, or

  (b)

  if that declaration is made after the first grant date, the first grant date, and

• “the relevant tax year” is—

  (a)

  the tax year in which the notice under this paragraph is given, or

  (b)

  if that notice is given on or before 6 July in that tax year, the preceding tax year.

(7) Sub-paragraph (4) is subject to the following paragraphs of this Part.

Annual returns U.K.

28B (1) This paragraph applies if notice is given in relation to a CSOP scheme under paragraph 28A. U.K.

(2) The scheme organiser must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).

(3) If paragraph 28A(5) applies in relation to the scheme, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.

(4) A return for a tax year must—

(a) contain, or be accompanied by, such information as HMRC may require, and

(b) be given on or before 6 July in the following tax year.

(5) The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—

(a) any person who has participated in the scheme, or

(b) any other person whose liability to tax the operation of the scheme is relevant to.

(6) If during a tax year—

(a) an alteration is made in a key feature of the scheme, or

(b) variations are made under a provision made under paragraph 22(3) to take account of a variation in any share capital,

the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.

(7) A declaration within this sub-paragraph is a declaration, as the case may be—

(a) that the alteration has, or

(b) that the variations have,

not caused the requirements of Parts 2 to 6 of this Schedule not to be met in relation to the scheme.

(8) For the purposes of sub-paragraph (6)(a) a “key feature” of a scheme is a provision of the scheme which is necessary in order for the requirements of Parts 2 to 6 of this Schedule to be met in relation to the scheme.

(9) A return is not required for any tax year following that in which the termination condition is met in relation to the scheme.

(10) For the purposes of this Part “the termination condition” is met in relation to a scheme when—

(a) all share options granted under the scheme—

(i) have been exercised, or

(ii) are no longer capable of being exercised in accordance with the scheme (because, for example, they have lapsed or been cancelled), and

(b) no more share options will be granted under the scheme.

(11) If the scheme organiser becomes aware that—

(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,

(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or

(c) any other error or inaccuracy has occurred in relation to a return for a tax year,

the scheme organiser must give an amended return correcting the position to HMRC without delay.

28C (1) This paragraph applies if the scheme organiser fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 28B(4)(b) (“the date for delivery”). U.K.

(2) The scheme organiser is liable for a penalty of £100.

(3) If the scheme organiser's failure continues after the end of the period of 3 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.

(4) If the scheme organiser's failure continues after the end of the period of 6 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.

(5) The scheme organiser is liable for a further penalty under this sub-paragraph if—

(a) the scheme organiser's failure continues after the end of the period of 9 months beginning with the date for delivery,

(b) HMRC decide that such a penalty should be payable, and

(c) HMRC give notice to the scheme organiser specifying the period in respect of which the penalty is payable.

(The scheme organiser may be liable for more than one penalty under this sub-paragraph.)

(6) The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).

(7) The period specified in the notice under sub-paragraph (5)(c)—

(a) may begin earlier than the date on which the notice is given, but

(b) may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.

(8) Liability for a penalty under this paragraph does not arise if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 28K, the tribunal) that there is a reasonable excuse for its failure.

(9) For the purposes of sub-paragraph (8)—

(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the scheme organiser's control,

(b) where the scheme organiser relies on any other person to do anything, that is not a reasonable excuse unless the scheme organiser took reasonable care to avoid the failure, and

(c) where the scheme organiser had a reasonable excuse for the failure but the excuse ceased, the scheme organiser is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

Notices and returns to be given electronically etc U.K.

28D (1) A notice under paragraph 28A, and any information accompanying the notice, must be given electronically. U.K.

(2) A return under paragraph 28B, and any information accompanying the return, must be given electronically.

(3) But, if HMRC consider it appropriate to do so, HMRC may allow the scheme organiser to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.

(4) The Commissioners for Her Majesty's Revenue and Customs—

(a) must prescribe how notices, returns and accompanying information are to be given electronically;

(b) may make different provision for different cases or circumstances.

28E (1) This paragraph applies if a return under paragraph 28B, or any information accompanying such a return— U.K.

(a) is given otherwise than in accordance with paragraph 28D, or

(b) contains a material inaccuracy—

(i) which is careless or deliberate, or

(ii) which is not corrected as required by paragraph 28B(11).

(2) The scheme organiser is liable for a penalty of an amount decided by HMRC.

(3) The penalty must not exceed £5,000.

(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the scheme organiser to take reasonable care.

Enquiries U.K.

28F (1) This paragraph applies if notice is given in relation to a CSOP scheme under paragraph 28A. U.K.

(2) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than—

(a) 6 July in the tax year following that in which the initial notification deadline falls, or

(b) if the notice under paragraph 28A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.

(3) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 28B(7) is given to HMRC.

(4) Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 6 of this Schedule—

(a) are not met in relation to the scheme, or

(b) have not been met in relation to the scheme.

(5) HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so.

(6) Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition is met in relation to the scheme.

28G (1) An enquiry under paragraph 28F(2), (3) or (5) is completed when HMRC give the scheme organiser a notice (a “closure notice”) stating— U.K.

(a) that HMRC have completed the enquiry, and

(b) that—

(i) paragraph 28H is to apply,

(ii) paragraph 28I is to apply, or

(iii) neither paragraph 28H nor paragraph 28I is to apply.

(2) If the scheme organiser receives notice under paragraph 28F(2), (3) or (5), the scheme organiser may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.

(3) The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).

(4) The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.

28H (1) This paragraph applies if HMRC decide— U.K.

(a) that requirements of Parts 2 to 6 of this Schedule—

(i) are not met in relation to the scheme, or

(ii) have not been met in relation to the scheme, and

(b) that the situation is, or was, so serious that this paragraph should apply.

(2) If this paragraph applies—

(a) the scheme is not to be a Schedule 4 CSOP scheme with effect from—

(i) such relevant time as is specified in the closure notice, or

(ii) if no relevant time is specified, the time of the giving of the closure notice, and

(b) the scheme organiser is liable for a penalty of an amount decided by HMRC.

(3) The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a) the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and

(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the scheme having been a Schedule 4 CSOP scheme at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(4) In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 6 of this Schedule were not met in relation to the scheme.

28I (1) This paragraph applies if HMRC decide— U.K.

(a) that requirements of Parts 2 to 6 of this Schedule—

(i) are not met in relation to the scheme, or

(ii) have not been met in relation to the scheme, but

(b) that the situation is not, or was not, so serious that paragraph 28H should apply.

(2) If this paragraph applies, the scheme organiser—

(a) is liable for a penalty of an amount decided by HMRC, and

(b) must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme.

(3) The penalty under sub-paragraph (2)(a) must not exceed £5,000.

(4) In sub-paragraph (2)(b) “the relevant day” means—

(a) the last day of the period in which notice of an appeal under paragraph 28K(2)(b) may be given, or

(b) if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.

(5) Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the scheme before the closure notice was given or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).

(6) If the scheme organiser fails to comply with sub-paragraph (2)(b), HMRC may give the scheme organiser a notice stating that that is the case (a “default notice”).

(7) If the scheme organiser is given a default notice—

(a) the scheme is not to be a Schedule 4 CSOP scheme with effect from—

(i) such relevant time as is specified in the default notice, or

(ii) if no relevant time is specified, the time of the giving of the default notice, and

(b) the scheme organiser is liable for a further penalty of an amount decided by HMRC.

(8) The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—

(a) the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and

(b) the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,

in consequence of the scheme having been a Schedule 4 CSOP scheme at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(9) In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 6 of this Schedule were not met in relation to the scheme.

Assessment of penalties U.K.

28J (1) This paragraph applies if the scheme organiser is liable for a penalty under this Part. U.K.

(2) HMRC must assess the penalty and notify the scheme organiser of the assessment.

(3) Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the scheme organiser becomes liable for the penalty.

(4) In the case of a penalty under paragraph 28E(1)(b), the assessment must be made no later than—

(a) 12 months after the date on which HMRC become aware of the inaccuracy, and

(b) 6 years after the date on which the scheme organiser becomes liable for the penalty.

(5) In the case of a penalty under paragraph 28H(2)(b) or 28I(2)(a) or (7)(b) where notice of appeal is given under paragraph 28K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.

(6) A penalty payable under this Part must be paid—

(a) no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the scheme organiser, or

(b) if notice of appeal is given against the penalty under paragraph 28K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.

(7) The penalty may be enforced as if it were corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax charged in an assessment and due and payable.

(8) Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

Appeals U.K.

28K (1) The scheme organiser may appeal against a decision of HMRC that the scheme organiser is liable for a penalty under paragraph 28C or 28E. U.K.

(2) The scheme organiser may appeal against—

(a) a decision of HMRC mentioned in paragraph 28H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;

(b) a decision of HMRC mentioned in paragraph 28I(1).

(3) The scheme organiser may appeal against a decision of HMRC—

(a) to give the scheme organiser a default notice under paragraph 28I;

(b) to specify, or not to specify, a relevant time in the default notice.

(4) The scheme organiser may appeal against a decision of HMRC as to the amount of a penalty payable by the scheme organiser under this Part.

(5) Notice of appeal must be given to HMRC no later than 30 days after the date on which—

(a) in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 28J(2) is given to the scheme organiser;

(b) in the case of an appeal under sub-paragraph (2), the closure notice is given;

(c) in the case of an appeal under sub-paragraph (3), the default notice is given.

(6) On an appeal under sub-paragraph (1) or (3)(a) which is notified to the tribunal, the tribunal may affirm or cancel the decision.

(7) On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—

(a) affirm or cancel the decision, or

(b) substitute for the decision another decision which HMRC had power to make.

(8) On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—

(a) affirm the amount of the penalty decided, or

(b) substitute another amount for that amount.

(9) Subject to this paragraph and paragraph 28J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax.]

Part 8 U.K. Supplementary provisions

Power to require information U.K.

33 [F356 (1) An officer of Revenue and Customs may by notice require a person to provide the officer with any information— U.K.

(a) which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the CSOP code, and

(b) which the person to whom the notice is addressed has or can reasonably obtain.]

(2) The power conferred by this paragraph extends, in particular, to—

(a) information to enable [F162 an officer of Revenue and Customs]—

[F357 (i) to check anything contained in a notice under paragraph 28A or a return under paragraph 28B or to check any information accompanying such a notice or return, or”, and]

(ii) to determine the liability to tax, including capital gains tax, of any person who has participated in a scheme [F358 or any other person whose liability to tax the operation of a scheme is relevant to], and

(b) information about the administration of a scheme and any alteration of the terms of a scheme.

(3) The notice must require the information to be provided within a specified time, which must not end earlier than 3 months after the date when the notice is given.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F356 Sch. 4 para. 33(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 180(2), 204 (with Sch. 8 paras. 205-215)

F357 Sch. 4 para. 33(2)(a)(i) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 180(3)(a), 204 (with Sch. 8 paras. 205-215)

F358 Words in Sch. 4 para. 33(2)(a)(ii) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 180(3)(b), 204 (with Sch. 8 paras. 205-215)

Jointly owned companies U.K.

34 (1) This paragraph applies for the purposes of the provisions of the CSOP code relating to group schemes. U.K.

(2) Each joint owner of a jointly owned company is to be treated as controlling every company within sub-paragraph (3).

(3) The companies within this sub-paragraph are—

(a) the jointly owned company, and

(b) any company controlled by that company.

(4) However, no company within sub-paragraph (3) may be—

(a) a constituent company in more than one group scheme, or

(b) a constituent company in a particular group scheme if another company within that sub-paragraph is a constituent company in a different group scheme.

(5) In this paragraph a “jointly owned company” means a company which (apart from sub-paragraph (2)) is not controlled by any one person and—

(a) of which 50% of the issued share capital is owned by one person and 50% by another, or

(b) which is otherwise controlled by two persons taken together.

(6) In this paragraph “joint owner” means one of the persons mentioned in sub-paragraph (5)(a) or (b).

Meaning of “associated company” U.K.

35 (1) For the purposes of the CSOP code one company is an “associated company” of another company at a given time if, at that time or at any other time within one year previously— U.K.

(a) one has control of the other, or

(b) both are under the control of the same person or persons.

(2) For the purposes of sub-paragraph (1) the question whether a person controls a company is to be determined in accordance with [F359 sections 450 and 451 of CTA 2010].

Textual Amendments

F359 Words in Sch. 4 para. 35(2) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 398(4) (with Sch. 2)

[F360 Non-UK company reorganisation arrangements U.K.

Textual Amendments

F360 Sch. 4 para. 35ZA and cross-heading inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 181, 204 (with Sch. 8 paras. 205-215)

35ZA (1) For the purposes of the CSOP code a “non-UK company reorganisation arrangement” is an arrangement made in relation to a company under the law of a territory outside the United Kingdom— U.K.

(a) which gives effect to a reorganisation of the company's share capital by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both of those methods, and

(b) which is approved by a resolution of members of the company.

(2) A resolution does not count for the purposes of sub-paragraph (1)(b) unless the members who vote in favour of approving the arrangement represent more than 50% of the total voting rights of all the members having the right to vote on the issue.]

[F361 Retirement age] U.K.

Textual Amendments

F361 Sch. 4 para. 35A and cross-heading inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 15(2)

F362 35A U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F362 Sch. 4 para. 35A omitted (17.7.2013) by virtue of Finance Act 2013 (c. 29), Sch. 2 para. 15 (with Sch. 2 para. 17)

Minor definitions U.K.

36 (1) In the CSOP code— U.K.

• “company” means a body corporate;

• “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

(2) For the purposes of the CSOP code a company is a member of a consortium owning another company if it is one of a number of companies—

(a) which between them beneficially own not less than 75% of the other company’s ordinary share capital, and

(b) each of which beneficially owns not less than 5% of that capital.

[F363 (3) For the purposes of the CSOP code—

(a) shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

(b) the “restriction” is that provision.]

Textual Amendments

F363 Sch. 4 para. 36(3) inserted (with effect in accordance with Sch. 2 para. 77 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 75

Index of defined expressions U.K.

37 U.K. In the CSOP code the following expressions are defined or otherwise explained by the provisions indicated below:

F364 . . .	F364 . . .
associated company	paragraph 35(1)
child	[F365 section 721(6)]
close company	[F366 section 989 of ITA 2007], (and see paragraph 9(4))
company	paragraph 36(1)
connected person	section 718
constituent company	paragraph 3(3)
control	section 719 (and see paragraph 35(2))
the CSOP code	section 521(3)
CSOP scheme	section 521(4)
distribution	[F367 section 989 of ITA 2007]
eligible shares (in Part 4 of this Schedule)	paragraph 15(2)
employee and employment	section 4
group scheme	paragraph 3(2) (and see paragraph 34)
F368 . . .	F368 . . .
market value	paragraph 36(1)
member of a consortium	paragraph 36(2)
[F369 non-UK company reorganisation arrangement	paragraph 35ZA]
notice	[F370 section 989 of ITA 2007]
the options (in relation to a participant)	paragraph 2(2)
ordinary share capital	[F371 section 989 of ITA 2007]
participant	paragraph 2(2)
participate	paragraph 2(2)
personal representatives	[F372 section 989 of ITA 2007]
recognised stock exchange	[F373 section 1005 of ITA 2007]
[F374 restriction (in relation to shares)	paragraph 36(3)]
[F369 Schedule 4 CSOP scheme	paragraph 1 and Part 7 of this Schedule]
the scheme organiser	paragraph 2(2)
share option	section 521(4)
shares	section 521(4)
[F375 tribunal	section 989 of ITA 2007]
F376 . . .	F376 . . .
F377 . . .	F377 . . .

Textual Amendments

F364 Words in Sch. 4 para. 37 omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 182(a), 204 (with Sch. 8 paras. 205-215)

F365 Words in Sch. 4 para. 37 substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 449(a) (with Sch. 2)

F366 Words in Sch. 4 para. 37 substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 449(b) (with Sch. 2)

F367 Words in Sch. 4 para. 37 substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 449(c) (with Sch. 2)

F368 Words in Sch. 4 para. 37 repealed (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 123(f), Sch. 5; S.I. 2005/1126, art. 2(2)(h)(i)

F369 Words in Sch. 4 para. 37 inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 182(b), 204 (with Sch. 8 paras. 205-215)

F370 Words in Sch. 4 para. 37 substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 449(d) (with Sch. 2)

F371 Words in Sch. 4 para. 37 substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 449(e) (with Sch. 2)

F372 Words in Sch. 4 para. 37 substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 449(f) (with Sch. 2)

F373 Words in Sch. 4 para. 37 substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 449(g) (with Sch. 2)

F374 Words in Sch. 4 para. 37 inserted (with effect in accordance with Sch. 2 para. 77 of the amending Act) by Finance Act 2013 (c. 29), Sch. 2 para. 76

F375 Words in Sch. 4 para. 37 inserted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 351(3)

F376 Words in Sch. 4 para. 37 omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 351(2)

F377 Words in Sch. 4 para. 37 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 449(h), Sch. 3 Pt. 1 (with Sch. 2)

Section 527

SCHEDULE 5 U.K. Enterprise management incentives

Part 1 U.K. Introduction

Enterprise management incentives: qualifying options U.K.

1 (1) This Schedule makes provision for establishing what is a qualifying option for the purposes of the EMI code. U.K.

(2) In the EMI code a “qualifying option” means (in accordance with section 527(4)) a share option—

(a) in relation to which the requirements of this Schedule are met at the time when the option is granted, and

(b) which is notified to [F162 an officer of Revenue and Customs] in accordance with Part 7.

(3) The requirements of this Schedule are—

(a) the general requirements in Part 2,

(b) that the company whose shares are the subject of the option (“the relevant company”) is a qualifying company (see Part 3),

(c) that the individual to whom it is granted is an eligible employee in relation to that company (see Part 4),

(d) that the option is granted to the employee by reason of the employee’s employment—

(i) with that company, or

(ii) if that company is a parent company, with that company or another member of the group, and

(e) the requirements of Part 5 as to the terms of the option, the types of shares that may be subject to it, and other matters.

(4) In the EMI code, as it applies to a share option, “the appropriate time” means the time when the option is granted.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

Meaning of “the relevant company” and “the employer company” U.K.

2 U.K. In the EMI code, in relation to a share option—

• “the relevant company” means (in accordance with paragraph 1(3)(b)) the company whose shares are subject to the option;

• “the employer company” means the company by reference to which the requirement in paragraph 1(3)(d) (the employment requirement) is met.

Part 2 U.K. General requirements

General requirements: introduction U.K.

3 U.K. A share option is not a qualifying option unless the requirements of this Part of this Schedule as to the following are met at the appropriate time—

• the purpose for which the option is granted (see paragraph 4),

• the maximum entitlement of an employee (see paragraphs 5 and 6),

• the maximum value of the relevant company’s shares in respect of which unexercised options can exist (see paragraph 7).

Purpose of granting the option U.K.

4 U.K. To be a qualifying option a share option must be granted for commercial reasons in order to recruit or retain an employee in a company, and not as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.

Maximum entitlement of employee: financial limit on unexercised options U.K.

5 (1) An employee may not hold unexercised qualifying options which— U.K.

(a) are in respect of shares with a total value of more than [F378 £250,000] , and

(b) were granted by reason of the employee’s employment—

(i) with one company, or

(ii) with two or more companies which are members of the same group of companies.

(2) A share option cannot be a qualifying option if the limit in sub-paragraph (1) is already exceeded at the time when it is granted.

(3) If the grant of a share option causes that limit to be exceeded, the option cannot be a qualifying option so far as it relates to the excess.

(4) Where, at the time when a share option is granted to an employee (“E”), E holds unexercised CSOP options granted by reason of E’s employment—

(a) with the employer company, or

(b) if it is a member of a group of companies, with any member of that group,

those options are to be treated for the purposes of this paragraph as if they were unexercised qualifying options.

(5) A “CSOP option” is an option to acquire shares under a scheme [F379 which is a Schedule 4 CSOP scheme (see Schedule 4)].

(6) For the purposes of this paragraph—

(a) “the value” of shares in respect of which a particular share option is or has been granted means the market value, at the time when the option is or was granted, of issued shares of the same class as those that may be acquired by exercise of the option; and

(b) a share option is to be treated as granted in respect of the maximum number of shares that may be acquired under it.

[F380 (7) For the purposes of this paragraph the market value of restricted shares is to be determined as if they were not.

(8) Shares are “restricted shares” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares.]

Textual Amendments

F378 Word in Sch. 5 para. 5(1)(a) substituted (16.6.2012) by The Income Tax (Limits for Enterprise Management Incentives) Order 2012 (S.I. 2012/1360), arts. 1, 2(2)(a)

F379 Words in Sch. 5 para. 5(5) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 203, 204 (with Sch. 8 paras. 205-215)

F380 Sch. 5 para. 5(7)(8) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 45(2)(4); S.I. 2003/1997, art. 2

Maximum entitlement of employee: further limit of 3 years U.K.

6 (1) Sub-paragraph (2) applies if an employee (“E”) has already been granted, by reason of E’s employment with one company, qualifying options in respect of shares with a total value of [F381 £250,000] . U.K.

(2) Any further option granted by reason of E’s employment—

(a) with that company, or

(b) if it is a member of a group of companies, with any member of that group,

within the 3-year restriction period cannot be a qualifying option.

(3) Sub-paragraph (4) applies if an employee (“E”) has already been granted, by reason of E’s employment with two or more companies which are members of the same group of companies, qualifying options in respect of shares with a total value of [F382 £250,000] .

(4) Any further option granted, by reason of E’s employment with any member of that group, within the 3-year restriction period cannot be a qualifying option.

(5) Sub-paragraph (2) or (4) applies whether or not the qualifying options already granted have been exercised or released.

(6) In those sub-paragraphs “the 3-year restriction period” means the period of three years after the date of the grant of the last qualifying option.

(7) Paragraph 5(6) to (8) (determination of value of shares) apply for the purposes of this paragraph as they apply for the purposes of paragraph 5.

Textual Amendments

F381 Word in Sch. 5 para. 6(1) substituted (16.6.2012) by The Income Tax (Limits for Enterprise Management Incentives) Order 2012 (S.I. 2012/1360), arts. 1, 2(2)(b)

F382 Word in Sch. 5 para. 6(3) substituted (16.6.2012) by The Income Tax (Limits for Enterprise Management Incentives) Order 2012 (S.I. 2012/1360), arts. 1, 2(2)(b)

Maximum value of options in respect of relevant company’s shares U.K.

7 (1) The total value of shares in the relevant company in respect of which unexercised qualifying options exist must not exceed £3 million. U.K.

(2) A share option cannot be a qualifying option if the limit in sub-paragraph (1) is already exceeded at the time when it is granted.

(3) If the grant of a share option causes that limit to be exceeded, the option cannot be a qualifying option so far as it relates to the excess.

(4) If the grant of two or more options at the same time causes that limit to be exceeded, sub-paragraph (5) applies.

(5) For the purpose of determining which part of each option relates to the excess, the amount of the excess is to be divided pro rata among the options according to the value of the shares in respect of which each option was granted.

(6) Paragraph 5(6) to (8) (determination of value of shares) apply for the purposes of this paragraph as they apply for the purposes of paragraph 5.

Part 3 U.K. Qualifying companies

Qualifying companies: introduction U.K.

8 U.K. A “qualifying company” is a company in relation to which the requirements of this Part of this Schedule as to the following are met at the appropriate time—

• independence (see paragraph 9),

• having only qualifying subsidiaries (see paragraphs 10 and 11),

• [F383 property managing subsidiaries (see paragraphs 11A and 11B),]

• gross assets (see paragraph 12), F384 ...

• [F385 number of employees (see paragraph 12A), F386 ...]

• trading activities (see paragraphs 13 and 14, read with paragraphs 15 to 23)[F387 , and

• UK permanent establishment (see paragraph 14A).]

Textual Amendments

F383 Words in Sch. 5 para. 8 inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(2)

F384 Word in Sch. 5 para. 8 omitted (with effect in accordance with s. 33(6) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 33(2)

F385 Words in Sch. 5 para. 8 inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2008 (c. 9), s. 33(2)

F386 Word in Sch. 5 para. 8 omitted (with effect in accordance with s. 6(5) of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), s. 6(2)

F387 Words in Sch. 5 para. 8 inserted (with effect in accordance with s. 6(5) of the amending Act) by Finance (No. 3) Act 2010 (c. 33), s. 6(2)

The independence requirement U.K.

9 (1) The independence requirement consists of two conditions. U.K.

(2) The first condition is that the company is not—

(a) a 51% subsidiary of another company, or

(b) a company which is under the control of—

(i) another company, or

(ii) another company and any other person connected with that other company,

without being a 51% subsidiary of that other company.

(3) The second condition is that no arrangements are in existence by virtue of which the company could become such a subsidiary or fall under such control.

(4) Arrangements with a view to a qualifying exchange of shares (see paragraph 40) do not count for the purposes of the second condition.

[F388 (5) But the independence requirement is treated as met if the company is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).]

Textual Amendments

F388 Sch. 5 para. 9(5) inserted (1.10.2014) by Finance Act 2014 (c. 26), Sch. 37 para. 22(1)(2); S.I. 2014/2461, art. 2

The qualifying subsidiaries requirement U.K.

10 (1) A company that has one or more subsidiaries is not a qualifying company unless every subsidiary of the company is a qualifying subsidiary (see paragraph 11). U.K.

[F389 (2) In this paragraph “subsidiary” means any company which the company controls, either on its own or together with any person connected with it.

(3) For the purpose of sub-paragraph (2), the question whether a person controls a company is to be determined in accordance with [F390 sections 450 and 451 of CTA 2010] (“control” in the context of close companies).]

Textual Amendments

F389 Sch. 5 para. 10(2)(3) substituted for Sch. 5 para. 10(2) (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(3)

F390 Words in Sch. 5 para. 10(3) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(2) (with Sch. 2)

Meaning of “qualifying subsidiary” U.K.

11 (1) A company (“the subsidiary”) is a qualifying subsidiary of a company (“the holding company”) if the following conditions are met. U.K.

(2) The conditions are—

F391 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F391 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F391 (c) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F392 (ca) that the subsidiary is a 51% subsidiary of the holding company;]

(d) that no person other than the holding company [F393 or another of its subsidiaries] has control of the subsidiary; and

(e) that no arrangements are in existence by virtue of which [F394 either of the conditions in paragraphs (ca) and] (d) would cease to be met.

F395 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Sub-paragraph (5) applies at a time when the subsidiary or another company is being wound up.

(5) The subsidiary is not to be regarded as having ceased, on account of the winding up, to be a company in relation to which the conditions in sub-paragraph (2) are met if—

(a) the conditions in that sub-paragraph would be met apart from the winding up, and

(b) the winding up is for commercial reasons and is not part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.

(6) Sub-paragraph (7) applies at a time when arrangements are in existence for the disposal by—

(a) the holding company, or

(b) another subsidiary of the holding company,

of all of its interest in the subsidiary.

(7) The subsidiary is not to be regarded as having ceased, on account of those arrangements, to be a company in relation to which the conditions in sub-paragraph (2) are met if the disposal is to be for commercial reasons and is not to be part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.

[F396 (8) Sub-paragraph (9) applies at a time when the subsidiary or another company is in administration or receivership.

(9) The subsidiary is not to be regarded, by reason only of anything done as a consequence of the company concerned being in administration or receivership, as having ceased to be a company in relation to which the conditions in sub-paragraph (2) are met if—

(a) the entry into administration or receivership, and

(b) everything done as a consequence of the company concerned being in administration or receivership,

is for commercial reasons and is not part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.

(10) [F397 Section 252 of ITA 2007] (meaning of being in administration or receivership) applies for the purposes of sub-paragraphs (8) and (9) as it applies for the purposes of [F398 Part 5 of ITA 2007] (enterprise investment scheme).]

Textual Amendments

F391 Sch. 5 para. 11(2)(a)-(c) repealed (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(4)(a), Sch. 42 Pt. 2(13)

F392 Sch. 5 para. 11(2)(ca) inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(4)(b)

F393 Words in Sch. 5 para. 11(2)(d) inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(4)(c)

F394 Words in Sch. 5 para. 11(2)(e) substituted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(4)(d)

F395 Sch. 5 para. 11(3) repealed (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(4)(e), Sch. 42 Pt. 2(13)

F396 Sch. 5 para. 11(8)-(10) inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(4)(f)

F397 Words in Sch. 5 para. 11(10) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(2)(a) (with Sch. 2)

F398 Words in Sch. 5 para. 11(10) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(2)(b) (with Sch. 2)

[F399 The property managing subsidiaries requirement U.K.

Textual Amendments

F399 Sch. 5 paras. 11A, 11B and cross-headings inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(5)

11A (1) A company is not a qualifying company if it has a property managing subsidiary which is not a qualifying 90% subsidiary of the company (see paragraph 11B). U.K.

(2) “Property managing subsidiary” means a qualifying subsidiary of a company whose business consists wholly or mainly in the holding or managing of land or any property deriving its value from land.

[F400 (3) In sub-paragraph (2) “property deriving its value from land” has the meaning given by section 188(3) of ITA 2007.]

Textual Amendments

F400 Sch. 5 para. 11A(3) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(3) (with Sch. 2)

Meaning of “qualifying 90% subsidiary” U.K.

11B (1) A company (“the subsidiary”) is a qualifying 90% subsidiary of a company (“the holding company”) if the following conditions are met. U.K.

(2) The conditions are—

(a) that the holding company possesses not less than 90% of the issued share capital of, and not less than 90% of the voting power in, the subsidiary;

(b) that the holding company would—

(i) in the event of a winding up of the subsidiary, or

(ii) in any other circumstances,

be beneficially entitled to not less than 90% of the assets of the subsidiary which would then be available for distribution to the shareholders of the subsidiary;

(c) that the holding company is beneficially entitled to not less than 90% of any profits of the subsidiary which are available for distribution to the shareholders of the subsidiary;

(d) that no person other than the holding company has control of the subsidiary; and

(e) that no arrangements are in existence by virtue of which any of the conditions in paragraphs (a) to (d) would cease to be met.

(3) Sub-paragraphs (4) to (10) of paragraph 11 (but not sub-paragraph (6)(b)) apply in relation to the conditions in sub-paragraph (2) above as they apply in relation to the conditions in sub-paragraph (2) of that paragraph.]

The gross assets requirement U.K.

12 (1) The gross assets requirement in the case of a single company is that the value of the company’s gross assets does not exceed £30 million. U.K.

(2) The gross assets requirement in the case of a parent company is that the value of the group assets does not exceed £30 million.

(3) The “value of the group assets” means the aggregate of the values of the gross assets of each of the members of the group, disregarding any that consist in rights against, or shares in or securities of, another member of the group.

[F401 The number of employees requirement U.K.

Textual Amendments

F401 Sch. 5 para. 12A and cross-heading inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2008 (c. 9), s. 33(3)

12A (1) The number of employees requirement in the case of a single company is that the full-time equivalent employee number for it is less than 250. U.K.

(2) The number of employees requirement in the case of a parent company is that the sum of—

(a) the full-time equivalent employee number for it, and

(b) the full-time equivalent employee numbers for each of its qualifying subsidiaries,

is less than 250.

(3) The full-time equivalent employee number for a company is calculated as follows—

Step 1

Find the number of full-time employees of the company.

Step 2

Add, for each employee of the company who is not a full-time employee, such fraction as is just and reasonable.

The result is the full-time equivalent employee number.

(4) In this paragraph references to an employee—

(a) include a director, but

(b) do not include—

(i) an employee on maternity [F402 , paternity or shared parental] leave, or

(ii) a student on vocational training.]

Textual Amendments

F402 Words in Sch. 5 para. 12A(4)(b)(i) substituted (1.12.2014) by Children and Families Act 2014 (c. 6), s. 139(6), Sch. 7 para. 63(2); S.I. 2014/1640, art. 5(2)(aa)

The trading activities requirement: single company U.K.

13 (1) The trading activities requirement in the case of a single company is that the company— U.K.

(a) disregarding any purposes within sub-paragraph (2), exists wholly for the purpose of carrying on one or more qualifying trades, and

(b) is carrying on a qualifying trade or preparing to do so.

(2) The purposes referred to in sub-paragraph (1)(a) are—

(a) the holding and managing of property used by the company for one or more qualifying trades carried on by it, and

(b) any purposes having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities.

(3) This paragraph is supplemented by paragraph 15 (meaning of “qualifying trade”) read with paragraphs 16 to 23 (excluded activities).

The trading activities requirement: parent company U.K.

14 (1) The trading activities requirement in the case of a parent company is that— U.K.

(a) at least one group company—

(i) disregarding any purposes within sub-paragraph (4), exists wholly for the purpose of carrying on one or more qualifying trades, and

(ii) is carrying on a qualifying trade or preparing to do so, and

(b) the business of the group does not consist (either wholly or as to a substantial part) in the carrying on of non-qualifying activities.

(2) The “business of the group” means what would be the business of the group if the activities of the group companies taken together were regarded as one business.

(3) For the purpose of determining the business of a group, activities of a group company are to be disregarded to the extent that they consist in—

(a) the holding of shares in or securities of, or the making of loans to, another group company,

(b) the holding and managing of property used by a group company for the purposes of one or more qualifying trades carried on by a group company, or

(c) incidental activities of a company which meets the trading activities requirement for a single company (see paragraph 13).

(4) The purposes referred to in sub-paragraph (1)(a)(i) are—

(a) the carrying on of any activities within sub-paragraph (3), and

(b) any purposes having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities.

(5) In this paragraph—

(a) “group company” means any member of the group;

(b) “incidental activities” means activities carried on in pursuance of purposes having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities;

(c) “non-qualifying activities” means—

(i) excluded activities, or

(ii) activities carried on otherwise than in the course of a trade.

(6) This paragraph is supplemented by paragraph 15 (meaning of “qualifying trade”) read with paragraphs 16 to 23 (excluded activities).

[F403 The UK permanent establishment requirement U.K.

Textual Amendments

F403 Sch. 5 para. 14A and cross-heading inserted (with effect in accordance with s. 6(5) of the amending Act) by Finance (No. 3) Act 2010 (c. 33), s. 6(3)

14A (1) The UK permanent establishment requirement is met if condition A or B is met. U.K.

(2) Condition A is that the company has a permanent establishment in the United Kingdom.

(3) Condition B is that—

(a) the company is a parent company, and

(b) any other member of the group—

(i) meets the conditions in paragraph 14(1)(a) (trading activities requirement), and

(ii) has a permanent establishment in the United Kingdom.]

Meaning of “qualifying trade” U.K.

15 (1) A trade is a qualifying trade if— U.K.

F404 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) it is conducted on a commercial basis and with a view to the realisation of profits, and

(c) it does not consist (either wholly or as to a substantial part) in the carrying on of excluded activities.

(2) The carrying on of activities of research and development from which it is intended that a connected qualifying trade will be derived or benefit counts as the carrying on of a qualifying trade.

(3) But preparing to carry on such activities does not count as preparing to carry on a qualifying trade.

(4) In sub-paragraph (2) “connected qualifying trade” means a qualifying trade carried on—

(a) by the company carrying on the activities of research and development, or

(b) if that company is a member of a group, by any other member of the group.

Textual Amendments

F404 Sch. 5 para. 15(1)(a) omitted (with effect in accordance with s. 6(5) of the amending Act) by virtue of Finance (No. 3) Act 2010 (c. 33), s. 6(4)

Excluded activities U.K.

16 U.K. The following are excluded activities—

(a) dealing in land, in commodities or futures or in shares, securities or other financial instruments;

(b) dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution (see also paragraph 17);

(c) banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities;

(d) leasing, including letting ships on charter or other assets on hire (see also paragraph 18);

(e) receiving royalties or licence fees (see also paragraph 19);

(f) providing legal or accountancy services;

(g) property development (see also paragraph 20);

(h) farming or market gardening;

(i) holding, managing or occupying woodlands, any other forestry activities or timber production;

[F405 (ia) shipbuilding (see also paragraph 20A);

(ib) producing coal (see also paragraph 20B);

(ic) producing steel (see also paragraph 20C);]

(j) operating or managing hotels or comparable establishments, or managing property used as a hotel or comparable establishment (see also paragraph 21);

(k) operating or managing nursing homes or residential care homes, or managing property used as a nursing home or residential care home (see also paragraph 22);

(l) any activities which are excluded activities under paragraph 23.

Textual Amendments

F405 Sch. 5 para. 16(ia)-(ic) inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2008 (c. 9), s. 33(4)

Excluded activities: wholesale and retail distribution U.K.

17 (1) This paragraph supplements paragraph 16(b). U.K.

(2) A trade of wholesale distribution is one in which the goods are offered for sale and sold to persons—

(a) for resale by them, or

(b) for processing and resale by them,

to members of the general public for their use or consumption.

(3) A trade of retail distribution is one in which the goods are offered for sale and sold to members of the general public for their use or consumption.

(4) A trade is not an ordinary trade of wholesale or retail distribution if—

(a) it consists, to a substantial extent—

(i) in dealing in goods of a kind which are collected or held as an investment, or

(ii) in that activity and any other excluded activity taken together, and

(b) a substantial proportion of those goods are held by the company for a period which is significantly longer than the period for which a vendor would reasonably be expected to hold them while endeavouring to dispose of them at their market value.

(5) In determining whether a trade carried on by any person (“P”) is an ordinary trade of wholesale or retail distribution, consideration must be given to the extent to which it has the following features—

(a) the goods are bought by P in quantities larger than those in which P sells them;

(b) the goods are bought and sold by P in different markets;

(c) P employs staff and incurs expenses in the trade in addition—

(i) to the cost of the goods, and

(ii) in the case of a trade carried on by a company, to any remuneration paid to any person connected with it;

(d) there are purchases or sales from or to persons who are connected with P;

(e) purchases are matched with forward sales or vice versa;

(f) the goods are held by P for longer than is normal for goods of the kind in question;

(g) the trade is carried on otherwise than at a place or places commonly used for wholesale or retail trade;

(h) P does not take physical possession of the goods.

(6) The features in sub-paragraph (5)(a) to (c) are indications that the trade is such an ordinary trade.

(7) Those in sub-paragraph (5)(d) to (h) are indications to the contrary.

Excluded activities: leasing of certain ships U.K.

18 (1) This paragraph supplements paragraph 16(d) so far as it relates to the leasing of ships other than [F406 offshore installations] or pleasure craft. U.K.

(2) In the following provisions “ship” accordingly means a ship other than an [F407 offshore installation] or a pleasure craft.

(3) If the requirements of sub-paragraph (4) are met, a trade is not to be regarded as consisting in the carrying on of excluded activities within paragraph 16(d) as a result only of its consisting in the letting of ships on charter.

(4) The requirements of this sub-paragraph are that—

(a) every ship let on charter by the company carrying on the trade is beneficially owned by the company;

(b) every ship beneficially owned by the company is registered in the United Kingdom;

(c) the company is solely responsible for arranging the marketing of the services of its ships; and

(d) the conditions mentioned in sub-paragraph (5) are satisfied in relation to every letting of a ship on charter by the company.

(5) The conditions are that—

(a) the letting is for a period not exceeding 12 months and no provision is made at any time (in the charterparty or otherwise) for extending it beyond that period otherwise than at the option of the charterer;

(b) during the period of the letting there is no provision in force (as a result of being contained in the charterparty or otherwise) for the grant of a new letting to end, otherwise than at the option of the charterer, more than 12 months after that provision is made;

(c) the letting is by way of a bargain made at arm’s length between the company and a person who is not connected with it;

(d) under the terms of the charter the company is responsible as principal—

(i) for taking, throughout the period of the charter, management decisions in relation to the ship, other than those of a kind generally regarded by persons engaged in trade of the kind in question as matters of husbandry, and

(ii) for defraying all expenses in connection with the ship throughout that period, or substantially all such expenses, other than those directly incidental to a particular voyage or to the employment of the ship during that period; and

(e) no arrangements exist as a result of which a person other than the company may be appointed to be responsible for the matters mentioned in paragraph (d) on behalf of the company.

(6) If in the case of a letting by the company carrying on the trade (“the letting company”) the charterer is also a company and—

(a) the charterer is a qualifying subsidiary of the letting company, or

(b) the letting company is a qualifying subsidiary of the charterer, or

(c) both companies are qualifying subsidiaries of a third company,

sub-paragraph (5) has effect with the omission of paragraph (c).

(7) Where any of the requirements in sub-paragraph (4) is not met in relation to any lettings, the trade is not, as a result, to be treated as consisting in the carrying on of excluded activities if those lettings and any other excluded activities do not, taken together, amount to a substantial part of the trade.

(8) In this paragraph—

• F408 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “pleasure craft” means any ship of a kind primarily used for sport or recreation.

Textual Amendments

F406 Words in Sch. 5 para. 18(1) substituted (with effect in accordance with Sch. 27 para. 17(6)(7) of the amending Act) by Finance Act 2004 (c. 12), Sch. 27 para. 17(2)

F407 Words in Sch. 5 para. 18(2) substituted (with effect in accordance with Sch. 27 para. 17(6)(7) of the amending Act) by Finance Act 2004 (c. 12), Sch. 27 para. 17(3)

F408 Words in Sch. 5 para. 18(8) repealed (with effect in accordance with Sch. 27 para. 17(6)(7) of the amending Act) by Finance Act 2004 (c. 12), Sch. 27 para. 17(4), Sch. 42 Pt. 2(19)

Excluded activities: receipt of royalties or licence fees U.K.

19 (1) This paragraph supplements paragraph 16(e) (receipt of royalties or licence fees). U.K.

(2) If the requirement of sub-paragraph (3) is met, a trade is not to be regarded as consisting in the carrying of excluded activities within paragraph 16(e) as a result only of its consisting to a substantial extent in the receiving of royalties or licence fees.

(3) The requirement of this sub-paragraph is that the royalties or licence fees (or all of them except for a part that is not substantial in terms of value) are attributable to the exploitation of relevant intangible assets.

(4) For this purpose a “relevant intangible asset” is an intangible asset the whole or greater part of which (in terms of value) has been created—

[F409 (a) by the relevant company, or

(b) by a company which was a qualifying subsidiary of the relevant company throughout a period during which it created the whole or greater part (in terms of value) of the intangible asset.]

(5) In the case of an intangible asset which is intellectual property, any reference in sub-paragraph (4) to the creation of the asset by a company is to its creation in circumstances in which the right to exploit it vests in the company (either alone or jointly with others).

(6) In sub-paragraph (5) “intellectual property” means—

(a) any patent, trade mark, registered design, copyright, design right, performer’s right or plant breeder’s right; or

(b) any rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a).

(7) In this paragraph “intangible asset” means any asset which falls to be treated as an intangible asset in accordance with generally accepted accounting practice.

[F410 (8) If—

(a) the relevant company acquired all the shares (“old shares”) in another company (“the old company”) at a time when the only shares issued in the relevant company were subscriber shares, and

(b) the consideration for the old shares consisted wholly of the issue of shares in the relevant company,

references in sub-paragraph (4) to the relevant company include the old company.]

Textual Amendments

F409 Sch. 5 para. 19(4)(a)(b) substituted (with effect in accordance with s. 61(2)-(6) of the amending Act) by Finance Act 2007 (c. 11), s. 61(1)(a)

F410 Sch. 5 para. 19(8) inserted (with effect in accordance with s. 61(2)-(6) of the amending Act) by Finance Act 2007 (c. 11), s. 61(1)(b)

Excluded activities: property development U.K.

20 (1) This paragraph supplements paragraph 16(g). U.K.

(2) “Property development” means the development of land—

(a) by a company which has, or at any time has had, an interest in the land, and

(b) with the sole or main object of realising a gain from the disposal of an interest in the land when it is developed.

(3) For this purpose “interest in land” means—

(a) any estate, interest or right in or over land, including any right affecting the use or disposition of land, or

(b) any right to obtain such an estate, interest or right from another which is conditional on the other’s ability to grant it.

(4) References in this paragraph to an interest in land do not, however, include—

(a) the interest of a creditor (other than a creditor in respect of a rentcharge) whose debt is secured by way of mortgage, an agreement for a mortgage or a charge of any kind over land, or

(b) in the case of land in Scotland, the interest of a creditor in a charge or security of any kind over land.

[F411 Excluded activities: shipbuilding U.K.

Textual Amendments

F411 Sch. 5 paras. 20A-20C and cross-heading inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2008 (c. 9), s. 33(5)

20A U.K. In paragraph 16(ia) “shipbuilding” has the same meaning as in the Framework on state aid to shipbuilding (2003/C 317/06), published in the Official Journal on 30 December 2003.

Excluded activities: producing coal U.K.

20B (1) This paragraph supplements paragraph 16(ib). U.K.

(2) “Coal” has the meaning given by Article 2 of Council Regulation (EC) No. 1407/2002 (state aid to coal industry).

(3) The production of coal includes the extraction of it.

Excluded activities: producing steel U.K.

20C U.K. In paragraph 16(ic) “steel” means any of the steel products listed in Annex 1 to the Guidelines on national regional aid (2006/C 54/08), published in the Official Journal on 4 March 2006.]

Excluded activities: hotels and comparable establishments U.K.

21 (1) This paragraph supplements paragraph 16(j). U.K.

(2) A “comparable establishment” means a guest house, hostel or other establishment offering overnight accommodation.

(3) An establishment offers overnight accommodation if the main purpose of maintaining it is the provision of facilities for such accommodation (with or without catering services).

(4) The activities of a person are not to be taken to fall within paragraph 16(j) unless that person has an estate or interest in, or is in occupation of, the hotel or comparable establishment in question.

Excluded activities: nursing homes and residential care homes U.K.

22 (1) This paragraph supplements paragraph 16(k). U.K.

(2) “Nursing home” means an establishment that exists wholly or mainly for the provision of nursing care—

(a) for persons suffering from sickness, injury or infirmity, or

(b) for women who are pregnant or have given birth to children.

(3) “Residential care home” means an establishment that exists wholly or mainly for the provision of residential accommodation, together with board and personal care, for persons in need of personal care by reason of—

(a) old age,

(b) mental or physical disability,

(c) past or present dependence on alcohol or drugs,

(d) any past illness, or

(e) past or present mental disorder.

(4) The activities of a person are not to be taken to fall within paragraph 16(k) unless that person has an estate or interest in, or is in occupation of, the nursing home or residential care home in question.

Excluded activities: provision of facilities for another business U.K.

23 (1) This paragraph applies where a company (“the service provider”) provides services or facilities for a business carried on by another person. U.K.

(2) Providing those services or facilities is an excluded activity if—

(a) the business consists to a substantial extent in carrying on excluded activities within any of sub-paragraphs (a) to (k) of paragraph 16, and

(b) a controlling interest in the business is held by a person (other than a company of which the service provider is a subsidiary) who also has a controlling interest in the business carried on by the service provider.

(3) Sub-paragraphs (4) to (6) explain what is meant by a controlling interest in a business for the purposes of sub-paragraph (2)(b).

(4) In the case of a business carried on by a company, a person (“P”) has a controlling interest in the business if—

(a) P controls the company,

(b) the company is a close company and P, or an associate of P's, is a director of the company and either—

(i) is the beneficial owner of more than 30% of the ordinary share capital of the company, or

(ii) is able (directly or through the medium of other companies or by any other indirect means) to control more than 30% of that share capital, or

(c) not less than half of the business could, in accordance with [F412 section 942 of CTA 2010 (options for purposes of ownership condition)], be regarded as belonging to him for the purposes of [F413 section 941 of that Act (trade transfers without change of ownership: ownership condition)].

(5) In any other case, a person has a controlling interest in a business if that person is entitled to not less than half—

(a) of the assets used for the business, or

(b) of the income arising from it.

(6) For the purposes of sub-paragraph (4)(a) the question whether a person controls a company is to be determined in accordance with [F414 sections 450 and 451 of CTA 2010] (“control” in the context of close companies).

(7) For the purposes of this paragraph any rights or powers of a person who is an associate of another person are to be attributed to that other person.

(8) In this paragraph—

• “associate” has the meaning given [F415 by section 448 of CTA 2010] (expressions relating to close companies), except that in [F416 that section as it applies] for the purposes of this paragraph “relative” does not include a brother or sister;

• “business” includes any trade, profession or vocation;

• “director” is to be construed in accordance with [F417 section 452 of CTA 2010] (expressions relating to close companies).

Textual Amendments

F412 Words in Sch. 5 para. 23(4)(c) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(4)(a)(i) (with Sch. 2)

F413 Words in Sch. 5 para. 23(4)(c) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(4)(a)(ii) (with Sch. 2)

F414 Words in Sch. 5 para. 23(6) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(4)(b) (with Sch. 2)

F415 Words in Sch. 5 para. 23(8) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(4)(c)(i) (with Sch. 2)

F416 Words in Sch. 5 para. 23(8) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(4)(c)(ii) (with Sch. 2)

F417 Words in Sch. 5 para. 23(8) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(4)(d) (with Sch. 2)

Part 4 U.K. Eligible employees

Eligible employees: introduction U.K.

24 U.K. An individual is an “eligible employee” in relation to the relevant company if the requirements of this Part of this Schedule as to the following are met at the appropriate time—

• employment (see paragraph 25),

• commitment of working time (see paragraphs 26 and 27), and

• having no material interest (see paragraphs 28 to 33).

The employment requirement U.K.

25 U.K. To be an eligible employee in relation to the relevant company an individual must be an employee—

(a) of that company, or

(b) if that company is a parent company, of that company or a qualifying subsidiary of that company.

The requirement as to commitment of working time U.K.

26 (1) For an individual (“the employee”) to be an eligible employee in relation to the relevant company the average amount per week of the employee’s committed time must equal or exceed the statutory threshold, that is— U.K.

(a) 25 hours a week, or

(b) if less, 75% of the employee’s working time (see paragraph 27).

(2) The employee’s “committed time” means the time that the employee is required, as an employee in relevant employment, to spend—

(a) on the business of the relevant company, or

(b) if the relevant company is a parent company, on the business of the group.

(3) It includes any time which the employee would have been required to spend as mentioned in sub-paragraph (2) but for—

(a) injury, ill-health or disability,

(b) pregnancy, childbirth, maternity or paternity leave [F418 , shared parental leave] or parental leave,

(c) reasonable holiday entitlement, or

(d) not being required to work during a period of notice of termination of employment.

(4) In this paragraph “relevant employment” means employment—

(a) by the relevant company, or

(b) where the relevant company is a parent company, by any member of the group.

Textual Amendments

F418 Words in Sch. 5 para. 26(3) inserted (1.12.2014) by Children and Families Act 2014 (c. 6), s. 139(6), Sch. 7 para. 63(3); S.I. 2014/1640, art. 5(2)(aa)

Meaning of “working time” U.K.

27 (1) In paragraph 26 “working time” means— U.K.

(a) time spent on remunerative work as an employee or self-employed person, or

(b) time which would have been so spent but for any of the reasons set out in paragraph 26(3)(a) to (d).

(2) In sub-paragraph (1)(a) “remunerative work”, in the context of work undertaken as an employee, means work the earnings from which—

(a) are general earnings to which section 15 [F419 applies (earnings for year when employee UK resident)], or

(b) would be general earnings within paragraph (a) if the employee were [F420 UK resident (and none of sections 809B, 809D and 809E of ITA 2007 (remittance basis) applied to the employee).]

(3) In sub-paragraph (1)(a) “remunerative work”, in the context of work undertaken as a self-employed person, means work which is undertaken with a view to profit and the profits (if any) from which—

(a) are (or would be) chargeable to tax [F421 as the profits of a trade, profession or vocation carried on wholly or partly in the United Kingdom], or

(b) would be so chargeable if the employee were resident F422 ... in the United Kingdom.

Textual Amendments

F419 Words in Sch. 5 para. 27(2)(a) substituted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 43(a)

F420 Words in Sch. 5 para. 27(2)(b) substituted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by Finance Act 2008 (c. 9), Sch. 7 para. 43(b)

F421 Words in Sch. 5 para. 27(3)(a) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 620(2) (with Sch. 2)

F422 Words in Sch. 5 para. 27(3)(b) omitted (with effect in accordance with Sch. 46 para. 72 of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 42

The “no material interest” requirement U.K.

28 (1) An individual is not an eligible employee in relation to the relevant company if the individual has a material interest— U.K.

(a) in that company, or

(b) if that company is a parent company, in any member of the group.

(2) For the purposes of this paragraph an individual is to be regarded as having a material interest in a company if—

(a) the individual,

(b) the individual together with one or more of the individual’s associates, or

(c) any such associate, with or without any other such associates,

has a material interest in the company.

(3) This paragraph is supplemented—

(a) as regards the meaning of “material interest”, by paragraphs 29 and 30; and

(b) as regards the meaning of “associate” by paragraph 31 (read with paragraphs 32 and 33).

Meaning of “material interest” U.K.

29 (1) In paragraph 28 (the “no material interest” requirement) references to a “material interest” in a company are to— U.K.

(a) a material interest in the share capital of the company, or

(b) where it is a close company, a material interest in its assets.

(2) A material interest in the share capital of a company means—

(a) beneficial ownership of, or

(b) the ability to control (directly or through the medium of other companies or by any other indirect means),

more than 30% of the ordinary share capital of the company.

(3) A material interest in the assets of a close company means—

(a) possession of, or

(b) an entitlement to acquire,

such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive more than 30% of the assets that would then be available for distribution among the participators.

(4) In this paragraph—

• “close company” includes a company that would be a close company but for—

  (a)

  [F423 section 442(a) of CTA 2010] (exclusion of companies not resident in the United Kingdom), or

  (b)

  [F424 sections 446 and 447 of CTA 2010] (exclusion of certain quoted companies);

• “participator” has the meaning given by [F425 section 454 of CTA 2010] (expressions relating to close companies).

(5) This paragraph is supplemented by paragraph 30 (options and interests in SIPs).

Textual Amendments

F423 Words in Sch. 5 para. 29(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(5)(a)(i) (with Sch. 2)

F424 Words in Sch. 5 para. 29(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(5)(a)(ii) (with Sch. 2)

F425 Words in Sch. 5 para. 29(4) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(5)(b) (with Sch. 2)

Material interest: options and interests in SIPs U.K.

30 (1) This paragraph applies for the purposes of paragraph 29 (meaning of “material interest”). U.K.

(2) A right to acquire shares (however arising) is to be treated as a right to control them.

(3) However, shares that an individual may acquire under a qualifying option are to be left out of account until such time as they are actually acquired.

(4) Sub-paragraph (5) applies in a case where—

(a) the shares to be attributed to an individual consist of or include shares which the individual or another person has a right to acquire, and

(b) the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company would be contractually bound to issue in the event of the exercise of the right.

(5) In determining at any time prior to the exercise of the right whether the number of shares to be attributed to the individual exceeds 30% of the ordinary share capital of the company, that ordinary share capital is to be treated as increased by the number of unissued shares referred to in sub-paragraph (4)(b).

(6) The references in sub-paragraphs (4) and (5) to the shares to be attributed to an individual are to the shares which—

(a) for the purposes of paragraph 29(2) (material interest in share capital), and

(b) in accordance with paragraph 28(2) (material interest can consist of or include that of individual’s associates),

fall to be brought into account in the individual’s case so that it can be determined whether their number exceeds 30% of the company’s ordinary share capital.

(7) In applying paragraph 29 the following are to be disregarded—

(a) the interest of the trustees of any [F426 Schedule 2 SIP (see Schedule 2)] in any shares which are held by them in accordance with the plan but which have not been appropriated to, or acquired on behalf of, an individual, and

(b) any rights exercisable by the trustees as a result of that interest.

Textual Amendments

F426 Words in Sch. 5 para. 30(7)(a) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 51, 89 (with Sch. 8 paras. 90-96)

Meaning of “associate” U.K.

31 (1) In paragraph 28(2) (the “no material interest” requirement) “associate”, in relation to an individual, means— U.K.

(a) any relative or partner of that individual,

(b) the trustee or trustees of any settlement in relation to which that individual, or any of that individual’s relatives (living or dead), is or was a settlor, and

(c) where that individual is interested in any shares or obligations of the company mentioned in paragraph 28(2) which are subject to any trust, or are part of the estate of a deceased person—

(i) the trustee or trustees of the settlement concerned, or

(ii) the personal representatives of the deceased,

as the case may be.

(2) Sub-paragraph (1)(c) needs to be read with paragraphs 32 and 33 (which relate to employee benefit trusts and discretionary trusts).

(3) In this paragraph—

• “relative” means—

  (a)

  spouse [F427 or civil partner], or

  (b)

  parent, child or remoter relation in the direct line;

• “settlor” and “settlement” have the same meaning as in [F428 Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act)].

Textual Amendments

F427 Words in Sch. 5 para. 31(3) inserted (5.12.2005) by The Tax and Civil Partnership Regulations 2005 (S.I. 2005/3229), regs. 1(1), 173

F428 Words in Sch. 5 para. 31(3) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 620(3) (with Sch. 2)

Meaning of “associate”: trustees of employee benefit trust U.K.

32 (1) This paragraph applies for the purposes of paragraph 31(1)(c) (meaning of “associate”: trustees of settlement) where the individual is interested as a beneficiary of an employee benefit trust in shares or obligations of the company mentioned in paragraph 28(2). U.K.

(2) The trustees of the employee benefit trust are not to be regarded as associates of the beneficiary by reason only of the individual’s being so interested if neither—

(a) the individual, nor

(b) the individual together with one or more of the individual’s associates, nor

(c) any such associate, with or without any other such associates,

has at any time after 13th March 1989 been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 30% of the ordinary share capital of the company.

(3) In sub-paragraph (2)(b) and (c) “associate” has the meaning given by paragraph 31(1), but does not include the trustees of an employee benefit trust as a result only of the individual’s having an interest in shares or obligations of the trust.

(4) Chapter 11 of Part 7 of this Act (which deals with the attribution of interests in companies to beneficiaries of employee benefit trusts) applies for the purposes of sub-paragraph (2).

(5) In this paragraph “employee benefit trust” has the same meaning as in that Chapter (see sections 550 and 551).

Meaning of “associate”: trustees of discretionary trust U.K.

33 (1) This paragraph applies for the purposes of paragraph 31(1)(c) (meaning of “associate”: trustees of settlement) where— U.K.

(a) the individual (“the beneficiary”) is one of the objects of a discretionary trust,

(b) the property subject to the trust has at any time consisted of or included shares or obligations of the company mentioned in paragraph 28(2),

(c) the beneficiary has ceased to be eligible to benefit under the trust as a result of—

(i) an irrevocable disclaimer or release executed by the beneficiary, or

(ii) the irrevocable exercise by the trustees of a power to exclude the beneficiary from the objects of the trust,

(d) immediately after the beneficiary ceased to be so eligible, no associate of the beneficiary was interested in the shares or obligations of the company which were subject to the trust, and

(e) during the period of 12 months ending with the date on which the beneficiary ceased to be so eligible, neither the beneficiary nor any associate of the beneficiary received any benefit under the trust.

(2) The beneficiary is not, as a result only of the matters mentioned in sub-paragraph (1)(a) and (b), to be regarded as having been interested in the shares or obligations of the company at any time during that period of 12 months.

(3) In sub-paragraph (1) “associate” has the meaning given by paragraph 31, but with the omission of sub-paragraph (1)(c) of that paragraph (trusts and estates).

Part 5 U.K. Requirements relating to options

Requirements relating to options: introduction U.K.

34 U.K. A share option is not a qualifying option unless the requirements of this Part of this Schedule as to the following are met at the appropriate time—

• the type of shares that may be acquired (see paragraph 35),

• when the option is capable of being exercised (see paragraph 36),

• the terms being agreed in writing (see paragraph 37), and

• the non-assignability of rights (see paragraph 38).

Type of shares that may be acquired U.K.

35 (1) The option must confer a right to acquire shares that— U.K.

(a) form part of the ordinary share capital of the relevant company,

(b) are fully paid up, and

(c) are not redeemable.

(2) Shares are not fully paid up for the purposes of sub-paragraph (1)(b) if there is any undertaking to pay cash to the relevant company at a future date.

(3) For the purposes of sub-paragraph (1)(c) “redeemable” shares include shares that may become redeemable at a future date.

Option to be capable of exercise within 10 years U.K.

36 (1) The option must be capable of being exercised within the period of 10 years beginning with the date on which it is granted. U.K.

(2) Where the exercise of the option is dependent on the fulfilment of conditions, the option is to be taken to be capable of being exercised within the period mentioned in sub-paragraph (1) if the conditions may be fulfilled within that period.

Terms of option to be agreed in writing U.K.

37 (1) The option must take the form of a written agreement between the person granting the option and the employee which meets the following requirements. U.K.

(2) The agreement must state—

(a) the date on which the option is granted;

(b) that it is granted under the provisions of this Schedule;

(c) the number, or maximum number, of shares that may be acquired;

(d) the price (if any) payable by the employee to acquire them, or the method by which that price is to be determined; and

(e) when and how the option may be exercised.

(3) The agreement must set out any conditions, such as performance conditions, affecting the terms or extent of the employee’s entitlement.

[F429 (4) Where the shares that may be acquired by the employee are restricted shares, the agreement must contain details of the restrictions.

(5) For the purposes of sub-paragraph (4)—

(a) shares are “restricted shares” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

(b) “restrictions” means that provision.]

F429 (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F429 Sch. 5 para. 37(4)(5) substituted for Sch. 5 para. 37(4)-(6) (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 45(3)(4); S.I. 2003/1997, art. 2

Non-assignability of rights U.K.

38 U.K. The terms on which the option is granted—

(a) must prohibit the person to whom it is granted from transferring any of that person’s rights under it, and

(b) if they permit it to be exercised after that person’s death, must not permit it to be exercised more than one year after the date of the death.

Part 6 U.K. Company reorganisations

Company reorganisations: introduction U.K.

39 (1) This Part applies in connection with company reorganisations. U.K.

(2) For the purposes of this Part there is a “company reorganisation” where a company (“the acquiring company”)—

(a) obtains control of a company whose shares are subject to an outstanding qualifying option—

(i) as a result of making a general offer to acquire the whole of the issued share capital of that company which is made on a condition such that, if it is met, the person making the offer will have control of the company, or

(ii) as a result of making a general offer to acquire all the shares in the company which are of the same class as those to which the option relates;

[F430 (b) obtains control of such a company as a result of a compromise or arrangement sanctioned by the court under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement);]

[F431 (c) becomes bound or entitled to acquire shares in the scheme company under sections 979 to 982 [F432 or 983 to 985] of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder).]

(d) obtains all the shares of a company whose shares are subject to an outstanding qualifying option as a result of a qualifying exchange of shares (see paragraph 40).

(3) In sub-paragraph (2) “outstanding qualifying option” means a qualifying option that has yet to be exercised.

[F433 (4) In sub-paragraph (2)(a)(i) the reference to the issued share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(5) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.]

Textual Amendments

F430 Sch. 5 para. 39(2)(b) substituted (6.4.2008) by The Companies Act 2006 (Consequential Amendments) (Taxes and National Insurance) Order 2008 (S.I. 2008/954), arts. 1(1), 34 (with art. 4)

F431 Sch. 5 para. 39(2)(c) substituted (1.10.2007) by The Companies Act 2006 (Commencement No. 3, Consequential Amendments, Transitional Provisions and Savings) Order 2007 (S.I. 2007/2194), Sch. 4 para. 101 (with art. 12)

F432 Words in Sch. 5 para. 39(2)(c) inserted (retrospective to 17.7.2013) by Finance Act 2016 (c. 24), Sch. 3 para. 8(1)(2)

F433 Sch. 5 para. 39(4)(5) inserted (31.10.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 31(1)(2); S.I. 2013/2796, art. 2

Meaning of “qualifying exchange of shares” U.K.

40 (1) For the purposes of the EMI code there is a “qualifying exchange of shares” where— U.K.

(a) arrangements are made in accordance with which a company (“the new company”) acquires all the shares (“old shares”) in another company (“the old company”), and

(b) the following conditions are met.

(2) The conditions are that—

(a) the consideration for the old shares consists wholly of the issue of shares (“new shares”) in the new company;

(b) new shares are issued in consideration of old shares only at times when there are no issued shares in the new company other than—

(i) subscriber shares, and

(ii) new shares previously issued in consideration of old shares;

(c) the consideration for new shares of each description consists wholly of old shares of the corresponding description;

(d) new shares of each description are issued to holders of old shares of the corresponding description in respect of, and in proportion to, their holdings; and

(e) by virtue of the CGT capital reorganisation provisions, the exchange of shares is not treated as involving a disposal of the old shares or an acquisition of the new shares.

(3) For the purposes of this paragraph old shares and new shares are of a corresponding description if, on the assumption that they were shares in the same company, they would be of the same class and carry the same rights.

(4) In this paragraph—

(a) references to “shares”, except in the expression “subscriber shares”, include securities; and

(b) “the CGT capital reorganisation provisions” means section 127 of TCGA 1992, as applied by section 135(3) of that Act (exchange of securities).

Grant of replacement option U.K.

41 (1) This paragraph applies if both of the following conditions are met in connection with a company reorganisation. U.K.

(2) The first condition is that the holder of a qualifying option, by agreement with the acquiring company, releases the holder’s rights under that option (“the old option”) in consideration of the granting to him of rights (“the new option”) which are equivalent but relate to shares in the acquiring company.

(3) The second condition is that the requirements of the following paragraphs are met—

• paragraph 42 (period within which replacement option must be granted), and

• paragraph 43 (further requirements to be met as to replacement option).

(4) If this paragraph applies, the new option is to be treated for the purposes of the EMI code as a “replacement option”.

(5) Except where the contrary is indicated—

(a) references in the EMI code to a qualifying option include a replacement option, and

(b) a replacement option is to be treated for the purposes of the EMI code as if it had been granted on the date on which the old option was granted.

(6) For the purposes of any of paragraphs 5 to 7 or section 536(1)(e), the total value of the shares in the acquiring company that are subject to the replacement option is to be taken to be equal to—

(a) the total value (as calculated in accordance with paragraph 5(6) to (8)) of the shares that were subject to the old option immediately before the release of rights under that option, or

(b) if the replacement option has been partially exercised, the proportion of that total value which corresponds to the proportion which the number of shares that remain subject to the option bears to the number of shares that were subject to it at the time when it was granted as a new option (see sub-paragraph (2) above).

(7) In the EMI code references to “the old option” or “the new option” are to be construed in accordance with this paragraph.

Period within which replacement option must be granted U.K.

42 (1) To qualify as a replacement option the new option must be granted within the required period (see sub-paragraphs (2) to (4)). U.K.

(2) If the company reorganisation falls within paragraph 39(2)(a), the required period is the period of 6 months after the date on which—

(a) the person making the offer has obtained control of the company, and

(b) any condition subject to which the offer is made is met.

(3) If the company reorganisation falls within paragraph 39(2)(b) or (d), the required period is the period of 6 months after the date on which the acquiring company obtains control of the company whose shares are subject to the old option.

(4) If the company reorganisation falls within paragraph 39(2)(c), the required period is the period during which the acquiring company remains bound or entitled as mentioned in that provision.

Further requirements to be met as to replacement option U.K.

43 (1) For the new option to qualify as a replacement option the following requirements must also be met. U.K.

(2) The new option must be granted to the holder of the old option by reason of the holder’s employment—

(a) with the acquiring company, or

(b) if that company is a parent company, with that company or another member of the group.

(3) The requirements of—

(a) paragraph 4 (purpose of granting option),

(b) paragraph 7 (maximum value of options in respect of relevant company) (as it has effect under sub-paragraph (4)), and

(c) Part 5 (requirements as to options),

must be met in relation to the new option at the time of the release of rights under the old option (“the relevant time”).

(4) For the purposes of paragraph 7 (as applied by sub-paragraph (3)(b)) the total value of the shares in the acquiring company that are subject to the new option is to be taken to be equal to the total value (as calculated in accordance with paragraph 5(6) to (8)) of the shares that were subject to the old option immediately before the relevant time.

(5) In addition to the requirements mentioned in sub-paragraph (3)—

(a) the independence requirement and the trading activities requirement must be met in relation to the acquiring company at the relevant time, and

(b) the individual to whom the new option is granted must be an eligible employee in relation to the acquiring company at that time.

(6) The total market value, immediately before the relevant time, of the shares which were subject to the old option must be equal to the total market value, immediately after the grant of the new option, of the shares in respect of which that option is granted.

(7) The total amount payable by the employee for the acquisition of the shares under the new option must be equal to the total amount that would have been payable for the acquisition of shares under the old option.

Part 7 U.K. Notification of option to inland revenue

Notice of option to be given to Inland Revenue U.K.

44 (1) For a share option to be a qualifying option, notice of the option must be given to [F162 an officer of Revenue and Customs] within 92 days after the date of the grant of the option. U.K.

(2) The notice must—

(a) be given by the employer company, F434 ...

F434 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) The notice must contain, or be supported by, such information as [F162 an officer of Revenue and Customs] may require for the purpose of determining whether the requirements of this Schedule are met.

(4) The notice must also contain a declaration within [F435 sub-paragraph (5)].

(5) A declaration within this sub-paragraph is a declaration by a director, or the secretary, of the employer company—

(a) that in the opinion of that person the requirements of this Schedule are met in relation to the option, F436 ...

(b) that the information provided is, to the best of that person’s knowledge, correct and complete[F437 , and

(c) that the individual to whom the option has been granted has made and signed a written declaration within sub-paragraph (6) and that the declaration is held by the employer company].

[F438 (5A) The employer company must—

(a) retain the declaration mentioned in sub-paragraph (5)(c) and, if requested to do so by an officer of Revenue and Customs, produce it to such an officer before the end of the period of 7 days after the day on which the request is made, and

(b) give a copy of that declaration to the individual before the end of the period of 7 days after the day on which the declaration is signed by the individual.]

(6) A declaration within this sub-paragraph is a declaration by the individual to whom the option has been granted that the individual meets the requirement of paragraph 26 (commitment of working time) in relation to the option.

(7) Any reference in this Part of this Schedule to the requirements (or any of the requirements) of this Schedule being met in relation to a share option is a reference to the requirements or requirement being met in relation to it at the appropriate time.

[F439 (8) The notice, and any information supporting it, must be given electronically.

(9) But, if an officer of Revenue and Customs considers it appropriate to do so, the officer may allow the employer company to give the notice or any supporting information in another way; and, if the officer does so, the notice or information must be given in that other way.

(10) The Commissioners for Her Majesty's Revenue and Customs—

(a) must prescribe how notices and supporting information are to be given electronically;

(b) may make different provision for different cases or circumstances.]

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F434 Sch. 5 para. 44(2)(b) and word omitted (with effect in accordance with Sch. 8 para. 223 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 217(2), 222

F435 Words in Sch. 5 para. 44(4) substituted (with effect in accordance with Sch. 8 para. 223 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 217(3), 222

F436 Word in Sch. 5 para. 44(5) omitted (with effect in accordance with Sch. 8 para. 223 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 217(4)(a), 222

F437 Sch. 5 para. 44(5)(c) and word inserted (with effect in accordance with Sch. 8 para. 223 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 217(4)(b), 222

F438 Sch. 5 para. 44(5A) inserted (with effect in accordance with Sch. 8 para. 223 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 217(5), 222

F439 Sch. 5 para. 44(8)-(10) inserted (with effect in accordance with Sch. 8 para. 223 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 217(6), 222

Correction of notice by Inland Revenue U.K.

45 (1) [F162 An officer of Revenue and Customs] may amend a notice given under paragraph 44 so as to correct obvious errors or omissions in the notice. U.K.

(2) A correction under this paragraph must be made by a notice given to the employer company.

(3) No correction may be made under this paragraph more than 9 months after the day on which the notice under paragraph 44 was given to [F162 an officer of Revenue and Customs].

(4) A correction under this paragraph is of no effect if the employer company, within 3 months after the date of issue of the notice of correction, gives notice to [F162 an officer of Revenue and Customs] rejecting the correction.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

Notice of enquiry U.K.

46 (1) This paragraph applies where notice of a share option is given under paragraph 44. U.K.

(2) [F162 An officer of Revenue and Customs] may enquire into the option if [F440 the officer] [F441 gives] notice to the employer company of [F442 the officer's] intention to do so in accordance with this paragraph.

(3) [F162 An officer of Revenue and Customs] may enquire into whether the requirement of paragraph 26 (commitment of working time) is met in relation to the option by the individual to whom it has been granted if [F443 the officer] [F441 gives] that individual notice of [F442 the officer's] intention to do so in accordance with this paragraph.

(4) [F162 An officer of Revenue and Customs] must give a copy of a notice under sub-paragraph (3) to the employer company.

(5) Unless given by virtue of sub-paragraph (6), a notice of enquiry may not be given more than 12 months after the end of the period of 92 days mentioned in paragraph 44(1) (the period within which a notice under that paragraph must be given).

(6) A notice of enquiry may be given at any time if [F162 an officer of Revenue and Customs] [F444 discovers] that any of the information provided in or in connection with the notice under paragraph 44 was false or misleading in a material respect.

(7) An option that has been the subject of one notice of enquiry under sub-paragraph (2) or (3) may not be the subject of another notice under that sub-paragraph, unless the notice is given by virtue of sub-paragraph (6).

(8) In this paragraph a “notice of enquiry” means a notice given under sub-paragraph (2) or (3).

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F440 Words in Sch. 5 para. 46(2) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(1)(x); S.I. 2005/1126, art. 2(2)(h)

F441 Word in Sch. 5 para. 46(2)(3) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 124(a)(i); S.I. 2005/1126, art. 2(2)(h); S.I. 2005/1126, art. 2(2)(h)

F442 Words in Sch. 5 para. 46(2)(3) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(2)(j); S.I. 2005/1126, art. 2(2)(h); S.I. 2005/1126, art. 2(2)(h)

F443 Words in Sch. 5 para. 46(3) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(1)(y); S.I. 2005/1126, art. 2(2)(h)

F444 Word in Sch. 5 para. 46(6) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 124(a)(ii); S.I. 2005/1126, art. 2(2)(h)

Completion of enquiry: closure notices U.K.

47 (1) An enquiry under paragraph 46(2) is completed when [F162 an officer of Revenue and Customs] [F445 gives] the employer company a notice— U.K.

(a) informing the company that [F446 the officer] [F445 has] completed [F447 the] enquiry, and

(b) stating [F448 the officer's] decision as to whether the requirements of this Schedule are met in relation to the option.

(2) If [F162 an officer of Revenue and Customs] [F449 concludes] that the requirements of this Schedule are not so met, [F446 the officer] must also give notice of that decision to the person to whom the option has been granted.

(3) An enquiry under paragraph 46(3) is completed when [F162 an officer of Revenue and Customs] [F450 gives] the individual concerned and the employer company a notice—

(a) informing the recipients that [F446 the officer] [F450 has] completed [F451 the] enquiry, and

(b) stating [F452 the officer's] decision as to whether the requirement of paragraph 26 (commitment of working time) is met by that individual in relation to the option.

(4) References in the EMI code to a “closure notice” are to a notice under sub-paragraph (1) or (3).

(5) A closure notice takes effect when it is issued.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F445 Word in Sch. 5 para. 47(1) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 124(b)(i); S.I. 2005/1126, art. 2(2)(h)

F446 Words in Sch. 5 para. 47 substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(1)(z); S.I. 2005/1126, art. 2(2)(h)

F447 Word in Sch. 5 para. 47(1)(a) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(3)(h); S.I. 2005/1126, art. 2(2)(h)

F448 Words in Sch. 5 para. 47(1)(b) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(2)(k); S.I. 2005/1126, art. 2(2)(h)

F449 Word in Sch. 5 para. 47(2) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 124(b)(ii); S.I. 2005/1126, art. 2(2)(h)

F450 Word in Sch. 5 para. 47(3) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 124(b)(iii); S.I. 2005/1126, art. 2(2)(h)

F451 Word in Sch. 5 para. 47(3)(a) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(3)(h); S.I. 2005/1126, art. 2(2)(h)

F452 Words in Sch. 5 para. 47(3)(b) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(2)(k); S.I. 2005/1126, art. 2(2)(h)

Completion of enquiry: application for closure notice to be given U.K.

48 (1) An application may be made [F453 to the tribunal] under this paragraph for a direction requiring [F162 an officer of Revenue and Customs] to give a closure notice within a specified period. U.K.

(2) The application may be made—

(a) by the employer company, or

(b) in a case within paragraph 46(3), by the individual concerned.

F454 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F455 (4) Any such application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).]

(5) [F456 The tribunal] must give a direction unless F457 ... satisfied that [F162 an officer of Revenue and Customs] [F458 has] reasonable grounds for not giving a closure notice within a specified period.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F453 Words in Sch. 5 para. 48(1) inserted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 353(2)

F454 Sch. 5 para. 48(3) omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 353(3)

F455 Sch. 5 para. 48(4) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 353(4)

F456 Words in Sch. 5 para. 48(5) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 353(5)(a)

F457 Words in Sch. 5 para. 48(5) omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 353(5)(b)

F458 Word in Sch. 5 para. 48(5) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 124(c); S.I. 2005/1126, art. 2(2)(h)

Effect of enquiry U.K.

49 (1) If [F162 an officer of Revenue and Customs] [F459 does] not give a notice of enquiry, the requirements of this Schedule are taken to be met in relation to the option. U.K.

(2) If [F162 an officer of Revenue and Customs] [F459 does] give a notice of enquiry, [F460 the officer's] decision stated in the closure notice is conclusive as to whether the requirements of this Schedule are met in relation to the option.

(3) But this is subject—

(a) if [F460 the officer's] decision is that the requirements are not met, to the outcome of any appeal against that decision under paragraph 50;

(b) if their decision is that the requirements are met, to the outcome of any subsequent enquiry under paragraph 46(6) (enquiry arising from discovery of false or misleading information).

(4) This paragraph does not affect the provisions of sections 532 to 539 (which relate to disqualifying events).

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F459 Word in Sch. 5 para. 49(1)(2) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 124(d); S.I. 2005/1126, art. 2(2)(h)

F460 Words in Sch. 5 para. 49(2)(3) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(2)(l); S.I. 2005/1126, art. 2(2)(h)

Appeals U.K.

50 (1) The employer company may appeal against a decision of [F162 an officer of Revenue and Customs] — U.K.

(a) that notice of the grant of the option was not given in accordance with paragraph 44, or

(b) that the requirements of this Schedule are not met in relation to the option.

(2) An individual may appeal against a decision of [F162 an officer of Revenue and Customs] that the individual does not meet the requirement of paragraph 26 (commitment of working time).

(3) Notice of the appeal must be given to [F162 an officer of Revenue and Customs] within 30 days after the date when the closure notice is given to the appellant.

F461 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F461 Sch. 5 para. 50(4) omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 354

Part 8 U.K. Supplementary provisions

Power to require information U.K.

51 (1) [F162 An officer of Revenue and Customs] may by notice require a person to provide [F462 the officer] with information— U.K.

(a) which [F462 the officer] reasonably [F463 requires] for the performance of [F464 the officer's] functions under the EMI code, and

(b) which the person to whom the notice is addressed has or can reasonably obtain.

(2) The power conferred by this paragraph extends, in particular, to information to enable [F162 an officer of Revenue and Customs] —

(a) to decide whether a share option is a qualifying option, or

(b) to determine the liability to tax, including capital gains tax, of any person who has been granted a qualifying option.

(3) The notice must require the information to be provided within a specified period, which must not end earlier than 3 months after the date when the notice is given.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F462 Words in Sch. 5 para. 51(1) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(1)(aa); S.I. 2005/1126, art. 2(2)(h)

F463 Word in Sch. 5 para. 51(1) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 124(e); S.I. 2005/1126, art. 2(2)(h)

F464 Words in Sch. 5 para. 51(1) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(2)(m); S.I. 2005/1126, art. 2(2)(h)

Annual returns U.K.

[F465 52 (1) This paragraph applies in relation to a company whose shares are (or have been) subject to qualifying options. U.K.

(2) The company must give to Her Majesty's Revenue and Customs (“HMRC”) a return for each tax year falling (wholly or partly) in the company's qualifying option period.

(3) The company's “qualifying option period” is the period—

(a) beginning when the first qualifying option to which the company's shares are subject is granted, and

(b) ending when the termination condition is met.

(4) “The termination condition” is met when the company's shares—

(a) are no longer subject to qualifying options, and

(b) will no longer become subject to qualifying options.

(5) The return for a tax year must—

(a) contain, or be accompanied by, such information as HMRC may require, and

(b) be given on or before 6 July in the following tax year.

(6) The information which may be required under sub-paragraph (5)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of any person who has been granted a qualifying option to which the company's shares are subject.

(7) If the company becomes aware that—

(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,

(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or

(c) any other error or inaccuracy has occurred in relation to a return for a tax year,

the company must give an amended return correcting the position to HMRC without delay.]

Textual Amendments

F465 Sch. 5 paras. 52, 52A substituted for Sch. 5 para. 52 (with effect in accordance with Sch. 8 para. 224 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 218, 222

[F465 52A (1) A return under paragraph 52, and any information accompanying the return, must be given electronically. U.K.

(2) But, if HMRC consider it appropriate to do so, HMRC may allow a company to give a return or any accompanying information in another way; and, if HMRC do so, the return or information must be given in that other way.

(3) The Commissioners for Her Majesty's Revenue and Customs—

(a) must prescribe how returns and accompanying information are to be given electronically;

(b) may make different provision for different cases or circumstances.]

Textual Amendments

F465 Sch. 5 paras. 52, 52A substituted for Sch. 5 para. 52 (with effect in accordance with Sch. 8 para. 224 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 218, 222

Compliance with time limits U.K.

53 (1) For the purposes of this Part and Part 7 a person [F466 (“P”)] is not to be regarded as having failed to do anything required to be done within a particular period of time if— U.K.

(a) [F467 P] had a reasonable excuse for not doing it within that period, and

(b) if the excuse ceased to exist, [F467 P] did it without unreasonable delay after the excuse ceased to exist.

(2) Where sub-paragraph (1)(b) applies, any further time limit running from the end of the period concerned is instead to run from the time when the thing in question was actually done.

[F468 (3) For the purposes of sub-paragraph (1)—

(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside P's control, and

(b) where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the failure.]

Textual Amendments

F466 Word in Sch. 5 para. 53(1) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 219(2)(a), 222

F467 Word in Sch. 5 para. 53(1)(a)(b) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 219(2)(b), 222

F468 Sch. 5 para. 53(3) inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 219(3), 222 (with Sch. 8 para. 225)

Power to amend by Treasury order U.K.

54 (1) The Treasury may by order amend the EMI code— U.K.

(a) to make such amendments of paragraphs 13 to 23 (the trading activities requirement and related provisions) as they consider expedient;

(b) to substitute different sums of money for those for the time being specified in—

(i) paragraphs 5(1) and 6(1) and (3) (maximum entitlement of employee);

(ii) paragraph 12(1) and (2) (the gross assets requirement).

(2) An order under sub-paragraph (1)(b) which amends paragraphs 5(1) and 6(1) and (3) may amend section 536(1)(e) (other disqualifying events) so as to substitute the same sum for the one that is for the time being specified there.

Meaning of “market value” of shares U.K.

55 (1) For the purposes of the EMI code the “market value” of shares has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act. U.K.

(2) Sub-paragraph (1) is subject to paragraph 5(7) (valuation of shares subject to restriction or risk of forfeiture) as it applies for the purposes of any provision of the EMI code.

Determination of market value of shares U.K.

56 (1) This paragraph applies to the determination of the market value of shares for the purposes of the EMI code. U.K.

(2) Unless—

(a) it is agreed between the employer company and [F162 an officer of Revenue and Customs], or

(b) a reference is made under sub-paragraph (4),

the market value of shares is to be determined by [F162 an officer of Revenue and Customs].

(3) Where the market value of shares on any date needs to be determined for the purposes of the EMI code, [F162 an officer of Revenue and Customs] and the employer company may agree that it is to be determined by reference to a date or dates, or to the average of the values on a number of dates, stated in the agreement.

(4) At any time before notice of [F162 an officer of Revenue and Customs] determination has been given to the employer company, [F469 the company may apply to the tribunal for the question of the market value of the shares to be determined].

F470 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F471 (6) Any such application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).]

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F469 Words in Sch. 5 para. 56(4) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 355(2)

F470 Sch. 5 para. 56(5) omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 355(3)

F471 Sch. 5 para. 56(6) substituted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 355(4)

Appeal against determination of market value of shares U.K.

57 (1) The employer company may appeal against any determination by [F162 an officer of Revenue and Customs] under paragraph 56. U.K.

(2) Notice of appeal must be given to [F162 an officer of Revenue and Customs] within 30 days after the date when notice of their determination is given to the employer company.

F472 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F472 Sch. 5 para. 57(3) omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 356

[F473 Penalties U.K.

Textual Amendments

F473 Sch. 5 paras. 57A-57E and cross-heading inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 220, 222

57A U.K. A company is liable for a penalty of £500 if the company fails—

(a) to produce a declaration to an officer of Revenue and Customs as required by paragraph 44(5A)(a) before the end of the period mentioned in that provision, or

(b) to provide a copy of a declaration to an individual as required by paragraph 44(5A)(b) before the end of the period mentioned in that provision,

and Her Majesty's Revenue and Customs (“HMRC”) decide that such a penalty should be payable.

57B (1) This paragraph applies if a company fails to give a return for a tax year (containing, or accompanied by, all required information) on or before the date mentioned in paragraph 52(5)(b) (“the date for delivery”). U.K.

(2) The company is liable for a penalty of £100.

(3) If the company's failure continues after the end of the period of 3 months beginning with the date for delivery, the company is liable for a further penalty of £300.

(4) If the company's failure continues after the end of the period of 6 months beginning with the date for delivery, the company is liable for a further penalty of £300.

(5) The company is liable for a further penalty under this sub-paragraph if—

(a) the company's failure continues after the end of the period of 9 months beginning with the date for delivery,

(b) HMRC decide that such a penalty should be payable, and

(c) HMRC give notice to the company specifying the period in respect of which the penalty is payable.

(The company may be liable for more than one penalty under this sub-paragraph.)

(6) The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).

(7) The period specified in the notice under sub-paragraph (5)(c)—

(a) may begin earlier than the date on which the notice is given, but

(b) may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.

57C (1) This paragraph applies if a return under paragraph 52, or any information accompanying such a return— U.K.

(a) is given otherwise than in accordance with paragraph 52A, or

(b) contains a material inaccuracy—

(i) which is careless or deliberate, or

(ii) which is not corrected as required by paragraph 52(7).

(2) The company is liable for a penalty of an amount decided by HMRC.

(3) The penalty must not exceed £5,000.

(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the company to take reasonable care.

57D (1) This paragraph applies if a company is liable for a penalty under this Part. U.K.

(2) HMRC must assess the penalty and notify the company of the assessment.

(3) Subject to sub-paragraph (4), the assessment must be made no later than 12 months after the date on which the company becomes liable for the penalty.

(4) In the case of a penalty under paragraph 57C(1)(b), the assessment must be made no later than—

(a) 12 months after the date on which HMRC become aware of the inaccuracy, and

(b) 6 years after the date on which the company becomes liable for the penalty.

(5) A penalty payable under this Part must be paid—

(a) no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the company, or

(b) if notice of appeal is given against the penalty under paragraph 57E(1) or (2), no later than 30 days after the date on which the appeal is determined or withdrawn.

(6) The penalty may be enforced as if it were corporation tax or, if the company is not within the charge to corporation tax, income tax charged in an assessment and due and payable.

(7) Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.

57E (1) A company may appeal against a decision of HMRC that the company is liable for a penalty under this Part. U.K.

(2) A company may appeal against a decision of HMRC as to the amount of a penalty payable by the company under this Part.

(3) Notice of appeal must be given to HMRC no later than 30 days after the date on which the notice under paragraph 57D(2) is given to the company.

(4) On an appeal under sub-paragraph (1) which is notified to the tribunal, the tribunal may affirm or cancel the decision.

(5) On an appeal under sub-paragraph (2) which is notified to the tribunal, the tribunal may—

(a) affirm the amount of the penalty decided, or

(b) substitute another amount for that amount.

(6) Subject to this paragraph and paragraph 57D, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the company is not within the charge to corporation tax, income tax.]

Minor definitions U.K.

58 U.K. In the EMI code—

• “arrangements” includes any scheme, agreement or understanding, whether it is legally enforceable or not;

• “company” means a body corporate;

• “group of companies” means a parent company and its 51% subsidiaries;

• “the group”, in relation to a parent company, means that company and its 51% subsidiaries;

• “parent company” means a company that has one or more 51% subsidiaries and “single company” means a company that does not;

• “research and development” has the meaning given by [F474 section 1006 of ITA 2007];

• “shares” includes stock.

Textual Amendments

F474 Words in Sch. 5 para. 58 substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(3) (with Sch. 2)

Index of defined expressions U.K.

59 U.K. In the EMI code the following expressions are defined or otherwise explained by the provisions indicated below:

the appropriate time	paragraph 1(4)
arrangements	paragraph 58(1)
child	[F475 section 721(6)]
close company	[F476 section 989 of ITA 2007], (and see paragraph 29(4))
closure notice	paragraph 47(4)
company	paragraph 58
company reorganisation (in Part 6 of this Schedule)	paragraph 39(2)
connected person	section 718
control	section 719 (and see paragraphs 10(2) and 23(6))
disqualifying event	see sections 532 to 539
distribution	[F477 section 989 of ITA 2007]
earnings	section 62 and see section 721(7)
the EMI code	section 527(3)
employee and employment	section 4
eligible employee	paragraph 24
employer company	paragraph 2
excluded activities	paragraph 16
farming	[F478 section 996 of ITA 2007]
F479 . . .	F479 . . .
generally accepted accounting practice	[F480 section 997 of ITA 2007]
group of companies	paragraph 58
the group	paragraph 58
F481 . . .	F481 ...
market value	paragraph 55 (and see paragraph 5(7))
met (in Part 7 of this Schedule)	paragraph 44(7)
new option	paragraph 41(7)
notice	[F482 section 989 of ITA 2007]
[F483 offshore installation]	[F484 sections 1001 and 1002 of ITA 2007]
old option	paragraph 41(7)
ordinary share capital	[F485 section 989 of ITA 2007]
original option	section 529(3)
parent company	paragraph 58
personal representative	[F486 section 989 of ITA 2007]
qualifying company	paragraph 8
qualifying option	section 527(4) (and see paragraph 41(5))
qualifying subsidiary	paragraph 11
qualifying trade	paragraph 15
relevant company	paragraph 2
replacement option	section 527(4)
the requirements of this Schedule	section 527(4)
research and development	paragraph 58
share option	section 527(4)
shares	paragraph 58 (and see paragraph 40(4)(a))
single company	paragraph 58
F487 . . .	F487 . . .
51% subsidiary	[F488 section 989 of ITA 2007]
tax	[F489 section 989 of ITA 2007]
tax year	[F490 section 4(2) of ITA 2007 (as applied by section 989 of that Act)]
trade	[F491 section 989 of ITA 2007]
[F492 tribunal	section 989 of ITA 2007]
United Kingdom	[F493 section 1013 of ITA 2007]

Textual Amendments

F475 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(a) (with Sch. 2)

F476 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(b) (with Sch. 2)

F477 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(c) (with Sch. 2)

F478 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(d) (with Sch. 2)

F479 Sch. 5 para. 59 Table entry omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 357(2)

F480 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(e) (with Sch. 2)

F481 Words in Sch. 5 para. 59 repealed (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 124(f), Sch. 5; S.I. 2005/1126, art. 2(2)(h)(i)

F482 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(f) (with Sch. 2)

F483 Words in Sch. 5 para. 59 inserted (with effect in accordance with Sch. 27 para. 17(6)(7) of the amending Act) by Finance Act 2004 (c. 12), Sch. 27 para. 17(5)

F484 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(g) (with Sch. 2)

F485 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(h) (with Sch. 2)

F486 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(i) (with Sch. 2)

F487 Sch. 5 para. 59 Table entry omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 357(3)

F488 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(j) (with Sch. 2)

F489 Words in Sch. 5 para. 59 substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 399(6) (with Sch. 2)

F490 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(l) (with Sch. 2)

F491 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(m) (with Sch. 2)

F492 Words in Sch. 5 para. 59 Table inserted (1.4.2009) by The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 357(4)

F493 Words in Sch. 5 para. 59 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 450(4)(n) (with Sch. 2)

Section 722

SCHEDULE 6 U.K. Consequential Amendments

Part 1 U.K. Income and Corporation Taxes Act 1988

1 U.K. The Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.

F494 2 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F494 Sch. 6 para. 2 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

3 U.K. In section 4(1) (construction of references in Income Tax Acts to deduction of tax) for “in pursuance of section 203” substitute “ under PAYE regulations ”.

F495 4 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F495 Sch. 6 para. 4 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F496 5 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F496 Sch. 6 para. 5 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

6 U.K. Omit section 19 (Schedule E).

7 U.K. In section 21A(2) (computation of amount chargeable)—

(a) for “sections 588 and 589” substitute “ section 588 ”;

(b) for “sections 589A and 589B” substitute “ section 589A ”;

(c) for “1989 (deductions in respect of certain emoluments)” substitute “ 1989 (Schedule D: computation) ”.

8 U.K. Omit section 58 (foreign pensions).

F497 9 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F497 Sch. 6 para. 9 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F498 10 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F498 Sch. 6 para. 10 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F499 11 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F499 Sch. 6 para. 11 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 10 Pt. 12 (with Sch. 9 paras. 1-9, 22)

F500 12 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F500 Sch. 6 para. 12 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F501 13 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F501 Sch. 6 para. 13 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

14 U.K. Omit sections 131 to 134 (miscellaneous provisions relating to the Schedule E charge).

15 U.K. Omit sections 135 to 137 (provisions relating to gains by directors and employees from share options).

16 (1) Amend section 138 (share acquisitions by directors and employees) as follows. U.K.

(2) In subsection (1)(b) for “Schedule E” substitute “ the employment income Parts of ITEPA 2003 ”.

(3) In subsection (4)(b) for “Case I of Schedule E” substitute “ section 15 or 21 of ITEPA 2003 (earnings of employee resident and ordinarily resident in the UK) ”.

17 U.K. Omit section 140 (further interpretation of sections 135 to 139).

18 U.K. Omit sections 140A to 140H (further provisions relating to share acquisitions by directors and employees).

19 U.K. Omit sections 141 to 144 (vouchers and credit-tokens).

20 U.K. Omit section 144A (payments received free of tax).

21 U.K. Omit sections 145 to 147 (living accommodation).

22 U.K. Omit sections 148 to 151A (payments on retirement, sick pay and certain social security benefits).

F502 23 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F502 Sch. 6 para. 23 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 10 Pt. 12 (with Sch. 9 paras. 1-9, 22)

24 U.K. Omit sections 153 to 159AC and sections 160 to 168G (employees earning £8,500 or more and directors: expenses and benefits in kind).

25 U.K. Omit section 185 (approved share option schemes).

26 (1) Amend section 186 (approved profit sharing schemes) as follows. U.K.

(2) In subsection (3)—

(a) omit “the participant shall be chargeable to income tax under Schedule E for the year of assessment in which the entitlement arises on”, and

(b) at the end add “ counts as employment income of the participant for the year of assessment in which the entitlement arises ”.

(3) In subsection (4)—

(a) omit “the participant shall be chargeable to income tax under Schedule E for the year of assessment in which the disposal takes place on”, and

(b) at the end add “ counts as employment income of the participant for the year of assessment in which the disposal takes place ”.

(4) In subsection (5)(a), for the words from “chargeable to income tax” to “those shares” substitute “entitled to a capital receipt (within the meaning of subsection (3) above) which is referable to those shares and—

(i) an amount calculated by reference to that capital receipt counts as his employment income by virtue of subsection (3) above, or

(ii) if the entitlement to the capital receipt arose before 6th April 2003, he was chargeable to income tax by virtue of that subsection (as it had effect before that date) in respect of that capital receipt,”.

27 U.K. In section 187 (interpretation of sections 185 and 186 and Schedules 9 and 10) omit subsections (1) to (4), (6) and (7), except so far as relating to profit sharing schemes.

28 U.K. Omit the following provisions (which give relief from income tax on various kinds of income)—

(a) section 187A;

(b) sections 189 to 198;

(c) sections 199 to 202.

29 U.K. Omit sections 202A and 202B (assessment on receipts basis).

30 U.K. Omit sections 203 to 204 (pay as you earn).

31 U.K. Omit sections 205 and 206 (assessments).

32 U.K. Omit section 206A (PAYE settlement agreements).

33 U.K. Omit section 207 (disputes as to domicile or ordinary residence).

F503 34 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F503 Sch. 6 para. 34 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F504 35 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F504 Sch. 6 para. 35 omitted (with effect in accordance with Sch. 1 para. 7 of the amending Act) by virtue of Finance Act 2009 (c. 10), Sch. 1 para. 6(l)

36 U.K. After section 266 insert—

“266A Life assurance premiums paid by employer

(1) This section applies if—

(a) pursuant to a non-approved retirement benefits scheme, the employer in any year of assessment pays a sum with a view to the provision of any relevant benefits for or in respect of any employee of that employer, and

(b) the payment is made under such an insurance or contract as is mentioned in section 266.

This section applies whether or not the accrual of the relevant benefits is dependent on any contingency.

(2) Relief, if not otherwise allowable, shall be given to that employee under section 266 in respect of the payment to the extent, if any, to which such relief would have been allowable to him if—

(a) the payment had been made by him, and

(b) the insurance or contract under which the payment is made had been made with him.

(3) For the purposes of subsection (1)(a)—

(a) a retirement benefits scheme is “non-approved” unless it is—

(i) an approved scheme,

(ii) a relevant statutory scheme, or

(iii) a scheme set up by a government outside the United Kingdom for the benefit of its employees or primarily for their benefit, and

(b) benefits are provided in respect of an employee if they are provided for the employee’s spouse, widow or widower, children, dependants or personal representatives.

(4) Sections 611, 611A and 612 apply for the purposes of this section as they apply for the purposes of Chapter 1 of Part 14.

(5) Section 388 of ITEPA 2003 (apportionment of payments in respect of more than one employee) applies in relation to a sum within subsection (1) as it applies in relation to a sum within section 386 of that Act (charge on payments to non-approved retirement benefits schemes).

(6) This section does not apply in any case where either of the following provisions of ITEPA 2003 provides for section 386 of that Act not to apply—

(a) section 389 (employments where earnings charged on remittance basis), and

(b) section 390 (non-domiciled employees with foreign employers).”

F505 37 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F505 Sch. 6 para. 37 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 2 (with Sch. 2)

F506 38 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F506 Sch. 6 para. 38 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 2 (with Sch. 2)

39 U.K. Omit section 313 (taxation of consideration for certain restrictive undertakings).

F507 40 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F507 Sch. 6 para. 40 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

41 U.K. Omit sections 315 to 318 (pensions etc. paid in respect of military or war service etc.).

42 U.K. Omit section 319 (crown servants: foreign service allowance).

43 U.K. Omit section 321 (consuls and other official agents).

F508 44 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F508 Sch. 6 para. 44 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F509 45 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F509 Sch. 6 para. 45 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

46 U.K. Omit section 330 (compensation for National-Socialist persecution).

47 (1) Amend section 332 (expenditure and houses of ministers of religion) as follows. U.K.

(2) Omit subsections (1) and (2).

F510 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) Omit subsections (3A), (3B) and (4).

Textual Amendments

F510 Sch. 6 para. 47(3) repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F511 48 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F511 Sch. 6 para. 48 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

F512 49 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F512 Sch. 6 para. 49 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F513 50 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F513 Sch. 6 para. 50 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

F514 51 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F514 Sch. 6 para. 51 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

52 U.K. In section 376(2) (qualifying borrowers and qualifying lenders) for the words from “an office or employment” to “Schedule E” substitute “ an office or employment which would, but for some special exemption or immunity from tax, be a taxable employment under Part 2 of ITEPA 2003 (as defined by section 66(3) of that Act) ”.

F515 53 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F515 Sch. 6 para. 53 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F516 54 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F516 Sch. 6 para. 54 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F517 55 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F517 Sch. 6 para. 55 repealed (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 3 Pt. 1 (with Sch. 2)

F518 56 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F518 Sch. 6 para. 56 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F519 57 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F519 Sch. 6 para. 57 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F520 58 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F520 Sch. 6 para. 58 repealed (with effect in accordance with s. 77 of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(7)

F521 59 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F521 Sch. 6 para. 59 repealed (with effect in accordance with s. 77 of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(7)

F522 60 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F522 Sch. 6 para. 60 repealed (with effect in accordance with s. 77 of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(7)

F523 61 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F523 Sch. 6 para. 61 repealed (with effect in accordance with s. 77 of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(7)

F524 62 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F524 Sch. 6 paras. 62-64 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F524 63 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F524 Sch. 6 paras. 62-64 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F524 64 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F524 Sch. 6 paras. 62-64 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F525 65 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F525 Sch. 6 para. 65 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F526 66 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F526 Sch. 6 para. 66 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F527 67 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F527 Sch. 6 para. 67 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

68 U.K. Omit section 589 (qualifying courses of training etc.).

F528 69 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F528 Sch. 6 para. 69 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F529 70 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F529 Sch. 6 para. 70 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

71 U.K. In section 591D (provisions supplementary to section 591C) omit subsection (6).

F530 72 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F530 Sch. 6 para. 72 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

F531 73 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F531 Sch. 6 para. 73 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

74 U.K. Omit sections 595 and 596 (payments by employer to retirement benefits scheme).

75 U.K. Omit sections 596A to 596C (benefits under non-approved retirement benefits schemes).

76 U.K. Omit section 597 (charge to tax: pensions).

77 U.K. In section 599A (charge to tax: payments out of surplus funds) omit subsections (5), (6) and (8).

78 U.K. Omit section 600 (charge to tax: unauthorised payments to or for employees).

F532 79 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F532 Sch. 6 para. 79 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

80 F533 (1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . U.K.

F533 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F533 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F533 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F533 (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) Omit subsection (3)(b)(iv) and the word “and” preceding it.

Textual Amendments

F533 Sch. 6 para. 80(1)-(5) repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

81 U.K. In section 608 (charge to tax on annuities paid out of superannuation funds approved before 6th April 1980) omit subsection (4).

F534 82 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F534 Sch. 6 para. 82 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

83 U.K. In section 613 (Parliamentary pension funds) omit subsections (1) to (3).

84 U.K. In section 614(3) (exemptions and reliefs in respect of income tax from investments etc. of certain pension schemes) for “paragraph (b), (c), (d) or (f) of subsection (2) of section 615” substitute “ section 648, 649, 650 or 651 of ITEPA 2003 ”.

85 U.K. In section 615 (exemption from tax in respect of certain pensions) omit subsections (1), (2), (4), (5) and (8).

86 U.K. Omit section 616 (other overseas pensions).

F535 87 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F535 Sch. 6 para. 87 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

88 U.K. Omit section 617A (tax credits under Part 1 of Tax Credits Act 2002 (c. 21)).

F536 89 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F536 Sch. 6 para. 89 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

F537 90 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F537 Sch. 6 para. 90 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

91 (1) Section 643 (employer’s contributions and personal pension income etc.) is amended as follows. U.K.

(2) Omit subsection (1).

(3) In subsection (5) omit “shall be assessable to tax under Schedule E (and section 203 shall apply accordingly) and”.

F538 92 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F538 Sch. 6 paras. 92-95 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

F538 93 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F538 Sch. 6 paras. 92-95 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

F538 94 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F538 Sch. 6 paras. 92-95 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

F538 95 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F538 Sch. 6 paras. 92-95 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

96 U.K. Omit sections 647 to 648A (personal pensions: unauthorised payments, contributions under unapproved arrangements and annuities).

F539 97 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F539 Sch. 6 para. 97 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

F540 98 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F540 Sch. 6 para. 98 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

F541 99 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F541 Sch. 6 para. 99 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

F542 100 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F542 Sch. 6 para. 100 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

F543 101 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F543 Sch. 6 paras. 101, 102 repealed (other than for corporation tax purposes) (1.4.2010) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 10 Pt. 9 (with Sch. 9 paras. 1-9, 22) and Sch. 6 paras. 101, 102 repealed (for corporation tax purposes with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 3 Pt. 2 (with Sch. 2)

F543 102 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F543 Sch. 6 paras. 101, 102 repealed (other than for corporation tax purposes) (1.4.2010) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 10 Pt. 9 (with Sch. 9 paras. 1-9, 22) and Sch. 6 paras. 101, 102 repealed (for corporation tax purposes with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 3 Pt. 2 (with Sch. 2)

F544 103 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F544 Sch. 6 para. 103 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 10 Pt. 1 (with Sch. 9 paras. 1-9, 22)

104 U.K. In section 824(4A) (repayment supplement: individuals and others) for “section 203” substitute “ PAYE regulations ”.

F545 105 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F545 Sch. 6 para. 105 repealed (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 3 Pt. 1 (with Sch. 2)

106 U.K. In section 830 (territorial sea and designated areas) omit subsection (5).

107 U.K. In section 831(3) (interpretation of ICTA) before the entry relating to “the Management Act” insert—

““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;”.

F546 108 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F546 Sch. 6 para. 108 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

F547 109 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F547 Sch. 6 para. 109 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

110 U.K. Omit Schedules 6 and 6A (taxation of directors and others: cars and vans).

111 U.K. Omit Schedules 7 and 7A (taxation of benefit of loans).

112 (1) Amend Schedule 9 (approved share option schemes and profit sharing schemes) as follows. U.K.

(2) Omit Parts 1, 2 and 6 except so far as relating to profit sharing schemes.

(3) Omit Parts 3 and 4.

113 (1) Amend Schedule 10 (further provisions relating to profit sharing schemes) as follows. U.K.

(2) In paragraphs 3(1) and 6(4) for “charging an individual to income tax under Schedule E” substitute “ under which an amount counts as employment income of an individual ”.

(3) In paragraph 7—

(a) in sub-paragraph (1), for “a participant in the scheme is chargeable to income tax under Schedule E” substitute “ an amount counts as employment income of the participant ”,

(b) in sub-paragraph (6), for the words from “section 203” to “Schedule E” substitute “ section 684 of ITEPA 2003 (PAYE regulations) and PAYE regulations as PAYE income payable to the recipient ”, and

(c) in sub-paragraph (7)(b)—

(i) omit second “to”, and

(ii) for “the participant is chargeable” substitute “ is charged on the participant ”.

114 U.K. Omit Schedule 11 (payments and other benefits in connection with termination of employment etc.).

115 U.K. Omit Schedule 11A (removal benefits and expenses).

116 U.K. Omit Schedule 12 (foreign earnings).

117 U.K. Omit Schedule 12AA (mileage allowances).

118 U.K. Omit Schedule 12A (ordinary commuting and private travel).

119 U.K. In Schedule 14 (modification of section 266 in certain cases), in paragraph 5 for “section 595” substitute “ section 386 of ITEPA 2003 (payments to non-approved retirement benefits schemes) ”.

F548 120 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F548 Sch. 6 para. 120 repealed (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 3 (with Sch. 2)

F549 121 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F549 Sch. 6 para. 121 repealed (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 3 Pt. 1 (with Sch. 2)

Part 2 U.K. Other enactments

Finance Act 1969 (c. 32) U.K.

122 (1) Section 58 of the Finance Act 1969 (disclosure of information for statistical purposes by Board of Inland Revenue) is amended as follows. U.K.

(2) In subsection (1)(a)—

(a) for “section 203 of the Taxes Act 1988 (pay as you earn)” substitute “ PAYE regulations ”;

(b) for “emoluments to which that section applies” substitute “ earnings or amounts treated as earnings from an employment ”.

(3) In subsection (1)(b) for “emoluments” substitute “ earnings or amounts treated as earnings ”.

(4) After subsection (1) insert—

“(1A) In subsection (1) “earnings or amounts treated as earnings” means earnings or amounts treated as earnings which constitute employment income (see section 7(2)(a) or (b) of the Income Tax (Earnings and Pensions) Act 2003).”

Taxes Management Act 1970 (c. 9) U.K.

123 U.K. The Taxes Management Act 1970 is amended as follows.

124 U.K. In section 7(4) and (5) (notice of liability to income tax and capital gains tax) for “section 203 of the principal Act” substitute “ PAYE regulations ”.

125 (1) Amend section 9 (returns to include self-assessment) as follows. U.K.

(2) In subsection (1) for “, 547(5) or 599A(5) of the principal Act” substitute “ or 547(5) of the principal Act or section 626 of ITEPA 2003 ”.

F550 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F550 Sch. 6 para. 125(3) repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

126 (1) Amend section 15 (return of employee’s emoluments etc.) as follows. U.K.

(2) For the sidenote to the section substitute “ Return of employees' earnings etc. ”

(3) In subsection (3)(a) for “employment to which Chapter II of Part V of the principal Act applies” substitute “ employment which, for the purposes of the benefits code in ITEPA 2003, is a taxable employment under Part 2 of that Act (see section 66) but is not an excluded employment (see section 63 of that Act) ”.

(4) In subsection (8)(a) for “the relevant sections, that is to say, sections 141, 142, 143, 144A, 145, 146 and 154 to 165 of the principal Act” substitute “ the relevant provisions, that is to say, Chapters 4 to 10 of Part 3 and sections 222 and 223 of ITEPA 2003 ”.

(5) In subsection (9)(a) for “the relevant sections” substitute “ the relevant provisions ”.

(6) In subsection (11)—

(a) for “the relevant sections”, in each place, substitute “ the relevant provisions ”; and

(b) in paragraph (a)(ii) for “section 141(3), 142(2), 145(3) or 156(8) of the principal Act” substitute “ section 328(1), 362, 363, 364 or 365 of ITEPA 2003 ”.

(7) In subsection (13)—

(a) in the definition of “employee”, for “whose emoluments fall to be assessed under Schedule E” substitute “ whose earnings are within the charge to tax under ITEPA 2003 ”; and

(b) for the definition of “the relevant sections” substitute—

““the relevant provisions” has the meaning given by section (8)(a) above.”

127 U.K. For section 16A substitute—

“16A Agency workers

(1) This section applies where—

(a) any services which an individual provides or is obliged to provide under an agency contract are treated under section 44(2) of ITEPA 2003 as the duties of an office or employment held by him with the agency, or

(b) any remuneration receivable under or in consequence of arrangements falling within section 45 of that Act is treated as earnings from an office or employment held by an individual with the agency.

(2) Where this section applies—

(a) section 15 above shall apply as if the individual were employed by the agency, and

(b) section 16 above shall not apply to any payments made to the individual under or in consequence of the agency contract or the arrangements.

(3) In this section “agency contract” and “remuneration” have the same meaning as in Chapter 7 of Part 2 of ITEPA 2003.”

128 U.K. In section 42(3) (procedure for making claims etc.) for “section 203 of the principal Act” substitute “ PAYE regulations ”.

F551 129 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F551 Sch. 6 para. 129 omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 358

130 U.K. In section 59A (payments on account of income tax)—

(a) in subsection (8)(b) for “section 203 of the principal Act” substitute “ PAYE regulations ”; and

(b) in subsection (10) for “Regulations under section 203 of the principal Act (PAYE)” substitute “ PAYE regulations ”.

131 (1) Amend section 59B (payment of income tax and capital gains tax) as follows. U.K.

(2) In subsection (1) for “, 547(5) or 599A(5) of the principal Act” substitute “ or 547(5) of the principal Act or section 626 of ITEPA 2003 ”.

(3) In subsection (2)(a) for “section 203 of the principal Act” substitute “ PAYE regulations ”.

(4) In subsection (8) for “Regulations under section 203 of the principal Act (PAYE)” substitute “ PAYE regulations ”.

132 U.K. In section 62(1A)(a) (priority of claim for tax)—

(a) for “emoluments” substitute “ taxable earnings (as defined by section 10 of ITEPA 2003) ”;

(b) for “section 203 of the principal Act (pay as you earn)” substitute “ PAYE regulations ”.

133 U.K. In section 63(3)(a) (recovery of tax in Scotland) for “section 203 of the principal Act (pay as you earn)” substitute “ PAYE regulations ”.

134 U.K. In section 64(1A)(a) (priority of claim for tax in Scotland)—

(a) for “emoluments” substitute “ taxable earnings (as defined by section 10 of ITEPA 2003) ”;

(b) for “section 203 of the principal Act (pay as you earn)” substitute “ PAYE regulations ”.

135 (1) Amend section 70 (evidence) as follows. U.K.

F552 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) In subsection (4) for “emoluments” in both places where it occurs substitute “ earnings or amounts treated as earnings ”.

(4) After subsection (4) insert—

“(5) In subsection (4) “earnings or amounts treated as earnings” means earnings or amounts treated as earnings which constitute employment income (see section 7(2)(a) or (b) of ITEPA 2003).”

Textual Amendments

F552 Sch. 6 para. 135(2) omitted (21.7.2008) by virtue of Finance Act 2008 (c. 9), Sch. 44 para. 11(f)

136 U.K. In section 91(3)(c) (effect on interest of reliefs) for “section 203 of the principal Act” substitute “ PAYE regulations ”.

137 (1) Amend the Table in section 98 (special returns, etc.) as follows. U.K.

(2) Omit from the first column of the Table the entries relating to—

(a) regulations under section 202 of ICTA;

(b) paragraph 117 of Schedule 8 to FA 2000;

(c) paragraph 64 of Schedule 14 to FA 2000.

(3) At the end of the first column of the Table insert the following entries—

“Regulations under section 589 of ITEPA 2003.

Regulations under section 715 of ITEPA 2003.

Paragraph 93 of Schedule 2 to ITEPA 2003.

Paragraph 45 of Schedule 3 to ITEPA 2003.

Paragraph 33 of Schedule 4 to ITEPA 2003.

Paragraph 51 of Schedule 5 to ITEPA 2003.”

(4) Omit from the second column of the Table the entries relating to—

(a) section 136(6) of ICTA;

(b) section 140G of ICTA;

(c) regulations under section 202 of ICTA;

(d) regulations under section 203 of ICTA;

(e) section 313(5) of ICTA;

(f) section 85(1) and (2) of FA 1988;

(g) paragraph 65 of Schedule 14 to FA 2000.

(5) At the end of the second column of the Table insert the following entries—

“	Sections 432 and 433 of ITEPA 2003.
	Section 445 of ITEPA 2003.
	Sections 465 and 466 of ITEPA 2003.
	Section 486 of ITEPA 2003.
	Regulations under section 589 of ITEPA 2003.
	Regulations under section 715 of ITEPA 2003.
	PAYE regulations.
	Paragraph 52 of Schedule 5 to ITEPA 2003.”

138 U.K. In section 98A(1) (special penalties in the case of certain returns) for “Regulations under section 203(2) (PAYE) or” substitute “ PAYE regulations or regulations under section ”.

139 U.K. In section 118 (interpretation) after the entry relating to “inspector” insert—

““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003,”.

140 U.K. In section 119(4) (construction of the Act) after “1992 Act” insert “ and ITEPA 2003 ”.

141 U.K. In paragraph 4(1A) of Schedule 1A (claims etc. not included in returns) for “section 203 of the principal Act” substitute “ PAYE regulations ”.

F553 142 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F553 Sch. 6 para. 142 omitted (1.4.2009) by virtue of The Transfer of Tribunal Functions and Revenue and Customs Appeals Order 2009 (S.I. 2009/56), art. 1(2), Sch. 1 para. 358

143 U.K. In Schedule 3A (electronic lodgement of tax returns etc.) in paragraph 2(4) (returns to which the Schedule applies) after “the principal Act” insert “ or under ITEPA 2003 ”.

Finance Act 1973 (c. 51) U.K.

F554 144 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F554 Sch. 6 paras. 144-147 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 10 Pt. 12 (with Sch. 9 paras. 1-9, 22)

F554 145 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F554 Sch. 6 paras. 144-147 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 10 Pt. 12 (with Sch. 9 paras. 1-9, 22)

F554 146 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F554 Sch. 6 paras. 144-147 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 10 Pt. 12 (with Sch. 9 paras. 1-9, 22)

Finance Act 1974 (c. 30) U.K.

F554 147 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F554 Sch. 6 paras. 144-147 repealed (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 10 Pt. 12 (with Sch. 9 paras. 1-9, 22)

Interpretation Act 1978 (c. 30) U.K.

148 U.K. In Schedule 1 to the Interpretation Act 1978 (words and expressions defined) after the definition of “Parliamentary election” insert—

““PAYE income” has the meaning given by section 683 of the Income Tax (Earnings and Pensions) Act 2003.

“PAYE regulations” means regulations under section 684 of that Act.”

Education (Scotland) Act 1980 (c. 44) U.K.

149 U.K. In section 73B of the Education (Scotland) Act 1980 (grants and loans: Scotland)—

(a) in subsection (3)(g) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”; and

(b) in subsection (4) for “income assessable to income tax under Schedule E” substitute “ PAYE income ”.

Inheritance Tax Act 1984 (c. 51) U.K.

150 U.K. The Inheritance Tax Act 1984 is amended as follows.

151 (1) Amend the following provisions as provided in sub-paragraph (2)— U.K.

(a) section 13(4)(c) (dispositions by close companies for benefit of employees),

(b) section 72(4A) (property leaving employee trusts and newspaper trusts), and

(c) section 86(3)(c) (trusts for benefit of employees).

(2) In each of those provisions, for “an employee share ownership plan approved under Schedule 8 to the Finance Act 2000” substitute “ a share incentive plan approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 ”.

152 U.K. In section 14(1) (waiver of remuneration), for “would be assessable to income tax under Schedule E” substitute “ would be earnings, or would be treated as earnings, and would constitute employment income (see section 7(2)(a) or (b) of the Income Tax (Earnings and Pensions) Act 2003) ”.

Bankruptcy (Scotland) Act 1985 (c. 66) U.K.

153 U.K. In paragraph 1(1) of Schedule 3 to the Bankruptcy (Scotland) Act 1985 (preferred debts) for “section 203 of the Income and Corporation Taxes Act 1988 (pay as you earn)” substitute “ PAYE regulations ”.

Insolvency Act 1986 (c. 45) U.K.

154 U.K. In paragraph 1 of Schedule 6 to the Insolvency Act 1986 (the categories of preferential debts)—

(a) for “emoluments” substitute “ taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) ”; and

(b) for “section 203 of the Income and Corporation Taxes Act 1988 (pay as you earn)” substitute “ PAYE regulations ”.

Finance Act 1988 (c. 39) U.K.

155 (1) Section 73 of the Finance Act 1988 (consideration for certain restrictive undertakings) is amended as follows. U.K.

(2) In subsection (2) for “any sum to which section 313 of that Act applies” substitute “ any payment which is treated as earnings of an employee by virtue of section 225 of the Income Tax (Earnings and Pensions) Act 2003 (payments for restrictive undertakings) ”.

(3) In subsection (3) for “Any sum to which section 313 of the Taxes Act 1988 applies” substitute “ Any payment which is treated as earnings of an employee by virtue of section 225 of the Income Tax (Earnings and Pensions) Act 2003 ”.

Finance Act 1989 (c. 26) U.K.

156 U.K. The Finance Act 1989 is amended as follows.

157 U.K. For section 43 substitute—

“43 Schedule D: computation

(1) In calculating profits or gains of a trade to be charged under Schedule D for a period of account, no deduction is allowed for an amount charged in the accounts in respect of employees' remuneration, unless the remuneration is paid before the end of the period of 9 months immediately following the end of the period of account.

(2) For the purposes of subsection (1) above an amount charged in the accounts in respect of employees' remuneration includes an amount—

(a) for which provision is made in the accounts, or

(b) which is held by an intermediary,

with a view to its becoming employees' remuneration.

(3) Subsection (1) above applies whether the amount is in respect of particular employments or in respect of employments generally.

(4) If the remuneration is paid after the end of the period of 9 months mentioned in subsection (1) above, any deduction allowed in respect of it is allowed for the period of account in which it is paid and not for any other period of account.

(5) If the profits of the trade are calculated before the end of the period of 9 months mentioned in subsection (1) above—

(a) it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but

(b) if the remuneration is subsequently paid before the end of that period, the calculation is adjusted if a claim to adjust it is made to an officer of the Board within 2 years beginning with the end of the period of account.

(6) For the purposes of this section, remuneration is paid when it—

(a) is treated as received by an employee for the purposes of the Income Tax (Earnings and Pensions) Act 2003 by section 18, 19, 31 or 32 of that Act (receipt of money and non-money earnings), or

(b) would be so treated if it were not exempt income.

(7) In this section—

• “employee” includes an office-holder and “employment” correspondingly includes an office, and

• “remuneration” means an amount which is or is treated as earnings for the purposes of the Income Tax (Earnings and Pensions) Act 2003.”

158 U.K. For section 44 substitute—

“44 Investment and insurance companies: computation

(1) In calculating the profits of an investment company for a period of account, no deduction is allowed for an amount charged in the accounts in respect of employees' remuneration, unless the remuneration is paid before the end of the period of 9 months immediately following the end of the period of account.

(2) For the purposes of subsection (1) above an amount charged in the accounts in respect of employees' remuneration includes an amount—

(a) for which provision is made in the accounts, or

(b) which is held by an intermediary,

with a view to its becoming employees' remuneration.

(3) Subsection (1) above applies whether the amount is in respect of particular employments or in respect of employments generally.

(4) If the remuneration is paid after the end of the period of 9 months mentioned in subsection (1) above, any deduction allowed in respect of it is allowed for the period of account in which it is paid and not for any other period of account.

(5) If the profits of the trade are calculated before the end of the period of 9 months mentioned in subsection (1) above—

(a) it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but

(b) if the remuneration is subsequently paid before the end of that period, the calculation is adjusted if a claim to adjust it is made to an officer of the Board by or on behalf of the company within 2 years beginning with the end of the period of account.

(6) For the purposes of this section, remuneration is paid when it—

(a) is treated as received by an employee for the purposes of the Income Tax (Earnings and Pensions) Act 2003 by section 18, 19, 31 or 32 of that Act (receipt of money and non-money earnings), or

(b) would be so treated if it were not exempt income.

(7) Where the profits of a company carrying on life assurance business are not charged under Case I of Schedule D, this section shall apply in calculating the profits as it applies in calculating the profits of an investment company; and in any such case—

(a) subsection (4) above shall have effect subject to section 86 below, and

(b) in construing section 86 below the remuneration shall be treated as expenses for the accounting period.

(8) In this section—

• “employee” includes an office-holder and “employment” correspondingly includes an office,

• “investment company” has the same meaning as in Part 4 of the Taxes Act 1988, and

• “remuneration” means an amount which is or is treated as earnings for the purposes of Parts 2 to 7 of the Income Tax (Earnings and Pensions) Act 2003.”

159 U.K. In section 53(2)(f) (amendments consequential on the substitution of a new section 167 of ICTA) for “sections 332(2)(c) and 418(3)(a)” substitute “ section 418(3)(a) ”.

160 (1) Amend section 69 (chargeable events in relation to employee share ownership trusts) as follows. U.K.

(2) In subsection (3AA)—

(a) in paragraph (a) for “an employee share ownership” substitute “ a share incentive ”, and

(b) in paragraph (b) for “Schedule 8 to the Finance Act 2000” substitute “ Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 ”.

(3) In the definition of “market value” in subsection (3AC), for “in Schedule 8 to the Finance Act 2000” substitute “ it has for the purposes of the SIP code (see paragraph 92 of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003) ”.

(4) In subsection (4ZA)(b)—

(a) for “a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988” substitute “ an SAYE option scheme within the meaning of the SAYE code (see section 516(4) of the Income Tax (Earnings and Pensions) Act 2003) ”, and

(b) in sub-paragraph (ii) for “that Schedule” substitute “ Schedule 3 to that Act ”.

F555 161 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F555 Sch. 6 para. 161 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

162 U.K. In section 178(2) (setting of rates of interest)—

(a) in paragraph (m) omit the words “160,”,

(b) at the end of the first paragraph (p) omit the word “and”,

(c) renumber the second paragraph (p) as paragraph (q), and

(d) at the end of paragraph (r) insert “, and

(s) Chapter 7 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003.”.

163 (1) Amend Schedule 5 (employee share ownership trusts) as follows. U.K.

(2) In paragraph 4(2A) (beneficiaries)—

(a) for “a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988” substitute “ an SAYE option scheme ”, and

(b) in paragraph (b), for “that Schedule” substitute “ Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003 ”.

(3) In paragraph 9(2ZA)(b) (transfers of securities on qualifying terms)—

(a) for “a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988” substitute “ an SAYE option scheme ”, and

(b) in sub-paragraph (ii), for “that Schedule” substitute “ Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003 ”.

(4) In paragraph 10 (other features)—

(a) for “savings-related share option schemes approved under Schedule 9 to the Taxes Act 1988” substitute “ SAYE option schemes approved under Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003 ”; and

(b) for “that Schedule” substitute “ Schedule 9 to the Taxes Act 1988 ”.

(5) After paragraph 17 insert—

“18 For the purposes of this Schedule “SAYE option scheme” has the same meaning as in the SAYE code (see section 516 of the Income Tax (Earnings and Pensions) Act 2003 (approved SAYE option schemes)).”

Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19)) U.K.

164 U.K. In paragraph 1 of Schedule 4 to the Insolvency (Northern Ireland) Order 1989 (the categories of preferential debts)—

(a) in sub-paragraph (1), for “emoluments” substitute “ taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) ”; and

(b) in sub-paragraph (2), for “section 203 of the Income and Corporation Taxes Act 1988 (pay as you earn)” substitute “ regulations made under section 684 of that Act (PAYE regulations) ”.

Finance Act 1990 (c. 29) U.K.

165 U.K. The Finance Act 1990 is amended as follows.

F556 166 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F556 Sch. 6 para. 166 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

167 (1) Amend paragraph 4 of Schedule 14 (amendments of sections 322 and 323 of ICTA) as follows. U.K.

(2) In sub-paragraph (1) for “sections 322(1)(a) and (2) and 323(1)” substitute “ section 322(1)(a) ”.

(3) Omit sub-paragraph (2).

Finance Act 1991 (c. 31) U.K.

168 (1) Amend section 38 of the Finance Act 1991 (employee share schemes: non-discrimination) as follows. U.K.

(2) Omit subsection (2).

(3) In subsection (6) for “Subsections (2) and” substitute “ Subsection ”.

Social Security Contributions and Benefits Act 1992 (c. 4) U.K.

169 U.K. The Social Security Contributions and Benefits Act 1992 is amended as follows.

170 U.K. In section 1 (outline of contributory system), in subsection (2)(bb) for “emoluments” substitute “ general earnings ”.

171 U.K. In section 2 (categories of earners), in subsection (1)(a) for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings ”.

172 (1) Amend section 4 (payments treated as remuneration and earnings) as follows. U.K.

(2) For subsection (4)(a) substitute—

“(a) the amount of any gain calculated under section 479 or 480 of ITEPA 2003 in respect of which an amount counts as employment income of the earner under section 476 or 477 of that Act (charge on exercise, assignment or release of share option);”.

(3) In subsection (4)(b) for “section 313 of the 1988 Act” substitute “ section 225 or 226 of ITEPA 2003 ”.

(4) In subsection (6)(a) for “Schedule E” substitute “ the employment income Parts of ITEPA 2003 ”.

173 U.K. In section 7(1)(b) (meaning of “secondary contributor”) for “emoluments” in both places where it occurs substitute “ general earnings ”.

174 (1) Amend section 10 (Class 1A National Insurance contributions: benefits in kind etc.) as follows. U.K.

(2) For subsection (1)(a) substitute—

“(a) for any tax year an earner is chargeable to income tax under ITEPA 2003 on an amount of general earnings received by him from any employment (“the relevant employment”),”.

(3) For subsection (1)(b) substitute—

“(b) the relevant employment is both—

(i) employed earner’s employment, and

(ii) an employment, other than an excluded employment, within the meaning of the benefits code (see Chapter 2 of Part 3 of ITEPA 2003),”.

(4) In subsection (1)(c) for “emolument” substitute “ general earnings ”.

(5) In subsection (1) in the words after paragraph (c) for “emolument” substitute “ general earnings ”.

(6) In subsection (2)(b) for “emolument” substitute “ general earnings ”.

(7) In subsection (4)—

(a) for “emolument” substitute “ general earnings ”;

(b) for “it” substitute “ them ”.

(8) In subsection (6) for “emolument as is taken” substitute “ general earnings as are taken ”.

(9) For subsection (7) substitute—

“(7) In calculating for the purposes of this section the amount of general earnings received by an earner from an employment, a deduction under any of the excluded provisions is to be disregarded.

This subsection does not apply in relation to a deduction if subsection (7A) applies in relation to it.

(7A) Where—

(a) a deduction in respect of a matter is allowed under an excluded provision, and

(b) the amount deductible is at least equal to the whole of any corresponding amount which would (but for this section) fall by reference to that matter to be included in the general earnings mentioned in subsection (7),

the whole of the corresponding amount shall be treated as not included.

(7B) For the purposes of subsections (7) and (7A) “excluded provision” means—

(a) any provision of Chapter 2 of Part 5 of ITEPA 2003 (deductions for employee’s expenses), other than section 352 (limited deduction for agency fees paid by entertainers), and

(b) any provision of Chapter 5 of Part 5 of ITEPA 2003 (deductions for earnings representing benefits or reimbursed expenses).”

(10) For subsection (8)(a) substitute—

“(a) modify the effect of subsections (7) and (7A) above by amending subsection (7B) so as to include any enactment contained in the Income Tax Acts within the meaning of “excluded provision”; or”.

(11) In subsection (8)(b)—

(a) for “subsection (7)” substitute “ subsections (7) to (7B) ”;

(b) for “under Schedule E” substitute “ on employment income ”.

(12) In subsection (9)(a) for “emoluments” substitute “ general earnings ”.

(13) Omit subsection (10).

175 (1) Amend section 10ZA (liability of third party provider of benefits in kind) as follows. U.K.

(2) In subsection (1)(a) for “an emolument” substitute “ general earnings ”.

(3) Amend subsection (1)(b) as follows—

(a) for “the emolument, in so far as it is one in respect of which” substitute “ the general earnings, in so far as they are ones in respect of which ”;

(b) for “consists” substitute “ consist ”.

(4) In subsection (2), in the words after paragraph (b) for “an emolument” substitute “ general earnings ”.

(5) In subsection (6) for “section 168(4) of the Income and Corporation Taxes Act 1988” substitute “ section 721(5) of ITEPA 2003 ”.

176 (1) Amend section 10ZB (non-cash vouchers provided by third parties) as follows. U.K.

(2) In subsection (2)(a) for the words from “employment” to the end of the paragraph substitute “ employment which is an excluded employment for the purposes of the benefits code, and ”.

(3) In subsection (2)(b) for “if that Chapter did apply to that employment” substitute “ if that employment were not an excluded employment ”.

(4) In subsection (2), in the words following paragraph (b) for “as if that employment were employment to which that Chapter applied” substitute “ as if that employment were not an excluded employment ”.

(5) In subsection (3) for “section 141 of the Income and Corporation Taxes Act 1988” substitute “ section 84 of ITEPA 2003 ”.

177 (1) Amend section 10A (Class 1B National Insurance contributions) as follows. U.K.

(2) In subsection (1) for “emoluments” substitute “ general earnings ”.

(3) In subsection (2)(a) for “the emoluments included” substitute “ the general earnings included ”.

(4) In subsection (4) for “Emoluments are chargeable emoluments” substitute “ General earnings are chargeable emoluments ”.

(5) In subsection (5) for “emoluments” in both places where it occurs substitute “ general earnings ”.

178 (1) Amend section 122(1) (interpretation of Parts 1 to 6 and supplementary provisions) as follows. U.K.

(2) Insert the following definitions in the appropriate places—

• ““the benefits code” has the meaning given by section 63(1) of ITEPA 2003;”

““the employment income Parts of ITEPA 2003” means Parts 2 to 7 of that Act;”

““excluded employment” has the meaning given by section 63(4) of ITEPA 2003;”

““general earnings” has the meaning given by section 7 of ITEPA 2003 and accordingly sections 3 and 112 of this Act do not apply in relation to the word “earnings” when used in the expression “general earnings”;”

““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;”.

(3) In the definition of “PAYE settlement agreement” for “section 206A of the Income and Corporation Taxes Act 1988” substitute “ Chapter 5 of Part 11 of ITEPA 2003 ”.

179 U.K. In section 126(5)(a)(ii) (trade disputes) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) under PAYE regulations ”.

180 (1) Amend section 150(2) (interpretation of Part 10) as follows. U.K.

(2) In paragraph (b) of the definition of “unemployability supplement or allowance”—

(a) in sub-paragraph (ii) for “section 315(1) of the Income and Corporation Taxes Act 1988” substitute “ section 641 of the Income Tax (Earnings and Pensions) Act 2003 ”;

(b) omit sub-paragraph (v).

(3) In paragraph (b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988” substitute “ any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(4) In the definition of “war widow’s pension” for “subsection (2)(e) of the said section 315” substitute “ section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003 ”.

181 U.K. In section 163(1) (interpretation of Part 11), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003) ”.

182 U.K. In section 171(1) (interpretation of Part 12), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003) ”.

183 U.K. In section 171ZJ(2)(a) (Part 12ZA: supplementary) for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003) ”.

184 U.K. In section 171ZS(2)(a) (Part 12ZB: supplementary) for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003) ”.

185 U.K. In Schedule 1 (supplementary provisions relating to contributions of Classes 1, 1A, 1B, 2 and 3)—

(a) in paragraph 6(1)(a) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”;

(b) in paragraph 6(1)(b) for “regulations under that section” substitute “ PAYE regulations ”;

(c) in paragraph 6(7) for “regulations made under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”;

(d) in paragraph 7(1)(a) for “regulations made by [F162 an officer of Revenue and Customs] under section 203(2) or” substitute “ PAYE regulations or regulations made under section ”; and

(e) in paragraph 7B(1) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

Social Security Administration Act 1992 (c. 5) U.K.

186 U.K. The Social Security Administration Act 1992 is amended as follows.

187 (1) Amend section 139(11) (definitions used in provisions relating to arrangements for council tax benefit) as follows. U.K.

(2) In paragraph (b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988” substitute “ any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(3) In the definition of “war widow’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “ section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003 ”.

188 (1) Amend section 159B(6) (effect of alterations affecting state pension credit) as follows. U.K.

(2) In paragraph (b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “ any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(3) In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “ section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003 ”.

189 (1) Amend section 162(5) (destination of national insurance contributions) as follows. U.K.

(2) In paragraph (c) for “emoluments” substitute “ general earnings ”.

(3) In paragraph (ca) for “emoluments” substitute “ general earnings ”.

Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) U.K.

190 U.K. The Social Security Contributions and Benefits (Northern Ireland) Act 1992 is amended as follows.

191 U.K. In section 1 (outline of contributory system), in subsection (2)(bb) for “emoluments” substitute “ general earnings ”.

192 U.K. In section 2 (categories of earners), in subsection (1)(a) for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings ”.

193 (1) Amend section 4 (payments treated as remuneration and earnings) as follows. U.K.

(2) For subsection (4)(a) substitute—

“(a) the amount of any gain calculated under section 479 or 480 of ITEPA 2003 in respect of which an amount counts as employment income of the earner under section 476 or 477 of that Act (charge on exercise, assignment or release of share option);”.

(3) In subsection (4)(b) for “section 313 of the 1988 Act” substitute “ section 225 or 226 of ITEPA 2003 ”.

(4) In subsection (6)(a) for “Schedule E” substitute “ the employment income Parts of ITEPA 2003 ”.

194 U.K. In section 7(1)(b) (meaning of “secondary contributor”) for “emoluments” in both places where it occurs substitute “ general earnings ”.

195 (1) Amend section 10 (Class 1A National Insurance contributions: benefits in kind etc.) as follows. U.K.

(2) For subsection (1)(a) substitute—

“(a) for any tax year an earner is chargeable to income tax under ITEPA 2003 on an amount of general earnings received by him from any employment (“the relevant employment”),”.

(3) For subsection (1)(b) substitute—

“(b) the relevant employment is both—

(i) employed earner’s employment, and

(ii) an employment, other than an excluded employment, for the purposes of the benefits code (see Chapter 2 of Part 3 of ITEPA 2003),”.

(4) In subsection (1)(c) for “emolument” substitute “ general earnings ”.

(5) In subsection (1), in the words after paragraph (c) for “emolument” substitute “ general earnings ”.

(6) In subsection (2)(b) for “emolument” substitute “ general earnings ”.

(7) In subsection (4)—

(a) for “emolument” substitute “ general earnings ”;

(b) for “it” substitute “ them ”.

(8) In subsection (6) for “emolument” substitute “ general earnings ”.

(9) For subsection (7) substitute—

“(7) In calculating for the purposes of this section the amount of general earnings received by an earner from an employment, a deduction under any of the excluded provisions is to be disregarded.

This subsection does not apply in relation to a deduction if subsection (7A) applies in relation to it.

(7A) Where—

(a) a deduction in respect of a matter is allowed under an excluded provision, and

(b) the amount deductible is at least equal to the whole of any corresponding amount which would (but for this section) fall by reference to that matter to be included in the general earnings mentioned in subsection (7),

the whole of the corresponding amount shall be treated as not included.

(7B) For the purposes of subsections (7) and (7A) “excluded provision” means—

(a) any provision of Chapter 2 of Part 5 of ITEPA 2003 (deductions for employee’s expenses) other than section 352 (limited deduction for agency fees paid by entertainers), and

(b) any provision of Chapter 5 of Part 5 of ITEPA 2003 (deductions for earnings representing benefits or reimbursed expenses).”

(10) For subsection (8)(a) substitute—

“(a) modify the effect of subsections (7) and (7A) above by amending subsection (7B) so as to include any enactment contained in the Income Tax Acts within the meaning of “excluded provision”; or”.

(11) In subsection (8)(b)—

(a) for “subsection (7)” substitute “ subsections (7) to (7B) ”;

(b) for “under Schedule E” substitute “ on employment income ”.

(12) In subsection (9)(a) for “emoluments” substitute “ general earnings ”.

(13) Omit subsection (10).

196 (1) Amend section 10ZA (liability of third party provider of benefits in kind) as follows. U.K.

(2) In subsection (1)(a) for “an emolument” substitute “ general earnings ”.

(3) Amend subsection (1)(b) as follows—

(a) for “the emolument, in so far as it is one in respect of which” substitute “ the general earnings, in so far as they are ones in respect of which ”;

(b) for “consists” substitute “ consist ”.

(4) In subsection (2), in the words after paragraph (b) for “an emolument” substitute “ general earnings ”.

(5) In subsection (6) for “section 168(4) of the Income and Corporation Taxes Act 1988” substitute “ section 721(5) of ITEPA 2003 ”.

197 (1) Amend section 10ZB (non-cash vouchers provided by third parties) as follows. U.K.

(2) In subsection (2)(a) for the words from “employment” to the end of the paragraph substitute “ employment which is an excluded employment for the purposes of the benefits code, and ”.

(3) In subsection (2)(b) for “if that Chapter did apply to that employment” substitute “ if that employment were not an excluded employment ”.

(4) In subsection (2), in the words following paragraph (b) for “as if that employment were employment to which that Chapter applied” substitute “ as if that employment were not an excluded employment ”.

(5) In subsection (3) for “section 141 of the Income and Corporation Taxes Act 1988” substitute “ section 84 of ITEPA 2003 ”.

198 (1) Amend section 10A (Class 1B National Insurance contributions) as follows. U.K.

(2) In subsection (1) for “emoluments” substitute “ general earnings ”.

(3) In subsection (2)(a) for “the emoluments included” substitute “ the general earnings included ”.

(4) In subsection (4) for “Emoluments are chargeable emoluments” substitute “ General earnings are chargeable emoluments ”.

(5) In subsection (5) for “emoluments” in both places where it occurs substitute “ general earnings ”.

199 (1) Amend section 121(1) (interpretation of Parts 1 to 6 and supplementary provisions) as follows. U.K.

(2) Insert the following definitions in the appropriate places—

• ““the benefits code” has the meaning given by section 63(1) of ITEPA 2003;”

““the employment income Parts of ITEPA 2003” means Parts 2 to 7 of that Act;”

““excluded employment” has the meaning given by section 63(4) of ITEPA 2003;”

““general earnings” has the meaning given by section 7 of ITEPA 2003 and accordingly sections 3 and 112 of this Act do not apply in relation to the word “earnings” when used in the expression “general earnings”;”

““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;”.

(3) In the definition of “PAYE settlement agreement” for “section 206A of the Income and Corporation Taxes Act 1988” substitute “ Chapter 5 of Part 11 of ITEPA 2003 ”.

200 U.K. In section 125(5)(a)(ii) (trade disputes) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) under PAYE regulations ”.

201 (1) Amend section 146(2) (interpretation of Part 10) as follows. U.K.

(2) In paragraph (b) of the definition of “unemployability supplement or allowance”—

(a) in sub-paragraph (ii) for “section 315(1) of the Income and Corporation Taxes Act 1988” substitute “ section 641 of the Income Tax (Earnings and Pensions) Act 2003 ”;

(b) omit sub-paragraph (v).

(3) In paragraph (b) of the definition of “war disablement pension”, for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988” substitute “ any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(4) In the definition of “war widow’s pension” for “subsection (2)(e) of the said section 315” substitute “ section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003 ”.

202 U.K. In section 159(1) (interpretation of Part 11), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003) ”.

203 U.K. In section 167(1) (interpretation of Part 12), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003) ”.

204 U.K. In Schedule 1 (supplementary provisions relating to contributions of Classes 1, 1A, 1B, 2 and 3)—

(a) in paragraph 6(1)(a) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”;

(b) in paragraph 6(1)(b) for “regulations under that section” substitute “ PAYE regulations ”;

(c) in paragraph 6(7) for “regulations made under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”;

(d) in paragraph 7(1)(a) for “regulations made by [F162 an officer of Revenue and Customs] under section 203(2) or” substitute “ PAYE regulations or regulations made under section ”; and

(e) in paragraph 7B(1) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

Social Security Administration (Northern Ireland) Act 1992 (c. 8) U.K.

205 (1) Section 139B(6) of the Social Security Administration (Northern Ireland) Act 1992 (effect of alterations affecting state pension credit) is amended as follows. U.K.

(2) b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “ any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(3) In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “ section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003 ”.

206 U.K. In section 142(5) of that Act (destination of national insurance contributions)—

(a) in paragraph (c) for “emoluments” substitute “ general earnings ”;

(b) in paragraph (ca) for “emoluments” substitute “ general earnings ”

Taxation of Chargeable Gains Act 1992 (c. 12) U.K.

207 U.K. The Taxation of Chargeable Gains Act 1992 is amended as follows.

F557 208 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F557 Sch. 6 para. 208 omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 79(a)

209 U.K. In section 11(1) (visiting forces, agents-general etc.)—

(a) for “section 323(1) of the Taxes Act” substitute “ section 303(1) of ITEPA 2003 ”; and

(b) for “subsection (2) of section 323 and subsections (4) to (8) of that section shall apply accordingly” substitute “ section 303(2) to (6) of that Act and section 323(2) of the Taxes Act ”.

210 (1) Amend section 120 (increased expenditure by reference to tax charged in relation to shares etc.) as follows. U.K.

(2) For subsection (1) substitute—

“(1) Subsection (1A) applies where—

(a) a person (“the employee”) has acquired shares or an interest in shares as mentioned in section 447(1) of ITEPA 2003, and

(b) an amount counts as employment income of the employee under Chapter 4 of Part 7 of that Act in respect of the shares.

(1A) On the first disposal of the shares after the acquisition occurs, the employment income amount shall be treated for the purposes of section 38(1)(a) as consideration given by the person making the disposal for the acquisition of the shares.

(1B) For the purposes of subsections (1) and (1A)—

(a) the “employment income amount” means the amount counting as employment income of the employee under that Chapter in respect of the shares, and

(b) it is immaterial whether the disposal of the shares mentioned in subsection (1A) is made by the employee or another person.”

(3) In subsection (3)—

(a) for “is chargeable to tax by virtue of section 162(5) of the Taxes Act” substitute “ is treated as earnings under section 195(2) of ITEPA 2003 ”, and

(b) for “so chargeable” substitute “ so treated as earnings ”.

(4) In subsection (4)—

(a) for “chargeable to tax under section 135(1) or (6) of the Taxes Act” substitute “ counting as employment income under section 476 or 477 of ITEPA 2003 ”, and

(b) for “so chargeable to tax” substitute “ so counting as employment income ”.

(5) In subsection (5A)—

(a) for “is chargeable to tax under section 140A of the Taxes Act” substitute “ counts as employment income under Chapter 2 of Part 7 of ITEPA 2003 ”, and

(b) for “so chargeable” substitute “ so counting as employment income ”.

(6) In subsection (5B)—

(a) for “is chargeable to tax under section 140D of the Taxes Act” substitute “ counts as employment income under Chapter 3 of Part 7 of ITEPA 2003 ”, and

(b) for “so chargeable” substitute “ so counting as employment income ”.

(7) Omit subsection (6).

(8) For subsection (7) substitute—

“(7) Each of the provisions of this section mentioned in the first column of the following table is to be construed as if it were contained in the Chapter of ITEPA 2003 specified in the corresponding entry in the second column—

Provision of this section	Chapter of ITEPA 2003
subsections (1), (1A) and (1B)	Chapter 4 of Part 7
subsection (3)	Chapter 8 of Part 3
subsection (4)	Chapter 5 of Part 7
subsection (5A)	Chapter 2 of Part 7
subsection (5B)	Chapter 3 of Part 7;

and subsection (5) of this section is to be construed as one with section 138 of the Taxes Act.”

(9) After subsection (7) insert—

“(7A) In relation to events that gave rise to amounts chargeable to income tax before 6th April 2003, this section is to be read as if any reference to an amount mentioned in the first column of the following table included a reference to an amount mentioned in the corresponding entry in the second column—

Amount mentioned in this section	Amount chargeable before 6th April 2003
an amount counting as employment income under Chapter 4 of Part 7 of ITEPA 2003	an amount chargeable to tax under Chapter 2 of Part 3 of the Finance Act 1988
an amount treated as earnings under section 195(2) of ITEPA 2003	an amount chargeable to tax under section 162(5) of the Taxes Act
an amount counting as employment income under section 476 or 477 of ITEPA 2003	an amount chargeable to tax under section 135(1) or (6) of the Taxes Act
an amount which counts as employment income under Chapter 2 of Part 7 of ITEPA 2003	an amount chargeable to tax under section 140A of the Taxes Act
an amount which counts as employment income under Chapter 3 of Part 7 of ITEPA 2003	an amount chargeable to tax under section 140D of the Taxes Act.”

(10) In subsection (8) for “section 140A of the Taxes Act” substitute “ Chapter 2 of Part 7 of ITEPA 2003 ”.

211 (1) Amend section 149B (employee incentive schemes: conditional interests in shares) as follows. U.K.

(2) In subsection (1) for “section 140A of the Taxes Act” substitute “ Chapter 2 of Part 7 of ITEPA 2003 (conditional interests in shares) ”.

(3) In subsection (2) for “section 140B of the Taxes Act” substitute “ section 429 of ITEPA 2003 ”.

(4) In subsection (4)—

(a) for “section 140A of the Taxes Act” substitute “ Chapter 2 of Part 7 of ITEPA 2003 ”, and

(b) for “that section” substitute “ that Chapter ”.

212 U.K. After section 149B insert—

“149C Priority share allocations

Section 17(1) shall not apply to an acquisition of shares if section 542 or 544 of ITEPA 2003 applies in relation to it.”

213 U.K. In section 222(8D)(b) (relief on disposal of private residence), for “the same meanings as they have for the purposes of Chapter II of Part V of the Taxes Act” substitute “ the meanings given by Chapter 2 of Part 3 of ITEPA 2003 ”.

214 U.K. In section 236A (employee share ownership plans), and in the sidenote and in the italic heading immediately before the section, for “employee share ownership” wherever it occurs substitute “ share incentive ”.

215 U.K. In section 238(2)(a) (approved profit sharing and share option schemes), for “is chargeable to income tax” substitute “ counts as employment income (or was chargeable to income tax for the year 2002-03 or an earlier year of assessment ”.

216 U.K. After section 238 insert—

“238A Approved share schemes and share incentives

(1) Schedule 7D (approved share schemes and share incentives) shall have effect.

(2) Schedule 7D relates—

(a) in Part 1, to approved share incentive plans (SIPs) (see section 488 of ITEPA 2003),

(b) in Part 2, to approved SAYE option schemes (see section 516 of that Act),

(c) in Part 3, to approved CSOP schemes (CSOPs) (see section 521 of that Act), and

(d) in Part 4, to enterprise management incentives (see section 527 of that Act).”

217 U.K. After section 263 insert—

“263ZA Former employees: employment-related liabilities

(1) This section applies if—

(a) a deduction of the amount of one or more deductible payments may be made under section 555 of ITEPA 2003 (former employee entitled to deduction from total income in respect of liabilities related to the former employment) when computing a former employee’s total income for a tax year, and

(b) the total amount which may be deducted exceeds the total income for that year.

(2) In this section “excess relief” means the amount of the difference between—

(a) the total amount which may be deducted, and

(b) the total income.

(3) The amount of the excess relief may be treated as an allowable loss accruing to the former employee for that tax year.

This subsection applies only if the former employee makes a claim for the purpose.

(4) But no relief is available under subsection (3) in respect of any amount of the excess relief that exceeds the maximum amount.

(5) For the purposes of this section the “maximum amount”, in relation to the excess relief for a tax year, means the amount on which the former employee would be chargeable to capital gains tax for that year if the following were disregarded—

(a) any relief available under this section,

(b) any allowable losses falling to be carried forward to that year from a previous year for the purposes of section 2(2),

(c) section 3(1) (the annual exempt amount),

(d) any relief against capital gains tax under section 72 of the Finance Act 1991 (deduction of trading losses), and

(e) any relief against capital gains tax under section 90(4) of the Finance Act 1995 (relief for post-cessation expenditure).

(6) A former employee may make a claim under subsection (3) and a claim under section 555(3) of ITEPA 2003 in the same notice.”

218 U.K. In section 271 (other miscellaneous exemptions), for subsection (1)(c) substitute—

“(c) any gain accruing to a person from his acquisition and disposal of assets held by him as part of a fund—

(i) mentioned in section 614(2) of the Taxes Act,

(ii) to which section 615(3) of the Taxes Act applies, or

(iii) mentioned in section 648, 649, 650, 651 or 653 of ITEPA 2003;”.

219 (1) Amend section 288(1) (interpretation) as follows. U.K.

(2) In the entry relating to “allowable loss” for “and 16” substitute “ , 16 and 263ZA ”.

(3) After the entry relating to “investment trust” insert—

““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;”.

220 (1) Amend Schedule 7C (relief for transfers to approved share plans) as follows. U.K.

(2) In paragraph 1(1) (introductory) for “an employee share ownership” substitute “ a share incentive ”.

(3) In paragraph 2 (conditions relating to the disposal)—

(a) in sub-paragraph (1) for “Schedule 8 to the Finance Act 2000” substitute “ Schedule 2 to ITEPA 2003 ”,

(b) in sub-paragraph (2)—

(i) for “Part VIII” substitute “ Part 4 ”,

(ii) for “used in plan” substitute “ awarded ”, and

(iii) for “61(a) and (c)” substitute “ 27(1)(a) and (c) and (2) ”,

(c) in sub-paragraph (4) for “of Schedule 8 to the Finance Act 2000” substitute “ given by paragraph 97 of Schedule 2 to ITEPA 2003 ”.

221 U.K. After Schedule 7C insert—

Section 238A

“SCHEDULE 7D U.K. Approved share schemes and share incentives

Part 1 U.K. Approved share incentive plans

Introductory U.K.

1 (1) The provisions of this Part of this Schedule apply for capital gains tax purposes in relation to an approved share incentive plan (“the plan”).

(2) This Part of this Schedule forms part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).

(3) Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by the index.

(4) In particular, for the purposes of paragraphs 5 and 7 of this Schedule “market value” has the meaning given by paragraph 92 of Schedule 2 to that Act (determination of market value); and Part 8 of this Act has effect subject to this paragraph.

Gains accruing to trustees U.K.

2 (1) Any gain accruing to the trustees is not a chargeable gain if the shares—

(a) are shares in relation to which the requirements of Part 4 of Schedule 2 to ITEPA 2003 (approved share incentive plans: types of shares that may be awarded) are met, and

(b) are awarded to employees, or acquired on their behalf as dividend shares, in accordance with the plan within the relevant period.

(2) If any of the shares in the company in question are readily convertible assets at the time the shares are acquired by the trustees, the relevant period is the period of two years beginning with the date on which the shares were acquired by the trustees.

This is subject to sub-paragraph (4).

(3) If at the time of the acquisition of the shares by the trustees none of the shares in the company in question are readily convertible assets, the relevant period is—

(a) the period of five years beginning with the date on which the shares were acquired by the trustees, or

(b) if within that period any of the shares in that company become readily convertible assets, the period of two years beginning with the date on which they did so,

whichever ends first.

This is subject to sub-paragraph (4).

(4) If the shares are acquired by the trustees by virtue of a payment in respect of which a deduction is allowed under paragraph 9 of Schedule 4AA to the Taxes Act (deduction for contribution to plan trust), the relevant period is the period of ten years beginning with the date of acquisition.

(5) For the purposes of determining whether shares are awarded to a participant within the relevant period, shares acquired by the trustees at an earlier time are taken to be awarded to a participant before shares of the same class acquired by the trustees at a later time.

(6) Sub-paragraph (5) is subject to paragraph 78(1) of Schedule 2 to ITEPA 2003 (acquisition by trustees of shares from employee share ownership trust).

(7) For the purposes of this paragraph “readily convertible assets” has the meaning given by sections 701 and 702 of that Act (readily convertible assets).

This is subject to sub-paragraph (8).

(8) In determining for the purposes of this paragraph whether shares are readily convertible assets any market for the shares that—

(a) is created by virtue of the trustees acquiring shares for the purposes of the plan, and

(b) exists solely for the purposes of the plan,

shall be disregarded.

(9) In relation to shares acquired by the trustees before 11th May 2001 this paragraph has effect with the substitution—

(a) in sub-paragraph (2), of “If the shares are readily convertible assets at the time they” for the words before “are acquired”, and

(b) in sub-paragraph (3)—

(i) of “If at the time of their acquisition by the trustees the shares are not readily convertible assets” for the words before “the relevant period”, and

(ii) in paragraph (b), of “the shares in question” for “any of the shares in that company”.

Participant absolutely entitled as against trustees U.K.

3 (1) Sub-paragraph (2) applies to any shares awarded to a participant under the plan.

(2) The participant is treated for capital gains tax purposes as absolutely entitled to those shares as against the trustees.

(3) Sub-paragraph (2) applies notwithstanding anything in the plan or the trust instrument.

Different classes of shares U.K.

4 (1) For the purposes of Chapter 1 of Part 4 of this Act (shares, securities, options etc: general) a participant’s plan shares are treated, so long as they are subject to the plan, as of a different class from any shares (which would otherwise be treated as of the same class) that are not plan shares.

(2) For the purposes of that Chapter, any shares to which sub-paragraph (3) applies shall be treated as of a different class from any shares to which sub-paragraph (4) applies, even if they would otherwise fall to be treated as of the same class.

(3) This sub-paragraph applies to any shares transferred to the trustees of the plan trust by a qualifying transfer that have not been awarded to participants under the plan.

(4) This sub-paragraph applies to any shares held by the trustees that were not transferred to them by a qualifying transfer.

(5) In this paragraph “qualifying transfer” has the meaning given in paragraph 78(2) of Schedule 2 to ITEPA 2003 (acquisition by trustees of shares from employee share ownership trust).

(6) For the purposes of Chapter 1 of Part 4 of this Act any shares which—

(a) were acquired by the trustees by virtue of a payment in respect of which a deduction is allowed under paragraph 9 of Schedule 4AA to the Taxes Act (deduction for contribution to plan trust), and

(b) have not been awarded under the plan,

shall be treated as of a different class from any shares held by the trustees that were not so acquired by them, even if they would otherwise fall to be treated as of the same class.

No chargeable gain on shares ceasing to be subject to the plan U.K.

5 (1) Shares which cease to be subject to the plan are treated as having been disposed of and immediately reacquired by the participant at market value.

(2) Any gain accruing on that disposal is not a chargeable gain.

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

6 (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 the SIP code 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 the SIP code to be equal to the market value of the shares at the time of the disposal.

Treatment of forfeited shares U.K.

7 (1) If any of the participant’s plan shares are forfeited, they are treated as having been disposed of by the participant and acquired by the trustees at market value at the date of forfeiture.

(2) Any gain accruing on that disposal is not a chargeable gain.

Disposal of rights under rights issue U.K.

8 (1) Any gain accruing on the disposal of rights under paragraph 77 of Schedule 2 to ITEPA 2003 (power of trustees to raise funds to subscribe for rights issue) is not a chargeable gain.

(2) Sub-paragraph (1) does not apply to a disposal of rights unless similar rights are conferred in respect of all ordinary shares in the company.

Part 2 U.K. Approved SAYE option schemes

Introductory U.K.

9 (1) This Part of this Schedule forms part of the SAYE code (see section 516 of ITEPA 2003 (approved SAYE option schemes)).

(2) Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 3 to that Act (approved SAYE option schemes) have the meaning indicated by the index.

Market value rule not to apply U.K.

10 (1) This paragraph applies where—

(a) a share option (“the option”) has been granted to an individual—

(i) in accordance with the provisions of an approved SAYE option scheme, and

(ii) by reason of the individual’s office or employment as a director or employee of a company,

(b) the individual exercises the option in accordance with the provisions of the SAYE option scheme at a time when the scheme is approved, and

(c) condition A or condition B in section 519(2) or (3) of ITEPA 2003 (no charge in respect of exercise of option) is met.

(2) The company mentioned in sub-paragraph (1)(a)(ii) may be—

(a) the company whose shares are the subject of the option, or

(b) some other company.

(3) If the option—

(a) was granted under the SAYE option scheme before the withdrawal of approval under paragraph 42 of Schedule 3 to ITEPA 2003, but

(b) is exercised after the withdrawal of approval,

then, for the purposes of sub-paragraph (1)(b) above in its application to the option, the scheme is to be treated as if it were still approved at the time of the exercise.

(4) Section 17(1) (disposals and acquisitions treated as made at market value) shall not apply in calculating the consideration for—

(a) the individual’s acquisition of shares by the exercise of the option, or

(b) any corresponding disposal of those shares to the individual.

(5) References in sub-paragraphs (1)(b) and (4) above to the individual include references to a person exercising the option in accordance with provision included in the scheme by virtue of paragraph 32 of Schedule 3 to ITEPA 2003 (exercise of options: death); and sub-paragraph (1)(c) above does not apply in relation to a person so exercising the option.

Part 3 U.K. Approved CSOP schemes

Introductory U.K.

11 (1) This Part of this Schedule forms part of the CSOP code (see section 521 of ITEPA 2003 (approved CSOP schemes)).

(2) Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 4 to that Act (approved CSOP schemes) have the meaning indicated by the index.

(3) This Part of this Schedule applies where—

(a) a share option (“the option”) has been granted to an individual—

(i) in accordance with the provisions of an approved CSOP scheme, and

(ii) by reason of the individual’s office or employment as a director or employee of a company, and

(b) shares (“the relevant shares”) are acquired by the exercise of the option.

(4) The company mentioned in sub-paragraph (3)(a)(ii) may be—

(a) the company whose shares are the subject of the option, or

(b) some other company.

Relief where income tax charged in respect of grant of option U.K.

12 (1) This paragraph applies where an amount (the “employment income amount”) counted as employment income of the individual under section 526 of ITEPA 2003 (charge where option granted at a discount) in respect of the option.

(2) For the purposes of section 38(1)(a) (acquisition and disposal costs etc.), that part of the employment income amount which is attributable to the relevant shares shall be treated as consideration given for the acquisition of the relevant shares.

(3) This paragraph also applies where the individual was chargeable to income tax on an amount in respect of the option under—

(a) subsection (6) of section 185 of ICTA (as it had effect before 1st January 1992),

(b) subsection (6A) of that section (as it had effect in relation to options obtained on or after 1st January 1992 but before 29th April 1996), or

(c) subsection (6) of that section (as it had effect in relation to options obtained on or after 29th April 1996);

and in such a case the “employment income amount” means the amount on which the individual was so chargeable.

(4) This paragraph applies whether or not—

(a) the exercise of the option is in accordance with the provisions of the CSOP scheme, or

(b) the CSOP scheme is approved at the time of the exercise.

Market value rule not to apply U.K.

13 (1) This paragraph applies where—

(a) the individual exercises the option in accordance with the provisions of the CSOP scheme at a time when the scheme is approved, and

(b) the condition in section 524(2) of ITEPA 2003 (no charge in respect of exercise of option) is met.

(2) Section 17(1) (disposals and acquisitions treated as made at market value) shall not apply in calculating the consideration for—

(a) the individual’s acquisition of the relevant shares by the exercise of the option, or

(b) any corresponding disposal of the relevant shares to the individual.

(3) Sub-paragraph (2) also applies where the option is exercised at a time when the scheme is approved in accordance with provision included in the scheme by virtue of paragraph 25 of Schedule 4 to ITEPA 2003 (exercise of options: death); and references in that sub-paragraph to the individual are to be read accordingly.

Part 4 U.K. Enterprise management incentives

Introductory U.K.

14 (1) This Part of this Schedule forms part of the EMI code (see section 527 of ITEPA 2003 (enterprise management incentives: qualifying options)).

(2) Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 5 to that Act (enterprise management incentives) have the meaning indicated by the index.

(3) In this Part of this Schedule, “qualifying shares”—

(a) means shares acquired by the exercise of a qualifying option, subject to sub-paragraphs (4) and (5), and

(b) includes shares (“replacement shares”) which—

(i) are treated under section 127 (equation of original shares and new holding) as the same asset as a holding of qualifying shares, and

(ii) meet the requirements of paragraph 35 of Schedule 5 to ITEPA 2003 (type of shares that may be acquired).

(4) If a disqualifying event occurs in relation to a qualifying option (whether the original option or a replacement option), shares acquired by the exercise of that option are qualifying shares only if the option is exercised within 40 days of that event.

(5) References in this Part of this Schedule to “the original option”, where there has been one or more replacement options, are to the option that the replacement option (or, if there has been more than one, the first of them) replaced.

Taper relief on disposal of qualifying shares U.K.

15 For the purposes of computing taper relief on a disposal of qualifying shares, the shares are treated as if they had been acquired when the original option was granted.

Rights issues in respect of qualifying shares U.K.

16 Where—

(a) an individual holds qualifying shares, and

(b) there is, by virtue of any such allotment for payment as is mentioned in section 126(2)(a) (allotment in proportion to shareholdings), a reorganisation affecting that holding,

sections 127 to 130 (which relate to reorganisation or reduction of share capital) shall not apply in relation to that holding.”

Pension Schemes Act 1993 (c. 48) U.K.

222 U.K. In section 181(1) of the Pension Schemes Act 1993 (general interpretation), in the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003) ”.

Pension Schemes (Northern Ireland) Act 1993 (c. 49) U.K.

223 U.K. In section 176(1) of the Pension Schemes (Northern Ireland) Act 1993 (general interpretation), in the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “ general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003) ”.

Finance Act 1994 (c. 9) U.K.

224 (1) In the Finance Act 1994, paragraph 27 of Schedule 24 (provisions relating to the Railways Act 1993 — employee benefits: transport vouchers) is amended as follows. U.K.

(2) In sub-paragraph (3) for “Subsection (6) of section 141 of the Taxes Act 1988” substitute “ Section 86 of ITEPA 2003 (exception for certain transport vouchers) ”.

(3) In sub-paragraph (3)(c) for “paragraphs (a) to (d) of that subsection” substitute “ section 86(2)(a) to (d) of ITEPA 2003 ”.

(4) In sub-paragraph (12) after the definition of “the former transport voucher benefits for comparable employees” insert—

““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003.”

(5) For sub-paragraph (13) substitute—

“(13) Subject to paragraph 1(1) and sub-paragraph (12) above, expressions used in this paragraph and in section 86 of ITEPA 2003 have the same meaning in this paragraph as in that section.

This does not apply in relation to the reference to a transport voucher in sub-paragraph (1) above.”

Finance Act 1995 (c. 4) U.K.

225 U.K. The Finance Act 1995 is amended as follows.

F558 226 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F558 Sch. 6 para. 226 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

227 U.K. In section 137(7) (part-time workers: miscellaneous provisions) for “Subsections (2) to” substitute “ Subsection ”.

Jobseekers Act 1995 (c. 18) U.K.

228 U.K. [F559 The Jobseekers Act 1995 is amended as follows.]

Textual Amendments

F559 Sch. 6 paras. 228-230 repealed (29.4.2013 for specified purposes, 1.7.2013 and 29.7.2013 for specified purposes, 28.10.2013 for specified purposes, 25.11.2013 for specified purposes, 24.2.2014 and 7.4.2014 for specified purposes, 23.6.2014 and further specified dates for specified purposes, 15.9.2014 and further specified dates for specified purposes, 26.11.2014 for specified purposes, 28.1.2015 for specified purposes, 16.2.2015 and for further specified dates for specified purposes, 18.3.2015 and for further specified dates for specified purposes, 21.9.2015 and further specified dates for specified purposes, 2.12.2015 for specified purposes, 27.1.2016 and 24.2.2016 for specified purposes, 23.3.2016 and 27.4.2016 for specified purposes) by Welfare Reform Act 2012 (c. 5), s. 150(3), Sch. 14 Pt. 1; S.I. 2013/983, arts. 4(1)(c), 5, Sch. 1 (with arts. 6, 9(1), 22, Sch. 4) (as amended: (1.7.2013) by S.I. 2013/1511; (29.10.2013) by S.I. 2013/2657; (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (15.9.2014) by S.I. 2014/2321; (17.11.2014) by S.I. 2014/3067; (26.11.2014) by S.I. 2014/3094; (19.1.2015) by S.I. 2015/32 (as amended (10.2.2015) by S.I. 2015/101); (10.3.2015) by S.I. 2015/634; (20.7.2015) by S.I. 2015/1537; (23.11.2015) by S.I. 2015/1930; (6.4.2017) by S.I. 2017/483; (2.2.2018) by S.I. 2018/138; (16.1.2019) by S.I. 2019/10; and (31.1.2019) by S.I. 2019/167); S.I. 2013/1511, art. 4 (as amended: (29.10.2013) by S.I. 2013/2657; (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2013/2657, art. 4 (with art. 6) (as amended: (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2013/2846, art. 4 (with art. 5) (as amended: (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2014/209, art. 4 (as amended: (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2105) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2014/1583, art. 4 (as amended (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2014/2321, art. 4 (as amended: (17.11.2014) by S.I. 2014/3057; (26.11.2014) by S.I. 2014/3094, art. 4 (with art. 6); (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; (20.7.2015) by S.I. 2015/1537); S.I. 2015/33, art. 4 (with art. 6) (as amended: (11.2.2015) by S.I. 2015/101; (10.3.2015) by S.I. 2015/634; (6.4.2017) by S.I. 2017/483; (11.4.2018) by S.I. 2018/138; (16.1.2019) by S.I. 2019/10; (15.1.2019) by S.I. 2019/37); and (31.1.2019) by S.I. 2019/167); S.I. 2015/101, art. 4 (with art. 2(2)-(4)) (as amended (10.3.2015) by S.I. 2015/534; (17.3.2015) by S.I. 2015/740; and (20.7.2015) by S.I. 2015/1537); S.I. 2015/634, art. 4 (with art. 6) (as amended: (17.3.2015) by S.I. 2015/740; (6.4.2017) by S.I. 2017/376; (16.1.2019) by S.I. 2019/10; (15.1.2019) by S.I. 2019/37; and (31.1.2019) by S.I. 2019/167); S.I. 2015/1537, art. 4 (as modified (23.11.2015) by S.I. 2015/1930, art. 6); S.I. 2015/1930, art. 4; S.I. 2016/33, art. 4; S.I. 2016/407, art. 4

229 U.K. [F559 In section 15(2)(c)(i) (effect on other claimants) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) under PAYE regulations ”.]

Textual Amendments

F559 Sch. 6 paras. 228-230 repealed (29.4.2013 for specified purposes, 1.7.2013 and 29.7.2013 for specified purposes, 28.10.2013 for specified purposes, 25.11.2013 for specified purposes, 24.2.2014 and 7.4.2014 for specified purposes, 23.6.2014 and further specified dates for specified purposes, 15.9.2014 and further specified dates for specified purposes, 26.11.2014 for specified purposes, 28.1.2015 for specified purposes, 16.2.2015 and for further specified dates for specified purposes, 18.3.2015 and for further specified dates for specified purposes, 21.9.2015 and further specified dates for specified purposes, 2.12.2015 for specified purposes, 27.1.2016 and 24.2.2016 for specified purposes, 23.3.2016 and 27.4.2016 for specified purposes) by Welfare Reform Act 2012 (c. 5), s. 150(3), Sch. 14 Pt. 1; S.I. 2013/983, arts. 4(1)(c), 5, Sch. 1 (with arts. 6, 9(1), 22, Sch. 4) (as amended: (1.7.2013) by S.I. 2013/1511; (29.10.2013) by S.I. 2013/2657; (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (15.9.2014) by S.I. 2014/2321; (17.11.2014) by S.I. 2014/3067; (26.11.2014) by S.I. 2014/3094; (19.1.2015) by S.I. 2015/32 (as amended (10.2.2015) by S.I. 2015/101); (10.3.2015) by S.I. 2015/634; (20.7.2015) by S.I. 2015/1537; (23.11.2015) by S.I. 2015/1930; (6.4.2017) by S.I. 2017/483; (2.2.2018) by S.I. 2018/138; (16.1.2019) by S.I. 2019/10; and (31.1.2019) by S.I. 2019/167); S.I. 2013/1511, art. 4 (as amended: (29.10.2013) by S.I. 2013/2657; (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2013/2657, art. 4 (with art. 6) (as amended: (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2013/2846, art. 4 (with art. 5) (as amended: (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2014/209, art. 4 (as amended: (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2105) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2014/1583, art. 4 (as amended (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2014/2321, art. 4 (as amended: (17.11.2014) by S.I. 2014/3057; (26.11.2014) by S.I. 2014/3094, art. 4 (with art. 6); (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; (20.7.2015) by S.I. 2015/1537); S.I. 2015/33, art. 4 (with art. 6) (as amended: (11.2.2015) by S.I. 2015/101; (10.3.2015) by S.I. 2015/634; (6.4.2017) by S.I. 2017/483; (11.4.2018) by S.I. 2018/138; (16.1.2019) by S.I. 2019/10; (15.1.2019) by S.I. 2019/37); and (31.1.2019) by S.I. 2019/167); S.I. 2015/101, art. 4 (with art. 2(2)-(4)) (as amended (10.3.2015) by S.I. 2015/534; (17.3.2015) by S.I. 2015/740; and (20.7.2015) by S.I. 2015/1537); S.I. 2015/634, art. 4 (with art. 6) (as amended: (17.3.2015) by S.I. 2015/740; (6.4.2017) by S.I. 2017/376; (16.1.2019) by S.I. 2019/10; (15.1.2019) by S.I. 2019/37; and (31.1.2019) by S.I. 2019/167); S.I. 2015/1537, art. 4 (as modified (23.11.2015) by S.I. 2015/1930, art. 6); S.I. 2015/1930, art. 4; S.I. 2016/33, art. 4; S.I. 2016/407, art. 4

230 U.K. [F559 In section 26(3) (the back to work bonus) for the words from “Subject to section 617” to “not to be taxable)” substitute “ Subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable) ”.]

Textual Amendments

F559 Sch. 6 paras. 228-230 repealed (29.4.2013 for specified purposes, 1.7.2013 and 29.7.2013 for specified purposes, 28.10.2013 for specified purposes, 25.11.2013 for specified purposes, 24.2.2014 and 7.4.2014 for specified purposes, 23.6.2014 and further specified dates for specified purposes, 15.9.2014 and further specified dates for specified purposes, 26.11.2014 for specified purposes, 28.1.2015 for specified purposes, 16.2.2015 and for further specified dates for specified purposes, 18.3.2015 and for further specified dates for specified purposes, 21.9.2015 and further specified dates for specified purposes, 2.12.2015 for specified purposes, 27.1.2016 and 24.2.2016 for specified purposes, 23.3.2016 and 27.4.2016 for specified purposes) by Welfare Reform Act 2012 (c. 5), s. 150(3), Sch. 14 Pt. 1; S.I. 2013/983, arts. 4(1)(c), 5, Sch. 1 (with arts. 6, 9(1), 22, Sch. 4) (as amended: (1.7.2013) by S.I. 2013/1511; (29.10.2013) by S.I. 2013/2657; (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (15.9.2014) by S.I. 2014/2321; (17.11.2014) by S.I. 2014/3067; (26.11.2014) by S.I. 2014/3094; (19.1.2015) by S.I. 2015/32 (as amended (10.2.2015) by S.I. 2015/101); (10.3.2015) by S.I. 2015/634; (20.7.2015) by S.I. 2015/1537; (23.11.2015) by S.I. 2015/1930; (6.4.2017) by S.I. 2017/483; (2.2.2018) by S.I. 2018/138; (16.1.2019) by S.I. 2019/10; and (31.1.2019) by S.I. 2019/167); S.I. 2013/1511, art. 4 (as amended: (29.10.2013) by S.I. 2013/2657; (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2013/2657, art. 4 (with art. 6) (as amended: (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2013/2846, art. 4 (with art. 5) (as amended: (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2014/209, art. 4 (as amended: (16.6.2014) by S.I. 2014/1452; (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2105) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2014/1583, art. 4 (as amended (30.6.2014) by S.I. 2014/1661; (28.7.2014) by S.I. 2014/1923; (17.11.2014) by S.I. 2014/3067; (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; and (20.7.2015) by S.I. 2015/1537); S.I. 2014/2321, art. 4 (as amended: (17.11.2014) by S.I. 2014/3057; (26.11.2014) by S.I. 2014/3094, art. 4 (with art. 6); (19.1.2015) by S.I. 2015/32; (10.3.2015) by S.I. 2015/634; (20.7.2015) by S.I. 2015/1537); S.I. 2015/33, art. 4 (with art. 6) (as amended: (11.2.2015) by S.I. 2015/101; (10.3.2015) by S.I. 2015/634; (6.4.2017) by S.I. 2017/483; (11.4.2018) by S.I. 2018/138; (16.1.2019) by S.I. 2019/10; (15.1.2019) by S.I. 2019/37); and (31.1.2019) by S.I. 2019/167); S.I. 2015/101, art. 4 (with art. 2(2)-(4)) (as amended (10.3.2015) by S.I. 2015/534; (17.3.2015) by S.I. 2015/740; and (20.7.2015) by S.I. 2015/1537); S.I. 2015/634, art. 4 (with art. 6) (as amended: (17.3.2015) by S.I. 2015/740; (6.4.2017) by S.I. 2017/376; (16.1.2019) by S.I. 2019/10; (15.1.2019) by S.I. 2019/37; and (31.1.2019) by S.I. 2019/167); S.I. 2015/1537, art. 4 (as modified (23.11.2015) by S.I. 2015/1930, art. 6); S.I. 2015/1930, art. 4; S.I. 2016/33, art. 4; S.I. 2016/407, art. 4

Child Support Act 1995 (c. 34) U.K.

231 U.K. For section 10(4) of the Child Support Act 1995 (child maintenance bonus) substitute—

“(4) Subsection (3) is subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable).”

Child Support (Northern Ireland) Order 1995 (S.I. 1995/2702 (N.I. 13)) U.K.

232 U.K. For Article 4(4) of the Child Support (Northern Ireland) Order 1995 (child maintenance bonus) substitute—

“(4) Paragraph (3) is subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable).”

Jobseekers (Northern Ireland) Order 1995 (S.I. 1995/2705 (N.I. 15)) U.K.

233 U.K. The Jobseekers (Northern Ireland) Order 1995 is amended as follows.

234 U.K. In Article 17(2)(c)(i) (effect on other claimants) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003 under regulations made under section 684 of that Act (PAYE regulations) ”.

235 U.K. In Article 28(3) (the back to work bonus) for the words from “Subject to section 617” to “not to be taxable)” substitute “ Subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable) ”.

Teaching and Higher Education Act 1998 (c. 30) U.K.

236 U.K. In section 22 of the Teaching and Higher Education Act 1998 (new arrangements for giving financial support to students)—

(a) in subsection (5)(g) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”; and

(b) in subsection (6)(a) for “income assessable to income tax under Schedule E” substitute “ PAYE income ”.

Scotland Act 1998 (c. 46) U.K.

237 U.K. In section 79(3) of the Scotland Act 1998 (supplemental powers to modify enactments) for “section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”.

Education (Student Support) (Northern Ireland) Order 1998 (S.I. 1998/1760 (N.I. 14)) U.K.

238 U.K. In Article 3 of the Education (Student Support) (Northern Ireland) Order 1998 (new arrangements for giving financial support to students)—

(a) in paragraph (5)(g) for “section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ section 684 of the Income Tax (Earnings and Pensions) Act 2003 (PAYE regulations) ”; and

(b) in paragraph (6)(a) for “income assessable to income tax under Schedule E” substitute “ PAYE income (as defined in section 683 of the Income Tax (Earnings and Pensions) Act 2003 ”.

Tax Credits Act 1999 (c. 10) U.K.

239 U.K. The Tax Credits Act 1999 is amended as follows.

240 U.K. In section 6(1) (payment of tax credit by employers etc.) for “income assessable to income tax under Schedule E” substitute “ PAYE income ”.

241 U.K. In paragraph 10(1) of Schedule 2 (transfer of functions), in paragraph (b) of the subsection which, in any case where the overpayment was made in respect of tax credit, is treated as substituted for—

(a) subsection (8) of section 71 of the Social Security Administration Act 1992 (c. 5), and

(b) subsection (8) of section 69 of the Social Security Administration (Northern Ireland) Act 1992 (c. 8),

for “section 203(2)(a) of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “ PAYE regulations ”.

Finance Act 2000 (c. 17) U.K.

242 U.K. The Finance Act 2000 is amended as follows.

F560 243 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F560 Sch. 6 para. 243 repealed (19.7.2011) by Finance Act 2011 (c. 11), Sch. 26 para. 3(2)(a)

F561 244 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F561 Sch. 6 para. 244 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

F562 245 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F562 Sch. 6 para. 245 repealed (with effect in accordance with Sch. 17 para. 5(2) of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(12)

Capital Allowances Act 2001 (c. 2) U.K.

246 U.K. The Capital Allowances Act 2001 is amended as follows.

247 (1) Amend section 4 (capital expenditure) as follows. U.K.

(2) For subsection (2)(b) substitute—

“(b) any expenditure or sum that may be allowed as a deduction under a relevant provision from the taxable earnings from an employment or office held by the person.”

(3) After subsection (2) insert—

“(2A) In subsection (2)—

“relevant provision” means any of the following—

(a) section 262;

(b) section 232 of ITEPA 2003 (giving effect to mileage allowance relief);

(c) Chapters 2 to 6 of Part 5 of that Act (general deductions allowed from earnings); and

(d) sections 613(1), 619 and 639 of ICTA (contributions to pensions funds etc.), and

“taxable earnings” has the meaning given by section 10 of ITEPA 2003.”

(4) In subsection (3) for “emoluments” substitute “ earnings ”.

248 (1) Amend section 20 (employments and offices) as follows. U.K.

(2) In subsection (2)—

(a) for “emoluments” substitute “ earnings ”; and

(b) for “do not fall within Case I or II of Schedule E” substitute “ fall within section 22 or 26 of ITEPA 2003 ”.

(3) In subsection (3)—

(a) for “those emoluments” substitute “ those earnings ”; and

(b) for “other emoluments” substitute “ other taxable earnings (as defined by section 10 of ITEPA 2003) ”.

249 U.K. In section 61(2) (disposal events and disposal values), in entry 2(b) of the Table, for “Schedule E” substitute “ ITEPA 2003 ”.

250 U.K. In section 63(1) (cases in which disposal value is nil) for “Schedule E” substitute “ ITEPA 2003 ”.

251 U.K. In section 72(3) (disposal values), in entry 2(b) of the Table, for “Schedule E” substitute “ ITEPA 2003 ”.

252 U.K. In section 88(c) (sales at under-value) for “Schedule E” substitute “ ITEPA 2003 ”.

253 U.K. In section 262 (employments and offices)—

(a) in paragraph (a) for “an amount to be deducted from the emoluments of” substitute “ a deduction from the taxable earnings from ”; and

(b) in paragraph (b) for “an emolument” substitute “ earnings ”.

254 U.K. In section 423(1) (disposal value for sections 421 and 422), in entry 2(b) of the Table, for “Schedule E” substitute “ ITEPA 2003 ”.

255 U.K. At the end of Part 1 of Schedule 1 (abbreviations) insert—

“ITEPA 2003

The Income Tax (Earnings and Pensions) Act 2003”.

F563 256 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F563 Sch. 6 para. 256 repealed (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 3 Pt. 1 (with Sch. 2)

Finance Act 2001 (c. 9) U.K.

257 U.K. For section 95 of the Finance Act 2001 (exemptions in relation to employee share ownership plans) substitute—

“95 Exemptions in relation to approved share incentive plans

(1) This section forms part of the SIP code (see section 488 of the Income Tax (Earnings and Pensions) Act 2003 (approved share incentive plans)).

(2) Accordingly, expressions used in this section and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by that index.

(3) Where, under an approved share incentive plan, partnership shares or dividend shares are transferred by the trustees to an employee—

(a) no ad valorem stamp duty is chargeable on any instrument by which the transfer is made, and

(b) no stamp duty reserve tax is chargeable on any agreement by the trustees to make the transfer.

(4) But subsection (3) does not apply to—

(a) any instrument executed (within the meaning of the Stamp Act 1891) before 6th April 2003, or

(b) any agreement to transfer shares made before that date.”

F564 258 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F564 Sch. 6 para. 258 repealed (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 3 Pt. 1 (with Sch. 2 Pts. 1, 2)

Social Security Contributions (Share Options) Act 2001 (c. 20) U.K.

259 U.K. The Social Security Contributions (Share Options) Act 2001 is amended as follows.

260 U.K. In section 2(3)(b) (effect of notice under section 1) for “section 135(3)(a) of the Income and Corporation Taxes Act 1988” substitute “ section 479 of the Income Tax (Earnings and Pensions) Act 2003 ”.

261 (1) Amend section 3 (special provision for roll-overs) as follows. U.K.

(2) In subsection (4)(a) for “section 136(1) of the Income and Corporation Taxes Act 1988” substitute “ section 485(1) to (4) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(3) In subsection (4)(b)(i) for “section 135(3)(a)” substitute “ section 479 ”.

(4) For subsection (6) substitute—

“(6) Subject to subsection (7), in relation to the replacement right or any subsequent right, section 485(1) to (3) of the Income Tax (Earnings and Pensions) Act 2003 (application of Chapter 5 of Part 7 where share option exchanged for another) shall be deemed to have effect (or, as the case may be, to have had effect) for the purposes of the determination mentioned in subsection (5) of this section—

(a) as if that section had effect (or, as the case may be, had had effect) in relation to that right to the extent only that it is a right to acquire additional shares; and

(b) as if the value of the consideration for the grant of the original right had been nil.”

(5) In subsection (7)(b) for “section 135 of the Income and Corporation Taxes Act 1988” substitute “ Chapter 5 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 ”.

(6) In subsection (11)(a) for “section 135(3)(a) of the Income and Corporation Taxes Act 1988” substitute “ section 479 of the Income Tax (Earnings and Pensions) Act 2003 ”.

262 U.K. In section 5(2)(c) (interpretation)—

(a) for “subsection (8) of section 135 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “ section 483(1) of the Income Tax (Earnings and Pensions) Act 2003 ”; and

(b) for “that section” substitute “ Chapter 5 of Part 7 of that Act ”.

State Pension Credit Act 2002 (c. 16) U.K.

263 (1) Section 17(1) of the State Pension Credit Act 2002 (other interpretation provisions) is amended as follows. U.K.

(2) In paragraph (b) of the definition of “foreign war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “ section 641 of the Income Tax (Earnings and Pensions) Act 2003 ”.

(3) In paragraph (b) of the definition of “foreign war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “ section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(4) In paragraph (b) of the definition of “war disablement pension”, for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “ any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(5) In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “ section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003 ”.

Tax Credits Act 2002 (c. 21) U.K.

264 U.K. The Tax Credits Act 2002 is amended as follows.

265 (1) Amend section 25 (payments of working tax credit by employers) as follows. U.K.

(2) In subsection (1) for “Schedule E payments” substitute “ payments of, or on account of, PAYE income ”.

(3) In subsection (5) for “Schedule E payment” substitute “ payment of, or on account of, PAYE income ”.

(4) Omit subsection (6).

266 U.K. In section 29(5) (recovery of overpayments) for “regulations under section 203(2)(a) of the Income and Corporation Taxes Act 1988 (c. 1) (PAYE)” substitute “ PAYE regulations ”.

State Pension Credit Act (Northern Ireland) 2002 (c. 14 (N.I.)) U.K.

267 (1) Section 17(1) of the State Pension Credit Act (Northern Ireland) 2002 (other interpretation provisions) is amended as follows. U.K.

(2) In paragraph (b) of the definition of “foreign war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “ section 641 of the Income Tax (Earnings and Pensions) Act 2003 ”.

(3) In paragraph (b) of the definition of “foreign war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “ section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(4) In paragraph (b) of the definition of “war disablement pension”, for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “ any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003 ”.

(5) In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “ section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003 ”.

Certain corresponding Northern Ireland provision U.K.

268 (1) This paragraph applies if provision is made for Northern Ireland which corresponds to section 171ZJ of the Social Security Contributions and Benefits Act 1992 (c. 4) (Part 12ZA — statutory paternity pay: supplementary) (which was inserted by section 2 of the Employment Act 2002 (c. 22)). U.K.

(2) In the Northern Ireland provision any reference to emoluments chargeable to income tax under Schedule E is to be construed as a reference to general earnings (as defined by section 7 of this Act).

269 (1) This paragraph applies if provision is made for Northern Ireland which corresponds to section 171ZS of the Social Security Contributions and Benefits Act 1992 (Part 12ZA — statutory adoption pay: supplementary) (which was inserted by section 4 of the Employment Act 2002). U.K.

(2) In the Northern Ireland provision any reference to emoluments chargeable to income tax under Schedule E is to be construed as a reference to general earnings (as defined by section 7 of this Act).

Section 723

SCHEDULE 7 U.K. Transitionals and savings

Part 1 U.K. Continuity of the law

1 U.K. The repeal of provisions and their enactment in a rewritten form in this Act does not affect the continuity of the law.

2 U.K. Paragraph 1 does not apply to any change in the law made by this Act.

3 U.K. Any subordinate legislation or other thing which—

(a) has been made or done, or has effect as if made or done, under or for the purposes of a repealed provision, and

(b) is in force or effective immediately before the commencement of the corresponding rewritten provision,

has effect after that commencement as if made or done under or for the purposes of the rewritten provision.

4 U.K. Any reference (express or implied) in any enactment, instrument or document to—

(a) a rewritten provision, or

(b) things done or falling to be done under or for the purposes of a rewritten provision,

is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding repealed provision had effect, a reference to the repealed provision or (as the case may be) things done or falling to be done under or for the purposes of the repealed provision.

5 U.K. Any reference (express or implied) in any enactment, instrument or document to—

(a) a repealed provision, or

(b) things done or falling to be done under or for the purposes of a repealed provision,

is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding rewritten provision has effect, a reference to the rewritten provision or (as the case may be) things done or falling to be done under or for the purposes of the rewritten provision.

6 U.K. Paragraphs 1 to 5 have effect instead of section 17(2) of the Interpretation Act 1978 (c. 30) (but are without prejudice to any other provision of that Act).

7 U.K. Paragraphs 4 and 5 apply only in so far as the context permits.

Part 2 U.K. Employment income: charge to tax

Taxable earnings U.K.

8 (1) The charging provisions of Chapters 4 and 5 of Part 2— U.K.

(a) apply for the purpose of determining taxable earnings from an employment in the tax year 2003-04 or any later tax year, and

(b) accordingly apply where (for the purposes of those Chapters) general earnings are received, or remitted to the United Kingdom, in that or any later tax year.

(2) But they apply to general earnings for a tax year before the tax year 2003-04, as well as to those for that or any later year.

This is subject to sub-paragraph (3).

(3) If—

(a) any general earnings within subsection (1) of section 22 (chargeable overseas earnings) or 26 (foreign earnings of resident employee) are for a tax year before 1989-90,

(b) the earnings are remitted to the United Kingdom in the tax year 2003-04 or any later tax year (“the remittance year”), and

(c) either—

(i) the employee is not resident in the United Kingdom in the remittance year, or

(ii) the employment is not held in the remittance year,

subsection (2) of section 22 or 26 does not apply to the earnings.

(4) Section 30 (treatment of earnings for year in which employment not held) does not apply where any of the tax years mentioned in subsection (2) or (3) of that section is a tax year before the tax year 1989-90.

Relief for delayed remittances U.K.

F565 9 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F565 Sch. 7 paras. 9-12 omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 44

F565 10 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F565 Sch. 7 paras. 9-12 omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 44

F565 11 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F565 Sch. 7 paras. 9-12 omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 44

Disputes as to domicile or ordinary residence U.K.

F565 12 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F565 Sch. 7 paras. 9-12 omitted (with effect in accordance with Sch. 7 para. 81 of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 7 para. 44

Application of provisions to agency workers U.K.

13 U.K. In relation to times before 6th April 2003, Chapter 7 of Part 2 applies with the following modifications—

(a) references to “employment income of the worker” are to be read as references to “income of the worker chargeable to tax under Schedule E”,

(b) references to “earnings” are to be read as references to “emoluments”, and

(c) references to “this Chapter” are to be read as references to “section 134 of ICTA”.

14 U.K. Section 44(2) does not apply in relation to—

(a) payments made before 6th April 1998 other than payments made in respect of services provided on or after that date, or

(b) payments made on or after that date in respect of services provided before that date,

if in providing the services the worker is or would be a sub-contractor within the meaning of section 560 of ICTA (sub-contractors in the construction industry).

Part 3 U.K. Employment income: earnings and benefits etc. treated as earning

F566 ... U.K.

Textual Amendments

F566 Sch. 7 para. 15 and cross-heading omitted (with effect in accordance with s. 12(5) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 12(4)(b)

F566 15 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F567 16 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F567 Sch. 7 para. 16 omitted (with effect in accordance with s. 12(5) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 12(4)(b)

Taxable benefits: the benefits code U.K.

17 (1) In relation to times before 6th April 2003, references in the benefits code to “employment”, “employed”, “employee” and “employer” are to be read in accordance with this paragraph. U.K.

(2) In relation to [F568 Chapters 3, 6, 7 and 10 of the benefits code (provisions not applicable before the tax year 2016-17 to lower-paid employments)], the references mentioned in sub-paragraph (1) are to be read in accordance with section 66 (meaning of employment and related expressions) but as if in subsection (1)(a) there were substituted “an employment to which Chapter 2 of Part 5 of ICTA applies” for “a taxable employment under Part 2”.

(3) In relation to any other Chapters of the benefits code, the references mentioned in sub-paragraph (1) are to be read in accordance with section 66 but as if in subsection (1)(a) there were substituted “an employment the emoluments of which fall to be assessed under Schedule E” for “a taxable employment under Part 2”.

F569 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) This paragraph is subject to paragraphs 18(2), 24, 27(3), 29(4) and 31(2) of this Schedule.

Textual Amendments

F568 Words in Sch. 7 para. 17(2) substituted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 22(2)(a)

F569 Sch. 7 para. 17(4) omitted (with effect in accordance with s. 13(4) of the amending Act) by virtue of Finance Act 2015 (c. 11), Sch. 1 para. 22(2)(b)

F570 ... U.K.

Textual Amendments

F570 Sch. 7 para. 19 and cross-heading omitted (with effect in accordance with s. 12(5) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 12(4)(b)

F571 18 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F571 Sch. 7 para. 18 omitted (with effect in accordance with Sch. 39 para. 50(3) of the amending Act) by virtue of Finance Act 2012 (c. 14), Sch. 39 para. 50(2)(b)

F570 19 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F572 20 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F572 Sch. 7 para. 20 omitted (with effect in accordance with s. 12(5) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 12(4)(b)

Taxable benefits: living accommodation U.K.

21 (1) Section 107 (special rule for calculating cost of providing accommodation) does not apply if the employee first occupied the living accommodation before 31st March 1983. U.K.

(2) Nothing in this paragraph affects the operation of section 107 as applied by section 398(2)(b) or 415(2)(b).

Taxable benefits: cars, vans and related benefits U.K.

22 (1) In relation to a capital sum contributed by the employee before 6th April 2003, section 132 (cars: capital contributions by employee) applies with the following modifications. U.K.

(2) In subsection (1)(b) substitute “under sections 168A to 168C of ICTA in determining the price of the car as regards a year” for “in calculating the cash equivalent of the benefit of the car”.

(3) In subsection (2)—

(a) omit paragraph (a), and

(b) in paragraph (b) substitute “ the tax years after the tax year in which the contribution was made which are ” for “subsequent”.

23 (1) In relation to a capital sum contributed by the employee before 6th April 2003, section 147 (classic cars: 15 years of age or more) applies with the following modifications. U.K.

(2) In subsection (5)(b) substitute “under section 168F(3) of ICTA in determining the price of the car as regards a year” for “in determining the market value of the car”.

(3) In subsection (6)—

(a) omit paragraph (a), and

(b) in paragraph (b) substitute “ the tax years after the tax year in which the contribution was made which are ” for “subsequent”.

F573 24 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F573 Sch. 7 para. 24 repealed (22.7.2004) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(9)

Taxable benefits: loans U.K.

25 (1) Chapter 7 of Part 3 applies to a loan made at any time, including one made before 29th July 1976 (the date on which FA 1976 was passed). U.K.

(2) But section 188 (loan released or written off: amount treated as earnings) does not apply to benefits received in pursuance of arrangements made at any time with a view to protecting the holder of shares acquired before 6th April 1976 from a fall in their market value.

26 (1) This paragraph relates to the operation of section 183 (alternative method of calculation) in relation to section 177(2) (exceptions for loans at fixed rate of interest) in the case of a loan made before 6th April 2003. U.K.

(2) Where section 183 applies, then for the purpose of calculating under section 177(2) the amount of interest that would have been payable on the loan at the official rate of interest for the year in which the loan was made, in step 3 in section 183(3) for “the number of days in the tax year” substitute “ 365 ”.

27 (1) Subject to paragraph 25(2), where a loan is made before 6th April 2003, section 188 (loan released or written off: amount treated as earnings) applies with the following modifications. U.K.

(2) References to the employment in relation to which a loan is an employment-related loan are to be read, in relation to times before 6th April 2003, as references to the employment referred to in section 174 (employment-related loans) as modified by paragraph 17.

(3) In relation to times before 6th April 2003—

(a) in subsection (2)(c), substitute “an employment to which Chapter 2 of Part 5 of ICTA applies” for [F574 “not lower-paid employment as a minister of religion”], and

(b) in subsection (3)(a), substitute “ an employment to which Chapter 2 of Part 5 of ICTA does not apply ” for [F575 “lower-paid employment as a minister of religion”].

Textual Amendments

F574 Words in Sch. 7 para. 27(3)(a) substituted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 22(3)(a)

F575 Words in Sch. 7 para. 27(3)(b) substituted (with effect in accordance with s. 13(4) of the amending Act) by Finance Act 2015 (c. 11), Sch. 1 para. 22(3)(b)

Taxable benefits: notional loans in respect of acquisitions of shares U.K.

28 U.K. Chapter 8 of Part 3 does not apply in relation to acquisitions on or before 6th April 1976.

29 (1) This paragraph relates to the operation of Chapter 8 of Part 3 in relation to an acquisition made before 6th April 2003. U.K.

(2) If—

(a) the acquisition gave rise to a notional loan under section 162(1) of ICTA, and

(b) the notional loan has not terminated under section 162(4) of ICTA before 6th April 2003,

the condition in section 193(1) (notional loan where acquisition for less than market value) is taken to be met and section 193(3) and (4) apply accordingly.

(3) In such a case, the amount initially outstanding of the notional loan for the purposes of Chapter 8 of Part 3 is taken to be the amount initially outstanding calculated under section 162 of ICTA in relation to the tax year 2002-03.

(4) In such a case, section 195(3)(c) (discharge of notional loan: amount treated as earnings) applies, in relation to times before 6th April 2003, with the substitution of “an employment to which Chapter 2 of Part 5 of ICTA applies” for “not an excluded employment”.

Taxable benefits: disposals of shares for more than market value U.K.

F576 30 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F576 Sch. 7 para. 30 repealed (with effect in accordance with Sch. 22 para. 46(26)(a) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 46(2), Sch. 43 Pt. 3(4)

F577 31 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F577 Sch. 7 para. 31 repealed (with effect in accordance with Sch. 22 para. 46(26)(a) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 46(2), Sch. 43 Pt. 3(4)

Taxable benefits: residual liability to charge U.K.

32 (1) This paragraph applies in relation to Chapter 10 of Part 3. U.K.

(2) In section 206, the references in subsection (4) and step 2 in subsection (5) to the cost of a benefit determined under section 205 are to be read as including a reference to the cost of a benefit determined under section 156(5) of ICTA.

(3) Sections 212, 213 and 215 do not have effect in relation to any payment if—

(a) it is made in respect of a scholarship awarded before 15th March 1983,

(b) the first payment in respect of the scholarship was made before 6th April 1984, and

(c) in relation to payments made after 5th April 1989, the person holding the scholarship (“the scholar”) is receiving full-time instruction at the university, college, school or other educational establishment at which the scholar was receiving such instruction on—

(i) 15th March 1983, in a case where the first payment in respect of the scholarship was made before that date, or

(ii) the date on which the first such payment was made, in any other case.

(4) For the purposes of sub-paragraph (3)(c), a payment made before 6th April 1989 in respect of any period beginning on or after that date is treated as made at the beginning of that period.

Part 4 U.K. Employment income: exemptions

Incidental overnight expenses and benefits U.K.

33 U.K. In determining whether section 240(1) or (2) or 268 applies—

(a) in the case of a period of absence which began before 6th April 2003 and ends on or after that date, or

(b) in the case of a period of absence which begins on or after that date and incidentally to which goods, services or money are obtained using a non-cash voucher in relation to which section 141(6C) of ICTA applies,

the question whether for the purposes of section 241 the exemption provisions total exceeds the permitted amount is to be determined as if this Act had applied at any relevant time before that date.

34 U.K. In determining—

(a) whether section 141(6C) and (6D), 142(3C) and (3D), 155(1B) and (1C) or section 200A of ICTA applies in the case of a period of absence which began before 6th April 2003 and ends on or after that date, or

(b) whether section 141(6C) and (6D) applies in the case of a period of absence which begins on or after that date,

the question whether the authorised maximum (as defined in section 200A(4) of ICTA) is exceeded in relation to the absence is to be determined as if in section 200A(5) after the words “exceeded by” there were inserted the words “the aggregate of the exemption provisions total in respect of the period (as defined in section 241 of ITEPA 2003) and”.

Removal benefits and expenses U.K.

35 (1) Section 287 (limit on exemption for removal benefits and expenses) applies with the modification in sub-paragraph (2) where— U.K.

(a) a benefit is provided on or after 6th April 2003 in connection with a change of an employee’s residence, or

(b) expenses are incurred on or after that day in connection with such a change,

and any such benefits have been provided or expenses incurred before that date in connection with that change.

(2) In subsection (2) before paragraph (a) insert—

“(aa) the total value to the employee immediately before 6th April 2003, as defined in paragraph 24(2) of Schedule 11A to ICTA,”.

36 U.K. A direction under paragraph 6(2) of Schedule 11A to ICTA (directions as to meaning of “the relevant day”) by virtue of which a day on or after 6th April 2003 was directed to be the relevant day in relation to a change of residence—

(a) is not affected by any repeals made by this Act, but

(b) continues in force as respects any benefit provided or expenses incurred on or after that date as if it were a direction given under section 274(2) (directions as to the limitation day), directing that day to be the limitation day.

Retraining courses U.K.

37 (1) The repeal of sections 588(5)(a) and 589(3) and (4) of ICTA does not affect— U.K.

(a) the operation of section 588(5) of ICTA by virtue of paragraph (a) of that provision where liability for a tax year before 2003-04 is determined,

(b) the operation of section 588(5) of ICTA by virtue of paragraph (b) of that provision where liability is determined on the assumption that the person undertaking the course fell within section 588(1) of ICTA in such a tax year, or

(c) the operation of section 588(6) F578 ... of ICTA as they apply by virtue of sub-paragraph (2).

(2) In any case where there has been such a determination as is mentioned in sub-paragraph (1)(a) or (b), section 588(6) [F579 applies as if it] referred to a failure to comply with any provision of section 589(3) or (4) of ICTA instead of a failure to meet such a condition as is mentioned in section 312(1)(b)(i) or (ii) of this Act.

Textual Amendments

F578 Words in Sch. 7 para. 37(1)(c) omitted (13.8.2009) by virtue of The Finance Act 2009, Schedule 47 (Consequential Amendments) Order 2009 (S.I. 2009/2035), art. 1, Sch. para. 40(a)

F579 Words in Sch. 7 para. 37(2) substituted (13.8.2009) by The Finance Act 2009, Schedule 47 (Consequential Amendments) Order 2009 (S.I. 2009/2035), art. 1, Sch. para. 40(b)

Suggestion awards U.K.

38 (1) This paragraph applies for the purpose of determining the extent, if any, to which section 321(2) (exemption of suggestion awards) applies in respect of a financial benefit award for a suggestion (“the later award”) in a case where such an award (“the earlier award”) has been made for the same suggestion on a previous occasion or occasions before the tax year 2003-04. U.K.

(2) For the purposes of the application of section 322(3) in relation to the later award, “the residue of the suggestion maximum” means the suggestion maximum, as defined in section 322(4), less the aggregate of—

(a) the total of the amounts exempted from income tax under section 321 in respect of financial benefit awards for the same suggestion made on previous occasions, and

(b) the total of the earlier awards.

Part 5 U.K. Employment income: deductions

Earnings charged on remittance U.K.

39 U.K. In relation to expenses incurred before the tax year 2003-04, section 353 (deductions from earnings charged on remittance) applies as if the condition in subsection (3) of that section were that the expenses would have been deductible under section 193, 194, 195 or 198(1) of ICTA from emoluments of the office or employment if those emoluments had been chargeable under Case I of Schedule E for the tax year in which the expenses were incurred.

Non-domiciled employee’s travel costs and expenses: “qualifying arrival date” U.K.

40 U.K. In relation to any time before 6th April 2003, section 375 (meaning of “qualifying arrival date”) has effect as if the references in subsections (1)(a) and (4) to the person receiving earnings for duties performed in the United Kingdom included a reference to the person receiving emoluments for such duties.

Part 6 U.K. Employment income: income which is not earnings or [F580 related to securities]

Textual Amendments

F580 Words in Sch. 7 Pt. 6 heading substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(3)

Benefits from non-approved pension schemes U.K.

F581 41 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F581 Sch. 7 para. 41 repealed (6.4.2006) by Finance Act 2004 (c. 12), Sch. 42 Pt. 3 (with Sch. 36)

Payments and benefits on termination of employment etc. U.K.

42 U.K. Section 403 (charge on payment or other benefit) does not apply in relation to payments or other benefits received on or after 6th April 2003 that were brought into charge to tax before 6th April 1998.

43 (1) This paragraph applies for the purpose of determining how the £30,000 threshold referred to in sections 403 and 404 operates where— U.K.

(a) payments or other benefits to which Chapter 3 of Part 6 apply are received, and

(b) payments or benefits to which section 148 of ICTA applied were received in respect of the same person—

(i) in respect of the same employment, or

(ii) in respect of different employments with the same employer or associated employers.

(2) For the purposes of section 403(4) and (5), section 415 (valuation of benefits) does not apply to the payments and benefits referred to in sub-paragraph (1)(b), and their aggregate amount is to be taken to be their aggregate amount immediately before 6th April 2003.

(3) The references in sections 403(4) and (5) and 404(3)(b) to payments or benefits to which Chapter 3 of Part 6 applies include references to the payments and benefits referred to in sub-paragraph (1)(b).

(4) Section 404(2) (when employers are associated) applies for the purposes of this paragraph.

Part 7 U.K. Employment income: [F582 income related to securities]

Textual Amendments

F582 Words in Sch. 7 Pt. 7 heading substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(4)

[F583 Pre-6th April 2003 acquisitions U.K.

Textual Amendments

F583 Sch. 7 para. 43A and cross-heading inserted (16.4.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(5)(26)(b)

43A (1) This paragraph relates to the operation of section 421E (exclusions from Chapters 2 to 4 of Part 7: residence) in relation to an acquisition made before 6th April 2003. U.K.

(2) Section 421E(1) has effect with the substitution of “ the employee was not chargeable under Case I of Schedule E in respect of the employment ” for the words from “the earnings”.

(3) Section 421E(2) has effect with the substitution of “ the emoluments of the employment did not fall to be charged to income tax under Schedule E ” for the words from “the earnings”.]

Conditional interests in shares U.K.

44 U.K. Chapter 2 of Part 7 [F584 , as originally enacted,] does not apply in relation to interests acquired before 17th March 1998.

Textual Amendments

F584 Words in Sch. 7 para. 44 inserted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(6)(26)(c); S.I. 2003/1997, art. 2

45 (1) This paragraph relates to the operation of section 425 (cases where Chapter 2 of Part 7 does not apply) [F585 , as originally enacted.] U.K.

(2) Section 425(1) applies in relation to any acquisition made before 6th April 2003 with the substitution of “if the person was not chargeable under Case I of Schedule E in respect of the office or employment in question” for the words from “if the earnings” onwards.

Textual Amendments

F585 Words in Sch. 7 para. 45(1) inserted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(7)(26)(c); S.I. 2003/1997, art. 2

46 (1) This paragraph relates to the operation of section 428 (amount of charge where interest in shares ceases to be only conditional or on disposal) [F586 , as originally enacted,] in relation to an acquisition made before 6th April 2003. U.K.

(2) For the purposes of section 428(1) each of the following is a “deductible amount”—

(a) any amounts on which the employee has become chargeable to tax under Schedule E in respect of the acquisition of the employee’s interest; and

(b) any amount on which the employee has become chargeable to tax in respect of the shares under section 78 or 79 of FA 1988 (unapproved employee share schemes) by reference to an event that occurred before 6th April 2003.

Textual Amendments

F586 Words in Sch. 7 para. 46(1) inserted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(8)(26)(c); S.I. 2003/1997, art. 2

F587 47 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F587 Sch. 7 para. 47 repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(9), Sch. 43 Pt. 3(4)

F588 48 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F588 Sch. 7 para. 48 repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(9), Sch. 43 Pt. 3(4)

Convertible shares U.K.

49 U.K. Chapter 3 of Part 7 does not apply in relation to [F589 securities] acquired before 17th March 1998.

Textual Amendments

F589 Word in Sch. 7 para. 49 substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(10)(26)(c); S.I. 2003/1997, art. 2

F590 50 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F590 Sch. 7 paras. 50-52 repealed (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(11)(26)(c, Sch. 43 Pt. 3(4); S.I. 2003/1997, art. 2

F590 51 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F590 Sch. 7 paras. 50-52 repealed (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(11)(26)(c, Sch. 43 Pt. 3(4); S.I. 2003/1997, art. 2

F590 52 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F590 Sch. 7 paras. 50-52 repealed (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(11)(26)(c, Sch. 43 Pt. 3(4); S.I. 2003/1997, art. 2

F591 53 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F591 Sch. 7 para. 53 repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(12), Sch. 43 Pt. 3(4)

Post-acquisition benefits from shares U.K.

54 U.K. Chapter 4 of Part 7[F592 , both as originally enacted and as substituted by [F593 FA] 2003,] does not apply in relation to shares or an interest in shares acquired before 26th October 1987, except to the extent provided by paragraph 55 (read with paragraph 56).

Textual Amendments

F592 Words in Sch. 7 para. 54 inserted (16.4.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(13)(26)(b)

F593 Word in Sch. 7 para. 54 substituted (21.7.2009) by Finance Act 2009 (c. 10), s. 126(5)(b)

55 (1) Chapter 4 of Part 7 [F594 , as originally enacted,] applies in relation to shares or an interest in shares acquired before 26th October 1987 if the company was not a dependent subsidiary on that date. U.K.

(2) But it so applies—

F595 (a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) subject to paragraph 56.

Textual Amendments

F594 Words in Sch. 7 para. 55 inserted (16.4.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(14)(a)(26)(b)

F595 Sch. 7 para. 55(2)(a) repealed (16.4.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(14)(b)(26)(b), Sch. 43 Pt. 3(4)

56 U.K. The removal or variation of a restriction applying to shares or an interest in shares acquired before 26th October 1987 is not a chargeable event for the purposes of section 449 [F596 , as originally enacted,] if paragraph 7 of Schedule 8 to FA 1973 (requirement for disposal to nominees at price not exceeding market value on termination of employment) would have applied to it.

Textual Amendments

F596 Words in Sch. 7 para. 56 inserted (16.4.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(15)(26)(b)

F597 57 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F597 Sch. 7 para. 57 omitted (with effect in accordance with s. 50(3) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 50(2)(b)

58 (1) This paragraph relates to the operation of section 448 (cases where Chapter 4 of Part 7 does not apply) [F598 , as originally enacted]. U.K.

(2) Section 448(1) applies in relation to any acquisition made before 6th April 2003 with the substitution of “if the person was not chargeable under Case I of Schedule E in respect of the office or employment in question” for the words “if the earnings” onwards.

(3) Section 448(3) and (4) do not apply in relation to any acquisition made before 16th January 1991.

Textual Amendments

F598 Words in Sch. 7 para. 58(1) inserted (16.4.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(16)(26)(b)

F599 59 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F599 Sch. 7 para. 59 repealed (16.4.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(17)(26)(b), Sch. 43 Pt. 3(4)

F600 60 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F600 Sch. 7 para. 60 repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(18), Sch. 43 Pt. 3(4)

F601 61 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F601 Sch. 7 para. 61 repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(18), Sch. 43 Pt. 3(4)

[F602 Securities disposed of for more than market value U.K.

Textual Amendments

F602 Sch. 7 para. 61A and cross-heading inserted (with effect in accordance with Sch. 22 para. 46(26)(a) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 46(19)

61A U.K. Chapter 3D of Part 7 does not apply in relation to securities, or an interest in securities, acquired on or before 6th April 1976.]

Share options U.K.

F603 62 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F603 Sch. 7 para. 62 repealed (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(20)(26)(c), Sch. 43 Pt. 3(4); S.I. 2003/1997, art. 2

[F604 63 (1) This paragraph relates to the operation of section 474 (exclusions from Chapter 5 of Part 7: residence) in relation to an acquisition made before 6th April 2003. U.K.

(2) Section 474(1) has effect with the substitution of “ the employee was not chargeable under Case I of Schedule E in respect of the employment ” for the words from “the earnings”.]

Textual Amendments

F604 Sch. 7 para. 63 substituted (16.4.2003 for specified purposes, otherwise 1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(21)(26)(d); S.I. 2003/1997, art. 2

64 (1) This paragraph relates to the operation of section 478 (amount of charges) in relation to a [F605 securities] option [F606 acquired] before 6th April 2003. U.K.

(2) For the purposes of section 478(1), any amount charged to tax under Schedule E in respect of the [F607 acquisition] of the [F605 securities] option is a deductible amount.

Textual Amendments

F605 Word in Sch. 7 para. 64 substituted (16.4.2003 for specified purposes, otherwise 1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(22)(a)(26)(d); S.I. 2003/1997, art. 2

F606 Word in Sch. 7 para. 64 substituted (16.4.2003 for specified purposes, otherwise 1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(22)(b)(26)(d); S.I. 2003/1997, art. 2

F607 Word in Sch. 7 para. 64 substituted (16.4.2003 for specified purposes, otherwise 1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(22)(c)(26)(d); S.I. 2003/1997, art. 2

65 (1) This paragraph relates to the operation of section [F608 478 in relation to an event that is a chargeable event by virtue of section 477(3)(a) or (b) (acquisition of securities pursuant to an option and assignment and release of option) in the case of a share option acquired] before 6th April 2003. U.K.

(2) For the purposes of section [F609 478(1)], if an amount was chargeable to tax under section 185(6) of ICTA (charge where option under approved share option scheme granted at a discount) in respect of the share option, so much of that amount as is attributable to the shares in question is a deductible [F609 amount].

Textual Amendments

F608 Words in Sch. 7 para. 65(1) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(23)(a)(26)(c); S.I. 2003/1997, art. 2

F609 Word in Sch. 7 para. 65(2) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(23)(b)(26)(c); S.I. 2003/1997, art. 2

F610 66 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F610 Sch. 7 para. 66 repealed (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(24)(26)(c), Sch. 43 Pt. 3(4); S.I. 2003/1997, art. 2

F611 67 U.K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F611 Sch. 7 para. 67 repealed (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(25), Sch. 43 Pt. 3(4)

Approved share incentive plans U.K.

68 (1) This paragraph applies where, immediately before 6th April 2003, an employee share ownership plan was approved under Schedule 8 to FA 2000 (employee share ownership plans). U.K.

(2) On and after that date the plan is to be treated as a share incentive plan (or “SIP”) approved by [F162 an officer of Revenue and Customs] under Schedule 2 to this Act.

(3) Sub-paragraph (2) has effect even if the provisions of the plan do not wholly conform with the provisions of Schedule 2 to this Act, but it has effect without prejudice to—

(a) paragraphs 83 and 84 of that Schedule (withdrawal of approval),

(b) paragraphs 89 and 90 of that Schedule (termination of plan), and

(c) any alteration of the plan.

(4) For the purposes of paragraph 84(1)(a) of Schedule 2, as it applies to the plan, nothing is to be regarded as a disqualifying event because of a contravention of any of the requirements of that Schedule if the requirement in question does not correspond to any of the requirements of Schedule 8 to FA 2000.

(5) Nothing in this Act affects the validity of—

(a) any provision of the plan which was included in it at any time before 6th April 2003 in accordance with the provisions of Schedule 8 to FA 2000 as then in force, or

(b) any award of shares under the plan which was made at any such time in accordance with the provisions of that Schedule as then in force.

(6) In this paragraph—

• “award of shares” means the appropriation of shares to, or the acquisition of shares on behalf of, a person;

• “employee share ownership plan” has the meaning given by paragraph 1(1) of Schedule 8 to FA 2000.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

69 (1) Any reference in any enactment, instrument or document— U.K.

(a) to an employee share ownership plan, or

(b) to an employee share ownership plan approved under Schedule 8 to FA 2000,

is to be read as including, in relation to times after 5th April 2003, a reference to a share incentive plan or to a share incentive plan approved under Schedule 2 to this Act.

(2) Any reference in any enactment, instrument or document—

(a) to a share incentive plan (or SIP), or

(b) to a share incentive plan (or SIP) approved under Schedule 2 to this Act,

is to be read as including, in relation to times before 6th April 2003, a reference to an employee share ownership plan or to an employee share ownership plan approved under Schedule 8 to FA 2000.

(3) Accordingly any reference in the SIP code to shares awarded under an approved SIP is to be read as including, in relation to times before 6th April 2003, a reference to shares awarded under a plan approved under Schedule 8 to FA 2000.

(4) Any reference in a plan within paragraph 68(1) to a person chargeable to tax under Case I of Schedule E is to be read as including, in relation to times after 5th April 2003, a reference to a person whose earnings fall within paragraph 8(2) of Schedule 2 to this Act.

(5) This paragraph—

(a) is without prejudice to Part 1 of this Schedule, and

(b) applies only in so far as the context permits.

(6) In this paragraph—

• “awarded” means appropriated to, or acquired on behalf of, a person;

• “employee share ownership plan” has the same meaning as in paragraph 68.

70 U.K. Nothing in paragraph 91(4) of Schedule 2 to this Act (jointly owned companies) prevents a company being a constituent company in a group plan (within the meaning of that Schedule) if it was a participating company in that plan (within the meaning of Schedule 8 to FA 2000) immediately before 24th July 2002.

Approved SAYE option schemes U.K.

71 (1) This paragraph applies where, immediately before 6th April 2003, a savings-related share option scheme was approved under Schedule 9 to ICTA (approved share option schemes and profit-sharing schemes). U.K.

(2) On and after that date the scheme is to be treated as an SAYE option scheme approved by [F162 an officer of Revenue and Customs] under Schedule 3 to this Act.

(3) Sub-paragraph (2) has effect even if the provisions of the scheme do not wholly conform with the provisions of Schedule 3 to this Act, but it has effect without prejudice to—

(a) paragraphs 42 and 43 of that Schedule (withdrawal or loss of approval), and

(b) any approved alteration of the scheme.

(4) For the purposes of paragraph 42 of Schedule 3, as it applies to the scheme, nothing is to be regarded as a disqualifying event if it would not have resulted in any of the former approval requirements ceasing to be met.

The “former approval requirements” means the requirements of Schedule 9 to ICTA by reference to which the scheme was approved.

(5) Nothing in this Act affects the validity of—

(a) any provision of the scheme which was included in it at any time before 6th April 2003 in accordance with the provisions of Schedule 9 to ICTA as then in force, or

(b) any rights obtained under the scheme which were obtained at any such time in accordance with the provisions of that Schedule as then in force.

(6) In this paragraph “savings-related share option scheme” has the meaning given by paragraph 1(1) of Schedule 9 to ICTA.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

72 (1) Any reference in the SAYE code to a share option granted in accordance with the provisions of an approved SAYE option scheme is to be read as including, in relation to times before 6th April 2003, a reference to a right to acquire shares obtained in accordance with the provisions of a savings-related share option scheme approved under Schedule 9 to ICTA. U.K.

(2) Any reference in a scheme within paragraph 71(1) to a person chargeable to tax under Case I of Schedule E is to be read as including, in relation to times after 5th April 2003, a reference to a person whose earnings fall within paragraph 6(2)(c) of Schedule 3 to this Act.

(3) This paragraph—

(a) is without prejudice to Part 1 of this Schedule, and

(b) applies only in so far as the context permits.

(4) In this paragraph “savings-related share option scheme” has the same meaning as in paragraph 71.

Approved CSOP schemes U.K.

73 (1) This paragraph applies where, immediately before 6th April 2003, a discretionary share option scheme was approved under Schedule 9 to ICTA (approved share option schemes and profit-sharing schemes). U.K.

(2) On and after that date the scheme is to be treated as a CSOP scheme approved by [F162 an officer of Revenue and Customs] under Schedule 4 to this Act.

(3) Sub-paragraph (2) has effect even if the provisions of the scheme do not wholly conform with the provisions of Schedule 4 to this Act, but they are without prejudice to—

(a) paragraphs 30 and 31 of that Schedule (withdrawal or loss of approval), and

(b) any approved alteration of the scheme.

(4) For the purposes of paragraph 30 of Schedule 4, as it applies to the scheme, nothing is to be regarded as a disqualifying event if it would not have resulted in any of the former approval requirements ceasing to be met.

The “former approval requirements” means the requirements of Schedule 9 to ICTA by reference to which the scheme was approved.

(5) Nothing in this Act affects the validity of—

(a) any provision of the scheme which was included in it at any time before 6th April 2003 in accordance with the provisions of Schedule 9 to ICTA as then in force, or

(b) any rights obtained under the scheme which were obtained at any such time in accordance with the provisions of that Schedule as then in force.

(6) In this paragraph “discretionary share option scheme” means a share option scheme other than a savings-related share option scheme (as defined by paragraph 1(1) of Schedule 9 to ICTA).

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

74 (1) Any reference in the CSOP code to a share option granted in accordance with the provisions of an approved CSOP scheme is to be read as including, in relation to times before 6th April 2003, a reference to a right to acquire shares obtained in accordance with the provisions of a discretionary share option scheme approved under Schedule 9 to ICTA. U.K.

(2) This paragraph—

(a) is without prejudice to Part 1 of this Schedule,

(b) applies only in so far as the context permits, and

(c) has effect subject to paragraph 75.

(3) In this paragraph “discretionary share option scheme” has the same meaning as in paragraph 73.

75 (1) This paragraph has effect where, immediately before 6th April 2003, a discretionary share option scheme which was approved before 29th April 1996— U.K.

(a) is approved under Schedule 9 to ICTA, and

(b) has effect subject to the modifications made by paragraphs 2 and 3 of Schedule 16 to FA 1996 (scheme to have effect, despite anything included in it to the contrary, as if it contained provisions required by paragraphs 28 and 29 of Schedule 9 to ICTA: limit of £30,000 on value of shares subject to outstanding options and requirements as to price for acquisition of shares).

(2) On and after 6th April 2003 the scheme is to continue to have effect as if it provided—

(a) that an individual may not be granted share options under it which would at the time when they are granted cause the aggregate market value of the shares which the individual may acquire by exercising share options granted under—

(i) the scheme, or

(ii) any other approved CSOP scheme established by the scheme organiser or an associated company of the scheme organiser,

to exceed or further exceed £30,000 (leaving out of account share options that have already been exercised), and

(b) that the price at which shares may be acquired by the exercise of a share option granted under the scheme must not be manifestly less than the market value of shares of the same class at that time (or, if [F21 the Commissioners for Her Majesty’s Revenue and Customs] and the scheme organiser agree in writing, at an earlier time or times stated in the agreement).

(3) For the purposes of sub-paragraph (2)(a), the market value of shares is to be calculated as at—

(a) the time when the options relating to them were granted, or

(b) if an agreement relating to them has been made under paragraph 22 of Schedule 4 (requirements as to price for acquisition of shares) the earlier time or times stated in the agreement.

(4) Sub-paragraph (2) is subject to any amendment to the scheme made after 28th April 1996 (whether before or after 6th April 2003).

(5) In this paragraph “discretionary share option scheme” has the same meaning as in paragraph 73.

(6) Other expressions used in this paragraph and contained in the index at the end of Schedule 4 (index of expressions defined in the CSOP code) have the meaning indicated by that index.

Textual Amendments

F21 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(2); S.I. 2005/1126, art. 2(2)(h)

76 (1) This paragraph applies to any right obtained by an individual— U.K.

(a) under a discretionary share option scheme approved under Schedule 9 to ICTA, and

(b) during the period beginning with 17th July 1995 and ending with 28th April 1996,

if, by virtue of section 115 of FA 1996 (transitional provisions which gave retrospective effect to certain amendments relating to discretionary share option schemes), the right was, immediately before 6th April 2003, treated for the purposes of sections 185 to 187 of and Schedule 9 to ICTA as having been obtained otherwise than in accordance with the provisions of a discretionary share option scheme approved under that Schedule.

(2) For the purposes of the CSOP code, the right is to be treated as having been granted otherwise than in accordance with the provisions of an approved CSOP scheme.

(3) In this paragraph “discretionary share option scheme” has the same meaning as in paragraph 73.

Enterprise management incentives U.K.

77 (1) This paragraph applies where, immediately before 6th April 2003, a share option was a qualifying option for the purposes of Schedule 14 to FA 2000 (enterprise management incentives). U.K.

(2) On and after that date the share option is to be treated as a qualifying option for the purposes of the EMI code.

(3) Sub-paragraph (2) has effect even if the requirements that had to be met in order for the share option, or any share option replaced by it, to be a qualifying option for the purposes of Schedule 14 to FA 2000 differed to any extent from those set out in Schedule 5.

(4) In this paragraph “share option” means a right to acquire shares.

78 (1) In section 535 (disqualifying events relating to employee), subsections (2) to (6) apply to the tax year 2003-04 and later tax years (in accordance with section 723(1)). U.K.

(2) In Schedule 14 to FA 2000 (enterprise management incentives), paragraph 52 (disqualifying events: actual relevant working time) continues to apply in relation to April 2003 for the purpose of calculating, in accordance with sub-paragraphs (3) to (5) of that paragraph, whether a disqualifying event is to be taken to have occurred at the end of the tax year 2002-03.

(3) If a disqualifying event is to be taken to have so occurred, it (like anything else which under that Schedule is a disqualifying event immediately before 6th April 2003) is a disqualifying event for the purposes of Schedule 5 to this Act.

79 (1) Section 536 (other disqualifying events) has effect in relation to any alteration made to the share capital of a company before 11th May 2001 with the following modification. U.K.

(2) In subsection (1), for paragraphs (b) and (c) substitute—

“(b) any alteration to the share capital of the relevant company to which section 537 applies and is made without the prior approval of [F162 an officer of Revenue and Customs] ;”.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

80 (1) Section 537 (alteration of share capital for purposes of section 536) has effect in relation to any alteration made to the share capital of a company before 11th May 2001 with the following modifications. U.K.

(2) In subsection (1), omit “and (c)”.

(3) In subsection (2), substitute “ This section ” for “This subsection”.

(4) Omit subsection (3).

81 U.K. In a case where the qualifying option was granted before 6th April 2003, section 540(2) (no charge on acquisition of shares as taxable benefit) applies in relation to the time when the option was granted with the substitution of “the employee was chargeable to tax under Case I of Schedule E” for the words from “the earnings” onwards.

82 (1) This paragraph relates to the operation of section 541(2) (effects on tax charges where shares cease to be conditional only or are converted) in relation to an FA 2000 option which was exercised before 6th April 2003. U.K.

(2) The references to a qualifying option include an FA 2000 option which was so exercised; but in relation to such an option sub-paragraph (3) applies instead of section 541(3).

(3) For the purposes of section 541(2) “the amount of relief on the exercise of the option” means the difference between—

(a) the amount on which tax would have been chargeable under section 135 of ICTA (charge on exercise etc. of option) in respect of the exercise of the option apart from Schedule 14 to FA 2000 (enterprise management incentives), and

(b) the amount (if any) in fact so chargeable in accordance with that Schedule.

(4) In this paragraph an “FA 2000 option” means a qualifying option for the purposes of Schedule 14 to FA 2000.

83 U.K. In Schedule 5 (enterprise management incentives), paragraph 41(6) (like other provisions of that paragraph) applies to replacement options whenever granted.

Employee benefit trusts U.K.

84 U.K. In relation to times before 6th April 2003, section 549(5) (definition of “employee” for purposes of Chapter 11 of Part 7) is to be read as referring to a person holding an office or employment whose emoluments were chargeable under Schedule E.

Part 8 U.K. Approved profit sharing schemes

Trustees' duty to provide information U.K.

85 U.K. Any obligation imposed in accordance with paragraph 34(b) of Schedule 9 to ICTA (trustees' duties to provide information) on the trustees of a profit sharing scheme approved under that Schedule is to be construed as an obligation, where an amount counts as employment income of a participant by reason of the occurrence of any event, to inform the participant of any facts relevant to determining the participant’s resulting liability to tax.

Share incentive plans U.K.

86 (1) Where the trustees of an approved share incentive plan acquire shares from the trustees of an approved profit sharing scheme, the disposal and the acquisition by the trustees are treated for capital gains tax purposes as being made for such consideration as to secure that neither a gain nor a loss accrues on the disposal. U.K.

(2) In such a case the relevant period for the purposes of paragraph 2 of Schedule 7D to TCGA 1992 is determined as if the shares had been acquired by the trustees of the share incentive plan at the time they were acquired by the trustees of the other trust.

F612 ...

(3) In this paragraph—

• “approved profit sharing scheme” means a profit sharing scheme approved under Schedule 9 to ICTA, and

• “approved share incentive plan” means a share incentive plan approved under Schedule 2 to this Act.

Textual Amendments

F612 Words in Sch. 7 para. 86(2) omitted (with effect in accordance with Sch. 2 para. 56(3) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 2 para. 52

Other share schemes: eligibility of individuals and material interests U.K.

87 (1) In applying any of the provisions specified in sub-paragraph (2) (which deal with the meaning of “material interest” for the purpose of determining eligibility to participate in share schemes, etc.) the following are to be disregarded— U.K.

(a) the interest of the trustees of any profit sharing scheme approved under Schedule 9 to ICTA in any shares which are held by them in accordance with the plan but which have not been appropriated to an individual, and

(b) any rights exercisable by the trustees as a result of that interest.

(2) The provisions referred to in sub-paragraph (1) are—

(a) paragraph 20 of Schedule 2 (approved share incentive plans);

(b) paragraph 12 of Schedule 3 (approved SAYE option schemes);

(c) paragraph 10 of Schedule 4 (approved CSOP schemes);

(d) paragraph 29 of Schedule 5 (enterprise management incentives).

Part 9 U.K. Social security income

Disabled person’s and working families' tax credits U.K.

88 (1) This paragraph applies if, on 6th April 2003, the repeals made by TCA 2002 of the provisions listed in sub-paragraph (3) have not come fully into force. U.K.

(2) Until the repeal of those provisions has come fully into force, Table B in section 677(1) of this Act is to be read as if it included references to disabled person’s tax credit and working families' tax credit.

(3) The provisions referred to in this paragraph are—

(a) in SSCBA 1992, section 128 (working families' tax credit) and section 129 (disabled person’s tax credit), and

(b) in SSCB(NI)A 1992, section 127 (working families' tax credit) and section 128 (disabled person’s tax credit).

Part 10 U.K. PAYE

PAYE regulations U.K.

89 (1) In relation to any time before the commencement of the repeals in Part 7 of Schedule 20 to FA 1999, section 684(2) (PAYE regulations) has effect with the following modification. U.K.

(2) At the end of item 5 insert “ including the proving of the contents or transmission of anything that the regulations allow to be transmitted to any person in electronic form or by electronic means ”.

Part 11 U.K. Consequences for corporation tax

90 (1) This paragraph applies where— U.K.

(a) a company is charged to corporation tax by reference to an accounting period which begins before and ends on or after 6th April 2003, and

(b) because of a change in the law made by this Act, the income tax law relating to the accounting period is different from what it would have been if that change had not been made.

(2) If the company so elects, this Act applies with such modifications as may be necessary to secure that the income tax law relating to the accounting period is the same as it would have been if the change in the law had not been made.

(3) An election under this paragraph must be made by notice given to [F162 an officer of Revenue and Customs] no later than the end of the period of two years beginning with the day following the last day of the accounting period.

(4) In this paragraph “income tax law” has the same meaning as in section 9 of ICTA.

Textual Amendments

F162 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

91 (1) This paragraph applies in relation to corporation tax charged by reference to an accounting period which begins before and ends on or after 6th April 2003. U.K.

(2) In its application for the purposes of corporation tax, any provision of this Schedule is to be read as if—

(a) any reference to the tax year 2003-04 were a reference to that accounting period, and

(b) any reference to 6th April 2003 were a reference to the first day of that accounting period.

92 (1) The provisions of this Act mentioned in sub-paragraph (2) do not have effect for corporation tax purposes for so much of any accounting period as falls before 6th April 2003. U.K.

(2) The provisions are—

(a) in Schedule 6 (consequential amendments)—

(i) paragraph 11 (which replaces references in section 84A of ICTA to share option schemes approved under Schedule 9 to that Act with references to SAYE option schemes and CSOP schemes approved under this Act), and

(ii) paragraphs 12 and 109 (which insert Schedule 4AA to ICTA (share incentive plans: corporation tax deductions)), and

(b) the repeal by Schedule 8 (repeals) of—

(i) Part 12 of Schedule 8 to FA 2000 (corporation tax deductions in relation to employee share option plans), and

(ii) so much of any other provision of Schedule 8 to that Act as is necessary for the operation of Part 12.

(3) This paragraph has effect as an exception to the provision made by section 723(1)(b) (commencement of this Act for purposes of corporation tax).

Section 724

SCHEDULE 8 U.K. Repeals and revocations

Part 1 U.K. Acts of Parliament

Short title and chapter	Extent of repeal
Taxes Management Act 1970 (c. 9)	In section 98, the entries in the first column of the Table relating to— (a) regulations under section 202 of ICTA; (b) paragraph 117 of Schedule 8 to FA 2000; (c) paragraph 64 of Schedule 14 to that Act.
	In section 98, the entries in the second column of the Table relating to— (a) section 136(6) of ICTA; (b) section 140G of ICTA; (c) regulations under section 202 of ICTA; (d) regulations under section 203 of ICTA; (e) section 313(5) of ICTA; (f) section 85(1) and (2) of FA 1988; (g) paragraph 65 of Schedule 14 to FA 2000.
Income and Corporation Taxes Act 1988 (c. 1)	Section 19.
	Section 58.
	In section 65(2), the words “Subject to section 330,”.
	Sections 131 to 137.
	Sections 140 to 151A.
	Sections 153 to 159AC.
	Sections 160 to 168G.
	Section 185.
	In section 186— (a) in subsection (3), the words “the participant shall be chargeable to income tax under Schedule E for the year of assessment in which the entitlement arises on”; (b) in subsection (4), the words “the participant shall be chargeable to income tax under Schedule E for the year of assessment in which the disposal takes place on”.
	In section 187, subsections (1) to (4), (6) and (7), except so far as relating to profit sharing schemes.
	Section 187A.
	Sections 189 to 198.
	Sections 199 to 207.
	Section 313.
	Sections 315 to 319.
	Section 321.
	Section 322(2).
	In section 323— (a) subsection (1); (b) in subsection (6), paragraph (b) and the word “and” preceding it; (c) subsection (7).
	Section 330.
	Section 332(1), (2), (3A), (3B) and (4).
	In section 577— (a) in subsection (1), paragraph (b) and the word “and” preceding it; (b) in subsection (3), the words from “but where-” to the end.
	Section 579(1).
	Section 580(3).
	In section 585— (a) in subsection (1), the words “, or under Case III of Schedule E,”; (b) in subsection (9), paragraph (b) and the word “and” preceding it.
	In section 588, in subsection (5), paragraph (a) and the word “or” preceding paragraph (b).
	Section 589.
	Section 589A(2) to (6), (10).
	In section 589B— (a) subsections (1) to (4A); (b) in subsection (5), the words “this section or”.
	Section 591D(6).
	Section 595.
	Section 596.
	Sections 596A to 596C.
	Section 597.
	Section 599A(5), (6) and (8).
	Section 600.
	In section 607(3)(b), sub-paragraph (iv) and the word “and” preceding it.
	Section 608(4).
	Section 613(1) to (3).
	Section 615(1), (2), (4), (5) and (8).
	Section 616.
	Section 617(1) and (2).
	Section 617A.
	In section 638(13), the definition of “employee share ownership plan”.
	In section 643— (a) subsection (1); (b) in subsection (5), the words “shall be assessable to tax under Schedule E (and section 203 shall apply accordingly) and”.
	Sections 647 to 648A.
	Section 830(5).
	Schedules 6, 6A, 7 and 7A.
	In Schedule 9— (a) Parts 1, 2 and 6, except so far as relating to profit sharing schemes; (b) Parts 3 and 4.
	In Schedule 10, in paragraph 7(7)(b), the second “to”.
	Schedules 11, 11A, 12, 12AA and 12A.
	In Schedule 29, paragraph 6.
Social Security Act 1988 (c. 7)	In Schedule 4, paragraph 1.
Finance Act 1988 (c. 39)	Section 46.
	Section 47(1).
	Section 48(1).
	Section 49(1).
	Section 57.
	Section 68.
	Section 69.
	Section 73(1).
	Sections 77 to 88.
	In section 89— (a) in paragraph (a), the words “section 185(3)(a) (approved share option schemes) and”; (b) paragraph (b).
	Section 128.
	In Schedule 3, paragraph 4.
	In Schedule 13, paragraph 3.
Finance Act 1989 (c. 26)	Sections 36 to 42.
	Section 45.
	Sections 50 to 52.
	Section 53, except subsection (2)(f) so far as relating to section 418(3) of ICTA.
	Section 62.
	Sections 64 and 66.
	In section 178(2)— (a) in paragraph (m), the words “160,”; (b) at the end of the first paragraph (p), the word “and”.
	Section 179(1)(g) and (5).
	In Schedule 6— (a) paragraphs 7 to 9; (b) paragraph 13; (c) in paragraph 18(1), the words “8(2)(b)”; (d) paragraph 18(5) to (7).
	In Schedule 12, paragraph 8.
Companies Act 1989 (c. 40)	In Schedule 18, paragraph 46.
Finance Act 1990 (c. 29)	Section 21.
	Section 77.
	Section 79.
	In Schedule 14, paragraph 4(2).
Oversea Superannuation Act 1991 (c. 16)	Section 2.
Disability Living Allowance and Disability Working Allowance Act 1991 (c. 21)	In Schedule 2, paragraph 18.
Finance Act 1991 (c. 31)	Section 38(2).
	Sections 39 to 40.
	Section 44.
	Section 69.
	In Schedule 6, paragraphs 1 and 3.
Social Security Contributions and Benefits Act 1992 (c. 4)	Section 10(10).
	In section 150(2), in paragraph (b) of the definition of “unemployability supplement or allowance”, sub-paragraph (v).
Social Security (Consequential Provisions) Act 1992 (c. 6)	In Schedule 2, paragraph 93.
Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7)	Section 10(10).
	In section 146(2), in paragraph (b) of the definition of “unemployability supplement or allowance”, sub-paragraph (v).
Social Security (Consequential Provisions) (Northern Ireland) Act 1992 (c. 9)	In Schedule 2, paragraph 33.
Taxation of Chargeable Gains Act 1992 (c. 12)	Section 120(6).
	In Schedule 10, paragraphs 14(9) to (12) and 16(3) to (5).
Finance (No. 2) Act 1992 (c. 48)	Section 37.
	Section 54.
Finance Act 1993 (c. 34)	Section 68.
	Sections 73 to 76.
	Section 105(1) and (2).
	Section 124.
	Schedules 3, 4 and 5.
Finance Act 1994 (c. 9)	Sections 88 and 89.
	Section 108(1) to (6) and (7)(b).
	Sections 109 and 110.
	Sections 125 to 132.
	Section 139.
Vehicle Excise and Registration Act 1994 (c. 22)	In Schedule 3, paragraph 22.
Finance Act 1995 (c. 4)	Sections 43 to 45.
	Sections 91 to 93.
	Section 108.
	Section 111.
	Section 137(2), (3) and (8).
	Section 141.
Jobseekers Act 1995 (c. 18)	In Schedule 2, paragraphs 12, 14 and 16.
Child Support Act 1995 (c. 34)	In Schedule 3, paragraph 1.
Finance Act 1996 (c. 8)	Sections 106 to 110.
	Sections 113 to 115.
	Section 120(11)(b).
	Section 152.
	In Schedule 7, paragraph 5.
	Schedule 16.
	In Schedule 20, paragraphs 6 to 10, 41 and 42.
Finance Act 1997 (c. 16)	Sections 62 and 63.
	In Schedule 18, in Part 6(3), Note 3(b).
Finance Act 1998 (c. 36)	Sections 49 to 53.
	Section 55(1).
	Section 58.
	Sections 60 and 61.
	Sections 63 to 69.
	Section 93.
	Schedules 9 and 10.
Tax Credits Act 1999 (c. 10)	In Schedule 1, paragraph 6(c).
Finance Act 1999 (c. 16)	Sections 42 to 45.
	Sections 48 to 51.
	In Schedule 5, paragraphs 1 to 3.
	In Schedule 10, paragraphs 4, 5, 6 and 8.
Welfare Reform and Pensions Act 1999 (c. 30)	In Schedule 8, paragraph 1(2).
	In Schedule 12, paragraph 75.
Care Standards Act 2000 (c. 14)	In Schedule 4, paragraph 13.
Finance Act 2000 (c. 17)	Section 38(5) and (7).
	Section 47.
	Sections 56 to 60.
	Section 62.
	Schedules 8, 10 and 11.
	Schedule 12, except paragraphs 17 and 18.
	Schedule 14.
Capital Allowances Act 2001 (c. 2)	In Schedule 2, paragraphs 24, 25, 51(1) and 107.
Finance Act 2001 (c. 9)	Section 57(1) and (2).
	Section 58.
	Sections 60 to 62.
	In Schedule 12— (a) Part 1; (b) in Part 2, paragraphs 1 to 10 and 12 to 16.
	Schedules 13 and 14.
	In Schedule 22, in paragraph 16(5), the definition of “PAYE regulations”.
Social Security Contributions (Share Options) Act 2001 (c. 20)	Section 4.
International Development Act 2002 (c. 1)	In Schedule 3, paragraph 10.
State Pension Credit Act 2002 (c. 16)	In Schedule 2, paragraph 28.
Tax Credits Act 2002 (c. 21)	Section 25(6).
	In Schedule 3, paragraph 14.
Finance Act 2002 (c. 23)	Sections 33 to 37.
	Section 38(2) and (3).
	Section 39.
	Section 41.
	In section 103(4)(f), the words “in Schedule 14, paragraph 22(4),”.
	Schedule 6.
	In Schedule 13, in paragraph 27(1), the definition of “PAYE regulations”.
Employee Share Schemes Act 2002 (c. 34)	The whole Act.

Part 2 U.K. Subordinate legislation

Reference and title	Extent of revocation
Disability Living Allowance and Disability Working Allowance (Northern Ireland Consequential Amendments) Order 1991 (S.I. 1991/2874)	Article 5.
Income Tax (Car Benefits) (Replacement Accessories) Regulations 1994 (S.I. 1994/777)	The whole Regulations.
Income Tax (Replacement Cars) Regulations 1994 (S.I. 1994/778)	The whole Regulations.
Income Tax (Employments) (Notional Payments) Regulations 1994 (S.I. 1994/1212)	In regulation 2— (a) in paragraph (1), all definitions except that of “the principal Regulations”; (b) paragraph (2).
	Regulations 3 to 8A.
Income Tax (Employments) (Notional Payments) (Amendment) Regulations 1996 (S.I. 1996/2969)	The whole Regulations.
Income Tax (Employments) (Notional Payments) (Amendment) Regulations 1998 (S.I. 1998/1891)	Regulations 4 to 6.
Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) Regulations 2001 (S.I. 2001/1123)	Regulation 8.
Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629)	Article 107.
Enterprise Management Incentives (Gross Asset Requirement) Order 2001 (S.I. 2001/3799)	The whole Order.