M34Subsection (1)(b)above does not apply where the benefit is received by virtue of a person’s ownership of or of an interest in shares which were acquired before 6th April 1972.

Where a director or employee acquires an interest in shares, subsection (1)above shall apply as if the references in that subsection to the acquisition of shares were references to the acquisition of an interest in shares.

M36For the purposes of section 138and this section, where a person acquires any shares or an interest in shares in a body corporate in pursuance of a right conferred on him or opportunity offered to him as a person connected with a director or employee of that or any other body corporate, the shares or interest shall be deemed to be acquired by the director or employee, and section 32A(4)of the 1979Act shall apply with the necessary modifications; and where that person receives a benefit as mentioned in section 138(1)(b)the benefit shall be deemed to be received by the director or employee.

For the purposes of section 138,a person who disposes of shares or an interest in shares otherwise than by a bargain at arm’s length with a person who is not connected with him shall be deemed not to cease to have a beneficial interest in the shares.

M37Where in any year of assessment a person acquires shares or an interest in shares as mentioned in section 138(1) (disregarding subsections (1)and (2)above),the body from which the shares are or the interest is acquired shall deliver to the inspector within 30days of the end of that year particulars in writing of the shares and the acquisition.

M39Subject to subsection (9)below, in determining for the purposes of section 138 (including any valuation made for those purposes)whether shares which, or interests in which, have been acquired or are or are to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or any interest in them or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantages to him or a person connected with him, except where the restriction is imposed as a condition of a loan which is not a related loan as defined by subsection (8)below.

For the purposes of section 138(3)(a),shares acquired by any person shall not, by virtue of subsection (7)above, be regarded as subject to any restriction by reason only of any contract, agreement, arrangement or condition providing for the disposal of the shares, when that person ceases to hold the office or employment by virtue of which he acquired the shares, to a person nominated in accordance with the contract, agreement, arrangement or condition if he is required to dispose of them at a price not exceeding their market value.

M40Any reference in subsection (7)above to a contract, agreement, arrangement or condition does not include a reference to so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Rules set out in the Model Code for Securities Transactions by Directors of Listed Companies issued by the Stock Exchange in November 1984.

In section 138and this section— M41

• “associated company” has the meaning given by section 416;

• “control” has the meaning given by section 840;

• “director” includes a person who is to be a director;

• “employee” includes a person who is to be an employee;

• “full-time”, in relation to an employee, means required to devote substantially the whole of his time to service as an employee;

• “shares” includes stock and securities and references to an interest in any shares include references to the proceeds of sale of part of the shares; and

• “units”, in relation to an authorised unit trust, means an entitlement to a share in the investments subject to that trust.

For the purposes of section 138and this section, section 168(11)shall apply for determining whether a person has a material interest in a company, but with the omission of the words following“ 417(3) ”.

A benefit officer may by notice notify a person who is taxable in respect of any unemployment benefit F243, Jobseeker’s allowance or income support of the amount on which he is taxable and any such notification shall state the date on which it is issued and shall inform the person to whom it is given that he may object to the notification by notice given within 60 days after the date of issue of the notification.

Subsection (3) above shall not apply if, within 60 days from the date when the agreement was come to, the objector gives notice to the benefit officer that he wishes to repudiate or resile from the agreement.

Where a benefit officer has notified an amount to a person under subsection (1) above, he may by another notice notify the person of an alteration in the amount previously notified and, if he does so, the original notification shall be cancelled and this section shall apply to such a subsequent notification as it applies to the original notification.

In this section “benefit officer” means the appropriate officer, F244in Great Britain, of the Department for Work and Pensions, or, in Northern Ireland, of the Department of Health and Social Services.

M3Subject to the provisions of this section and paragraph 4 of Schedule 10, if, in respect of or by reference to any of a participant’s shares, the trustees become or the participant becomes entitled, before the release date, to receive any money or money’s worth (“a capital receipt”), F120. . . the appropriate percentage (determined as at the time the trustees become or the participant becomes so entitled) of so much of the amount or value of the receipt as exceeds the appropriate allowance for that year, as determined under subsection (12) belowF121 counts as employment income of the participant for the year of assessment in which the entitlement arises.

M4If the trustees dispose of any of a participant’s shares at any time before the release date or, if it is earlier, the date of the participant’s death, then, subject to subsections (6) and (7) below, F122. . . the appropriate percentage of the locked-in value of the shares at the time of the disposalF123 counts as employment income of the participant for the year of assessment in which the disposal takes place.

Subject to subsection (7) below, if, on a disposal of shares falling within subsection (4) above, the proceeds of the disposal are less than the locked-in value of the shares at the time of the disposal, subsection (4) above shall have effect as if that locked-in value were reduced to an amount equal to the proceeds of the disposal.

If, at any time prior to the disposal of any of a participant’s shares, a payment was made to the trustees to enable them to exercise rights arising under a rights issue, then, subject to subsection (8) below, subsections (4) and (6) above shall have effect as if the proceeds of the disposal were reduced by an amount equal to that proportion of that payment or, if there was more than one, of the aggregate of those payments which, immediately before the disposal, the market value of the shares disposed of bore to the market value of all the participant’s shares held by the trustees at that time.

M8Where the trustees of an approved scheme acquire any shares as to which the requirements of Part II of Schedule 9 are fulfilled and, within the period of 18 months beginning with the date of their acquisition, those shares are appropriated in accordance with the scheme, section 686 shall not apply to income consisting of dividends on those shares received by the trustees; and, for the purpose of determining whether any shares are appropriated within that period, shares which were acquired at an earlier time shall be taken to be appropriated before shares of the same class which were acquired at a later time.

M9For the purposes of subsection (3) above, “the appropriate allowance”, in relation to any year of assessment, means a sum which, subject to a maximum of F127£60, is the product of multiplying £20 by 1 plus the number of years which fall within the period of F128three years immediately preceding the year in question and in which shares were appropriated to the participant under the scheme; and if in any year (and before the release date) the trustees become or the participant becomes entitled, in respect of or by reference to any of his shares, to more than one capital receipt, the receipts shall be set against the appropriate allowance for that year in the order in which they are received.

Schedule 10 shall have effect with respect to profit sharing schemes.

F129M10In sections 185 and 186, this section and Schedules 9 and 10 “the relevant provisions” means those sections (including this section) and Schedules.

F129For the purposes of the relevant provisions, except where the context otherwise requires—

• “appropriate percentage” shall be construed in accordance with paragraph 3 of Schedule 10;

• “approved”, in relation to a scheme, means approved under Schedule 9;

• “associated company” has the same meaning as in section 416, except that, for the purposes of paragraph 23 of Schedule 9, subsection (1) of that section shall have effect with the omission of the words “ or at any time within one year previously ”;

• “bonus date” has the meaning given by paragraph 17 of Schedule 9;

• “capital receipt” means money or money’s worth to which the trustees of or a participant in a profit sharing scheme become or becomes entitled as mentioned in section 186(3), but subject to paragraph 4 of Schedule 10;

• “certified contractual savings scheme” has the meaning given by section 326;

• “control” has the same meaning as in section 840;

• “grantor”, in relation to any scheme, means the company which has established the scheme;

• “group scheme” and, in relation to such a scheme, “participating company” have the meanings given by paragraph 1(3) and (4) of Schedule 9;

• “initial market value”, in relation to shares in a profit sharing scheme, has the meaning given by paragraph 30(4) of Schedule 9;

• “locked-in value”, in relation to any shares, shall be construed in accordance with section 186(5);

• “market value” has the same meaning as in Part VIII of the F1301992 Act;

• “new holding” has the meaning given by section F130126(1)(b) of the 1992 Act;

• “participant”, in relation to a profit sharing scheme, means an individual to whom the trustees of the scheme have appropriated shares;

• “participant’s shares”, in relation to a participant in a profit sharing scheme, means, subject to paragraph 5(4) of Schedule 10, shares which have been appropriated to the participant by the trustees;

• F131. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “period of retention” has the meaning given by paragraph 2 of Schedule 10;

• “release date”, in relation to any of the shares of a participant in a profit sharing scheme, means the F132third anniversary of the date on which they were appropriated to him;

• “relevant amount”, in relation to a participant in a profit sharing scheme, means an amount which is F133not less than £3,000 and not more than £8,000 but which, subject to that, is 10 per cent. of his salary (determined under subsection (5) below) for the year of assessment in question or the preceding year of assessment, whichever is the greater;

• “relevant requirements” has the meaning given by paragraph 1 of Schedule 9;

• “savings-related share option scheme” has the meaning given by paragraph 1 of Schedule 9;

• “scheme” means a savings-related share option scheme, a share option scheme which is not a savings-related share option scheme or a profit sharing scheme, as the context may require;

• “shares” includes stock;

• F134“specified age”, in relation to a scheme, means the age specified in pursuance of paragraph 8A of Schedule 9 as the specified age for the purposes of the scheme;

• “the trustees”, in relation to an approved profit sharing scheme or the shares of a participant in such a scheme, means the body of persons for the establishment of which the scheme must provide as mentioned in paragraph 30 of Schedule 9; and

• “just instrument”, in relation to an approved profit sharing scheme, means the instrument referred to in paragraph 30(1)(c) of Schedule 9.

F129M12Subsection (3) above shall have effect subject to the provisions of Part VI of Schedule 9.

M13For the purposes of subsection (2) above, a participant’s salary for a year of assessment means such of the emoluments of the office or employment by virtue of which he is entitled to participate in a profit sharing scheme as are liable to be paid in that year under deduction of tax pursuant to section 203 after deducting therefrom amounts included by virtue of Chapter II of this Part.

F129M14Section 839 shall apply for the purposes of the relevant provisions.

F129M15For the purposes of the relevant provisions a company is a member of a consortium owning another company if it is one of a number of companies which between them beneficially own not less than three-quarters of the other company’s ordinary share capital and each of which beneficially owns not less than one-twentieth of that capital.