Requirements to be met for relief to be availableU.K.
1015Basic requirements for relief under Chapter 3U.K.
(1)Relief under this Chapter is available to a company (“the employing company”) if—
(a)a person (“the employee”) has employment with the employing company,
(b)that employment (“the relevant employment”) is in relation to a business within subsection (2) (“the qualifying business”),
(c)the employee or another person obtains an option to acquire shares because of the relevant employment,
(d)the person who obtains the option acquires shares pursuant to the option, and
(e)the conditions set out in sections 1016 and 1017 are met as mentioned in those sections.
The person who obtains the option is, in that capacity, called “the recipient”.
(2)A business is within this subsection so far as—
(a)the business is carried on by the employing company, and
(b)the employing company is within the charge to corporation tax in relation to the profits of the business [F1“ or would be but for section 18A].
(3)If—
(a)the recipient dies, and
(b)subsequently another person acquires shares pursuant to the option,
this Chapter applies as if the recipient were alive and the shares were acquired by the recipient.
Textual Amendments
F1Words in s. 1015(2)(b) inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 10, 31
1016Conditions relating to shares acquiredU.K.
(1)Each of the following conditions must be met in relation to the shares acquired.
Condition 1
The shares are ordinary shares that are fully paid-up and not redeemable.
Condition 2
The shares are—
(a)shares of a class listed on a recognised stock exchange,
(b)shares in a company that is not under the control of another company, F2...
(c)shares in a company that is under the control of a listed company [F3, or
(d)shares within subsection (1A)].
Condition 3
The shares are shares in—
(a)the employing company,
(b)a company that, when the option is obtained, is a parent company of the employing company,
(c)a company that, when the option is obtained, is a member of a consortium that owns the employing company,
(d)a company that, when the option is obtained, is a member of a consortium that owns a parent company of the employing company,
(e)a company within subsection (2), or
(f)a qualifying successor company (see section 1022).
[F4(1A)Shares are within this subsection if—
(a)after the option is obtained, the company in which the shares are to be acquired (“the relevant company”) comes to be controlled by another company (“the takeover”),
(b)immediately before the takeover, the shares were within any of paragraphs (a) to (c) of Condition 2,
(c)as a result of the takeover, the shares cease to be within any of those paragraphs,
(d)the shares are acquired pursuant to the option within the period of 90 days beginning with the day of the takeover, and
(e)the avoidance of tax is not the main purpose (or one of the main purposes) of the takeover.]
(2)A company (“company A”) is within this subsection if when the option is obtained—
(a)the employing company or a parent company of the employing company is a member of a consortium that owns another company (“company B”), and
(b)company A is—
(i)a member of that consortium or a parent company of a member of that consortium, and
(ii)a member of the same commercial association of companies as company B.
Textual Amendments
F2Word in s. 1016(1) omitted (17.7.2014) by virtue of Finance Act 2014 (c. 26), Sch. 9 para. 44(2)
F3Words in s. 1016(1) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 9 para. 44(2)
F4S. 1016(1A) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 9 para. 44(3)
1017Condition relating to employee's income tax positionU.K.
(1)The following condition must be met in relation to the income tax position of the employee.
The Condition
The acquisition of the shares is a chargeable event in relation to the employee for the purposes of section 476 of ITEPA 2003 (whether or not an amount counts as employment income of the employee because of that event).
(2)Subsection (3) applies if the condition—
(a)is not met, but
(b)would be met if at all material times the employee had been a UK employee.
(3)This Chapter applies as if the employee had been a UK employee as mentioned in subsection (2)(b).
(4)The employee is a UK employee if—
(a)the employee is UK resident F5..., and
(b)the duties of the relevant employment are performed in the United Kingdom.
(5)If the employee is dead when the shares are acquired, the condition is to be treated as met if it would have been met had the employee been alive.
Textual Amendments
F5Words in s. 1017(4)(a) omitted (with application in accordance with Sch. 46 para. 142(2) of the amending Act) by virtue of Finance Act 2013 (c. 29), Sch. 46 para. 142(1)