PART V PROVISIONS RELATING TO THE SCHEDULE E CHARGE

CHAPTER I SUPPLEMENTARY CHARGING PROVISIONS OF GENERAL APPLICATION

Miscellaneous provisions

131 Chargeable emoluments.

F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

132 Place of performance, and meaning of emoluments received in the U.K.

F2. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

133 Voluntary pensions.

F3. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

134 Workers supplied by agencies.

F4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shareholdings, loans etc.

135 Gains by directors and employees from share options.

F5. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

136 Provisions supplementary to section 135.

F6. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

137 Payment of tax under section 135 by instalments.

F7. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F39C1C2138 Share acquisitions by directors and employees.

1

Subject to section 185and the following provisions of this section, where a person has acquired or acquires 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 director or employee of that or any other body corporate, and not in pursuance of an offer to the public—

a

M1if the market value of the shares at the end of the period mentioned in subsection (9)below exceeds their market value at the time of the acquisition, he shall be chargeable to tax under Schedule E for the year of assessment in which that period ends on an amount equal, except as provided by subsection (8)below, to the excess (or, if his interest is less than the full beneficial ownership, such part of that amount as corresponds to his interest);

b

M2if he receives, by virtue of his ownership of or interest in the shares, any benefit not received by the majority of persons who—

i

hold shares forming part of the ordinary share capital of the same body corporate; and

ii

have acquired the shares otherwise than as mentioned above;

and the benefit is not otherwise chargeable to income tax, he shall be chargeable to tax under F40the employment income Parts of ITEPA 2003 for the year of assessment in which he receives the benefit on an amount equal to the value of the benefit;and any amount chargeable under this subsection shall be treated as earned income, whether or not it would otherwise fall to be so treated.

2

Subsection (1)above does not apply if the acquisition—

a

M3was made in pursuance of arrangements under which employees of a body corporate receive as part of their emoluments shares or interests in shares in that body or in a body controlling it to an extent determined in advance by reference to the profits of either body; and

b

M4where the arrangements were made or modified after 22nd March 1973,was of shares or an interest in shares which satisfy the conditions set out in subsection (4)(a)below and the arrangements satisfy the condition set out in subsection (4)(b)below.

3

Subsection (1)(a)above does not apply if—

a

M5the acquisition was an acquisition of shares in a body and either of the following conditions was satisfied immediately after the acquisition, namely—

i

that the shares were not subject to such restrictions as are specified in subsection (6)below, and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class was acquired otherwise than as mentioned in subsection (1)above; or

ii

that the shares were not subject to such restrictions as are specified in paragraph (a)or (b)of subsection (6)below and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class was acquired by persons who were or had been employees or directors of, or of a body controlled by, that body and who were together able as holders of the shares to control that body; or

b

M6the acquisition was an acquisition after 5thApril 1984of an interest in shares which consists of units in an authorised unit trust and—

i

prior to the acquisition the unit trust was approved by the Board for the purposes of this section and, at the time of the acquisition, continues to be so approved, and

ii

the condition set out in subsection (7)below is fulfilled with respect to the body corporate (in that subsection referred to as “the relevant company”)directorship of or employment by which gave rise to the right or opportunity by virtue of which the acquisition was made; or

c

M7the acquisition took place before 6th April 1981.

4

The conditions referred to in subsection (2)(b)above are as follows—

a

M8that the shares—

i

are not subject to such restrictions as will or may result in the person acquiring the shares or an interest in the shares obtaining a benefit through an increase, subsequent to the acquisition, of the value or the value to him of the shares or interest; and

ii

cannot (whether by one transaction or a series of transactions)be exchanged for or converted into shares which are subject to such restrictions; and

iii

are either shares of a class quoted on a recognised stock exchange or are shares in a company which is not under the control of another company;

b

M9that the arrangements allow every full-time employee of the company concerned who—

i

has been a full-time employee of that company for a continuous period of not less than five years, and

ii

is chargeable to tax in respect of his employment under F41section 15 or 21 of ITEPA 2003 (earnings of employee resident and ordinarily resident in the UK), and

iii

is not less than 25years old,

to acquire shares or interests in shares of the same class on similar terms.

5

M10For the purposes of subsection (3)(a)above—

a

shares in a body are available shares if they are not held by or for the benefit of an associated company of that body; and

b

shares are exchangeable for other shares if (whether by one transaction or a series of transactions)they can be exchanged for or converted into the other shares.

6

M11The restrictions referred to in subsection (3)(a)above are—

a

restrictions not attaching to all shares of the same class; or

b

restrictions ceasing or liable to cease at some time after the acquisition; or

c

restrictions depending on the shares being or ceasing to be held by directors or employees of any body corporate (other than such restrictions imposed by a company’s articles of association as require shares to be disposed of on ceasing to be so held).

7

M12The condition referred to in subsection (3)(b)above is fulfilled with respect to the relevant company if, for no continuous period of one month or more, throughout which any director or employee of the relevant company either—

a

has, by virtue of his office or employment, any such right or opportunity as is referred to in subsection (1)above to acquire units in the unit trust, or

b

retains any beneficial interest in any units in the unit trust which he acquired in pursuance of such a right or opportunity,

do investments in the relevant company and in any other company in relation to which the relevant company is an associated company make up more than 10per cent. by value of the investments subject to the trusts of the unit trust.

8

M13The amount on which or on part of which the person making the acquisition is chargeable to tax under subsection (1)(a)above (“the chargeable amount”)shall, in the following cases, be reduced as follows, that is to say—

a

where, in accordance with the terms on which the acquisition of the shares was made, the consideration for the acquisition is subsequently increased, the chargeable amount shall be reduced by an amount equal to the increase; and

b

where, in accordance with those terms, the shares are subsequently disposed of for a consideration which is less than their market value at the time of the disposal, the chargeable amount shall be reduced so as to be equal to the excess of that consideration over the market value of the shares at the time of the acquisition;

and similarly where the interest acquired is less than the full beneficial ownership, and such assessments, alterations of assessments or repayments of tax shall be made as may be necessary to give effect to the reduction.

9

The period referred to in subsection (1)(a)above is a period ending at the earliest of the following times—

a

the expiration of seven years from the acquisition of the shares or interest in the shares;

b

the time when the person making the acquisition ceases to have any beneficial interest in the shares;

c

in relation only to a person who acquires shares, the time when by reason of their ceasing to be subject to such restrictions as are specified in subsection (6)above either of the conditions in subsection (3)(a)above would be satisfied in relation to the shares if they had been acquired at that time;

and for the purposes of subsection (1)(a)and paragraph (b)above a person whose beneficial interest in shares is reduced shall be treated as ceasing to have an interest in such part of the shares as is proportionate to the reduction.

10

M14Subsection (11)below applies where—

a

a person has acquired shares or an interest in shares as mentioned in subsection (1)above (and the shares which he acquires or in which he acquires an interest are in sub-paragraphs (b)and (c)and subsection (11)below referred to as “the original shares”);and

b

the circumstances of his acquisition of the original shares are such that the application of subsection (1)(a)above is not excluded; and

c

after 18th March 1986by virtue of his holding of the original shares or the interest in them he acquires (whether or not for consideration)additional shares or an interest in additional shares (and the shares which he so acquires or in which he so acquires an interest are in subsection (11)below referred to as “the additional shares”).

11

Where this subsection applies—

a

the additional shares or, as the case may be, the interest in them shall be treated as having been acquired as mentioned in subsection (1)above and in circumstances falling within subsection (10)(b)above and, for the purposes of subsection (9)(a)above, as having been acquired at the same time as the original shares or the interest in them;

b

for the purposes of subsections (1)(a)and (8)above, the additional shares and the original shares shall be treated as one holding of shares and the market value of the shares comprised in that holding at any time shall be determined accordingly (the market value of the original shares at the time of acquisition being attributed proportionately to all the shares in the holding); and

c

for the purposes of those subsections, any consideration given for the acquisition of the additional shares or the interest in them shall be taken to be an increase falling within subsection (8)(a)above in the consideration for the original shares or the interest in them.

12

M15Subsection (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.

F42C3139 Provisions supplementary to section 138.

1

M16Where—

a

a director or employee of a body corporate acquires shares in pursuance of an opportunity to acquire shares of that class offered to directors and employees of the body in their capacity as such (“the discount offer”);and

b

the discount offer is made in conjunction with an offer to the public (“the main offer”)under which shares of the same class may be acquired on the same terms, except that a discount in price is offered to directors and employees; and

c

the director or employee is chargeable to tax under Schedule E on an amount equal to the discount in the price of the shares acquired by him; and

d

at least 75per cent. of the aggregate number of shares of the class in question which are acquired in pursuance of the discount offer and the main offer taken together are shares acquired in pursuance of the main offer,

he shall be treated for the purposes of section 138(1)as acquiring the shares in pursuance of an offer to the public.

2

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.

3

M17For 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.

4

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.

5

M18Where 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.

6

M19The Board may by notice require the managers or trustees of any unit trust scheme which is an authorised unit trust approved by the Board for the purposes of section 138to furnish to the Board within such time as they may direct (but not being less than 30days)such information as the Board think necessary for the purposes of enabling them to determine—

a

whether the condition in subsection (7)of that section is being or has at any time been fulfilled; and

b

the liability to tax of any unit holder whose rights were acquired as mentioned in subsection (1)of that section.

7

M20Subject 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.

This subsection does not apply where the person acquired the shares before 19th October 1972.

8

A loan made to any person is a related loan for the purposes of subsection (7)above if—

a

it is made, arranged, guaranteed or in any way facilitated by—

i

the body corporate of which he is a director or employee, or

ii

an associated company of that body, or

iii

if that body or an associated company of it is a close company, any person having a material interest in the close company; or

b

it is made to a person connected with another person and would have been such a loan if it had been made to that other person;

but a loan made by the body corporate, associated company or person mentioned in paragraph (a)above is not a related loan if that body, company or person carries on a business of making personal loans and the loan is made in the ordinary course of that business.

9

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.

10

M21Any 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.

11

In section 138and this section— M22

  • “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.

12

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) ”.

13

M23If, on a person ceasing to have a beneficial interest in any shares, he acquires, after 18th March 1986,other shares or an interest in other shares and the circumstances are such that, for the purposes of sections 78to 81of the 1979Act (reorganisations etc.)the shares in which he ceases to have a beneficial interest constitute original shares and the other shares constitute a new holding—

a

section 78of that Act (which equates the original shares with the new holding)shall apply for the purposes of this section and section 138;

b

if any such consideration is given for the new holding as is mentioned in section 79(1)of that Act, it shall be treated for the purposes of this section and section 138as an increase falling within section 138(8)(a)in the consideration for the shares; and

c

if any such consideration is received for the disposal of the original shares as is mentioned in section 79(2)of the 1979Act—

i

the consideration shall be apportioned among the shares comprised in the new holding, and

ii

the amount which, apart from this paragraph, would at any subsequent time be the market value of any of those shares shall be taken to be increased by the amount of the consideration apportioned to them;

and in paragraphs (a)to (c)above “the original shares” shall be construed in accordance with sections 78to 81of the 1979Act.

14

M24In any case where section 138(1)applies and the acquisition was an acquisition of units in an authorised unit trust—

a

any reference in section 138(1)(a), (8)or (9)or subsection (4)above or sectionF43120(4) of the 1992 Act to shares shall be construed as references to units; and

b

any reference in those provisions to an interest in shares shall be omitted .

140 Further interpretation of sections 135 to 139.

F8. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140AF17 Conditional acquisition of shares.

F9. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140B Consideration for shares conditionally acquired.

F10. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140C Cases where interest to be treated as only conditional.

F11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140DF18 Convertible shares.

F12. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140E Consideration for convertible shares.

F13. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140F Supplemental provision with respect to convertible shares.

F14. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140GF19 Information for the purposes of sections 140A to 140F.

F15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

140HF20 Construction of sections 140A to 140G.

F16. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Vouchers etc.

141 Non-cash vouchers.

F21. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

142 Credit-tokens.

F22. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

143 Cash vouchers taxable under P.A.Y.E.

F23. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

144 Supplementary provisions.

F24. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

144AF26 Payments etc. received free of tax.

F25. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Living accommodation

145 Living accommodation provided for employee.

F27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

146 Additional charge in respect of certain living accommodation.

F28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

146AF31 Priority of rules applying to living accommodation.

F29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

147 Occupation of Chevening House.

F30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Payments on retirement, sick pay etc.

148 Payments and other benefits in connection with termination of employment, etc.

F32. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

149 Sick pay.

F33. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

150 Job release scheme allowances, maternity pay and statutory sick pay.

F34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

151 Income support etc.

F35. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

151AF38 Jobseeker’s allowance.

F36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

152F37Notification of taxable amount of certain benefits.

M251

A benefit officer may by notice notify a person who is taxable in respect of any unemployment benefit F44, 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.

2

Where—

a

no objection is made to a notification of an amount under subsection (1) above within the period specified in that subsection (or such further period as may be allowed by virtue of subsection (5) below); or

b

an objection is made but is withdrawn by the objector by notice,

that amount shall not be questioned in any appeal against any assessment in respect of income including that amount.

3

Where—

a

an objection is made to a notification of an amount under subsection (1) above within the period specified in that subsection (or such further period as may be allowed by virtue of subsection (5) below), and

b

the benefit officer and the objector come to an agreement that the amount notified should be varied in a particular manner, and

c

the officer confirms the agreement to vary in writing,

then, subject to subsection (4) below, that amount as so varied shall not be questioned in any appeal against any assessment in respect of income including that amount.

4

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.

5

An objection to a notification may be made later than 60 days after the date of the issue of the notification if, on an application for the purpose—

a

a benefit officer is satisfied that there was a reasonable excuse for not objecting within that time, and

b

the objection was made thereafter without unreasonable delay, and

c

the officer gives consent in writing;

and if the officer is not so satisfied he shall refer the application for determination—

i

by the General Commissioners for the division in which the objector ordinarily resides or,

ii

in a case where an appeal has been made against an assessment in respect of income including the amount in question, the General Commissioners or the Special Commissioners having jurisdiction in that appeal.

6

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.

7

In this section “benefit officer” means the appropriate officer, F45in Great Britain, of the Department for Work and Pensions, or, in Northern Ireland, of the Department of Health and Social Services.