PART V U.K. PROVISIONS RELATING TO THE SCHEDULE E CHARGE

CHAPTER I U.K. SUPPLEMENTARY CHARGING PROVISIONS OF GENERAL APPLICATION

Shareholdings, loans etc. U.K.

F1 139 Provisions supplementary to section 138. U.K.

(1) M1 Where—

(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) M2 For 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) M3 Where 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) M4 The 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) M5 Subject 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) M6 Any 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— M7

• “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) M8 If, 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) M9 In 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 section[F2 120(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 .

Textual Amendments

F1 Ss. 138, 139 repealed by Finance Act 1988 (c. 39), ss. 88, 148, Sch. 14 Part VI in respect of shares issued on or after 26 October 1987, subject to transitional arrangements.

F2 Words in s. 139(14) substituted (6.3.1992 with effect as mentioned in s. 289(1)(2) of the amending Act) by Taxation of Chargeable Gains Act 1992 (c. 12), ss. 289, 290, Sch. 10 para. 14(10) (with ss. 60, 101(1), 171, 201(3)).

Modifications etc. (not altering text)

C1 Ss. 138-140 continued for specified purposes (6.4.2003 with effect in accordance with s. 723(1) of the affecting Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 418(4) (and as that affecting section 418 is substituted (with effect in accordance with Sch. 22 para 2(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 2(1))

Marginal Citations

M1 Source—1972 s.79(1A), (1B); 1984 s.41(1)

M2 Source—1972 s.79(10), (11)

M3 Source—1972 Sch.12 3; 1984 s.41(2)

M4 Source—1972 Sch.12 3A; 1984 s.40(4)

M5 Source—1973 Sch.8 5-7; 1982 s.41

M6 Source—11982 s.41; 1986 s.23(4)

M7 Source—1973 Sch.8 35; 1972 Sch.12 6, 8

M8 Source—1972 s.79(6A); 1986 s.26(5)

M9 Source—1972 s.79(4A); 1984 s.40(3)