Part IV Shares, securities, options etc.
Chapter I General
Deep discount securities, the accrued income scheme etc.
F1118 Amount to be treated as consideration on disposal of deep discount securities etc.
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119 Transfers of securities subject to the accrued income scheme.
F2(1)
Where there is a transfer of securities within the meaning of Chapter 2 of Part 12 of ITA 2007 (accrued income profits)—
(a)
if a payment is treated as made to the transferor under section 632 of that Act or by the transferor under section 633 of that Act, section 37 shall be disregarded in computing the gain accruing on the disposal concerned;
(b)
if a payment is treated as made by the transferee under section 632 of that Act or to the transferee under section 633 of that Act, section 39 shall be disregarded in computing the gain accruing to the transferee if he disposes of the securities;
but subsections (2) and (3) below shall apply.
(2)
Where the securities are transferred with accrued interest (within the meaning of that Chapter)—
(a)
if a payment is treated as made to the transferor under section 632 of ITA 2007, an amount equal to the amount of that payment shall be excluded from the consideration mentioned in subsection (8) below;
(b)
if a payment is treated as made by the transferee under that section, an amount equal to the amount of that payment shall be excluded from the sums mentioned in subsection (9) below.
(3)
Where the securities are transferred without accrued interest (within the meaning of that Chapter)—
(a)
if a payment is treated as made by the transferor under section 633 of ITA 2007, an amount equal to the amount of that payment shall be added to the consideration mentioned in subsection (8) below;
(b)
if a payment is treated as made to the transferee under that section, an amount equal to the amount of that payment shall be added to the sums mentioned in subsection (9) below.
(3A)
Subsections (3B) and (3C) below apply where there is a transfer of variable rate securities (within the meaning of that Chapter) and—
(a)
the transferor is treated as making accrued income profits under section 630(2) of ITA 2007, or
(b)
a payment is treated as made to the transferor under section 635 of that Act.
(3B)
Section 37 shall be disregarded in computing the gain accruing on the disposal concerned.
(3C)
An amount equal to the amount of the profits or payment shall be excluded from the consideration mentioned in subsection (8) below.
(4)
Where there is a transfer of securities with unrealised interest (within the meaning of Chapter 2 of Part 12 of ITA 2007)—
(a)
if section 630 of that Act applies or a payment is treated as made to the transferor under section 634 of that Act, section 37 shall be disregarded in computing the gain accruing on the disposal concerned, but the relevant amount shall be excluded from the consideration mentioned in subsection (8) below;
(b)
if section 681 of that Act applies, section 39 shall be disregarded in computing the gain accruing on the disposal concerned, but the relevant amount shall be excluded from the sums mentioned in subsection (9) below.
(5)
In subsection (4) above “the relevant amount” means an amount equal to—
(a)
if paragraph (b) below does not apply, the amount of the unrealised interest in question (within the meaning of Chapter 2 of Part 12 of ITA 2007);
(b)
if section 660 of that Act applies—
(i)
in a case falling within subsection (4)(a) above, the amount taken, by virtue of section 660 or 661 of that Act (as the case may be), to be the unrealised interest value for the purposes of section 660(2) or (3) of that Act;
(ii)
in a case falling within subsection (4)(b) above, the amount of income that is exempt from liability to income tax under section 681 of that Act.
(6)
In relation to any securities which by virtue of subsection (7) below are treated for the purposes of this subsection as having been transferred, subsections (2) and (3) above shall have effect F3as if for “is treated as made”, in each place where it occurs, there were substituted “would, if the disposal were a transfer, be treated as made”.
F4(7)
Where there is a disposal of securities for the purposes of this Act which is not a transfer (within the meaning of Chapter 2 of Part 12 of ITA 2007) but, if it were such a transfer, a payment would be treated as made under section 632 or 633 of that Act, the securities shall be treated—
(a)
for the purposes of subsection (6) above, as transferred on the day of the disposal, and
(b)
for the purposes of subsections (2) and (3) above, as transferred with accrued interest if, had the disposal been a transfer within the meaning of that Chapter, it would have been a transfer with accrued interest and as transferred without accrued interest if, had the disposal been such a transfer, it would have been a transfer without accrued interest.
(7A)
In relation to any securities which by virtue of subsection (7B) below are treated for the purposes of this subsection as having been transferred, subsection (3A) above shall have effect as if—
(a)
for “is treated as making” there were substituted “
would, if the disposal were a transfer, be treated as making
”
, and
(b)
for “is treated as made” there were substituted “
would, if the disposal were a transfer, be treated as made
”
.
(7B)
Where there is a disposal of securities for the purposes of this Act which is not a transfer (within the meaning of Chapter 2 of Part 12 of ITA 2007) but, if it were such a transfer, the transferor would be treated as making accrued income profits under section 630(2) of that Act in respect of a transfer of variable rate securities or a payment would be treated as made under section 635 of that Act—
(a)
the securities shall be treated, for the purposes of subsection (7A) above, as transferred on the day of the disposal, and
(b)
the transfer shall be treated, for the purposes of subsection (3A) above, as a transfer of variable rate securities.
(8)
The consideration is the consideration for the disposal of the securities transferred which is taken into account in the computation of the gain accruing on the disposal.
(9)
The sums are the sums allowable to the transferee as a deduction from the consideration in the computation of the gain accruing to him if he disposes of the securities.
(10)
Where on a conversion or exchange of securities F5a payment is treated as made to a person under section 632 or 635 of ITA 2007, or a person is treated as making accrued income profits under section 630(2) of that Act in respect of a transfer of variable rate securities, an amount equal to the amount of the payment or profits shall, for the purposes of this Act, be treated as follows—
(a)
to the extent that it does not exceed the amount of any consideration which the person receives (or is deemed to receive) or becomes entitled to receive on the conversion or exchange (other than his new holding), it shall be treated as reducing that consideration; and
(b)
to the extent that it does exceed that amount, it shall be treated as consideration which the person gives on the conversion or exchange;
and where on a conversion or exchange of securities F6a payment is treated as made by a person under section 633 of that Act an amount equal to the amount of the payment shall, for the purposes of the computation of the gain, be treated as consideration which the person receives on the conversion or exchange.
(11)
In subsection (10) above “conversion” means conversion within the meaning of section 132 and “exchange” means an exchange which by virtue of Chapter II of this Part does not involve a disposal.
F7119AIncrease in expenditure by reference to tax charged in relation to employment-related securities
(1)
This section applies to a disposal of an asset consisting of employment-related securities if the disposal—
(a)
is an event giving rise to a relevant income tax charge, or
(b)
is the first disposal after an event, other than a disposal, giving rise to a relevant income tax charge.
(2)
Section 38(1)(a) applies as if the relevant amount had formed part of the consideration given by the person making the disposal for his acquisition of the employment-related securities.
(3)
For the purposes of this section an event gives rise to a relevant income tax charge if it results in an amount counting as employment income F8in respect of the employment-related securities—
(a)
under section 426 of ITEPA 2003 (restricted securities),
(b)
under section 438 of ITEPA 2003 by virtue of section 439(3)(a) of that Act (conversion of convertible securities),
(c)
under section 446U of ITEPA 2003 (securities acquired for less than market value: discharge of notional loan),
F9(ca)
under section 447 of ITEPA 2003 (receipt of benefit) in a case where the benefit is an increase in the market value of the employment-related securities,
(d)
under section 476 of ITEPA 2003 by virtue of section 477(3)(a) of that Act (acquisition of securities pursuant to employment-related securities option), F10or—
(e)
under subsection (3) of section 21 of the Finance Act 2005 (transitional charge in relation to shares in spin-out companies) by virtue of subsection (4)(b) of that section (election by employee).
F11. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4)
For the purposes of this section “the relevant amount” is the aggregate of the amounts counting as employment income as mentioned in subsection (3) above by reason of events occurring—
(a)
not later than the disposal, and
(b)
where this section has applied to an earlier disposal of the employment-related securities, after the last disposal to which this section applied.
F12(5)
In determining for the purposes of subsection (4) the amount counting as employment income—
(a)
in the case of an amount counting as employment income under section 476 of ITEPA 2003 any amounts deducted under section 480(5)(a)F13, (b) or (d) of that Act shall be added back, and
(b)
no account shall be taken of any relief under section 428A, 442A, 481 or 482 of that Act (relief for secondary Class 1 contributions or special contribution met by employee).
F14(5A)
(6)
Where securities or interests in securities cease to be employment-related securities—
(a)
by reason of subsection (6) of section 421B of ITEPA 2003 in circumstances in which, immediately before the employee’s death, the employment-related securities are held otherwise than by the employee, or
(b)
by reason of subsection (7) of that section,
they are to be regarded for the purposes of this section as remaining employment-related securities until the next occasion on which they are disposed of.
(7)
In this section—
“employment-related securities”, and
“employee”, in relation to employment-related securities,
have the same meaning as in Chapters 1 to 4 of Part 7 of ITEPA 2003.
F17(8)
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F18119BSection 119A: F19unchargeable, and unremitted chargeable, foreign securities income
(1)
For the purposes of section 119A reduce the amount that counts as employment income by so much of that amount (if any) as isF20—
(a)
unchargeable foreign securities income, or
(b)
unremitted chargeable foreign securities income.
F21(1A)
In this section “unchargeable foreign securities income” means unchargeable foreign securities income for the purposes of section 41F of ITEPA 2003 (taxable specific income: internationally mobile employees etc) (see sections 41H to 41L of that Act).
(2)
In this section “unremitted F22chargeable foreign securities income” means income that—
F23(a)
is chargeable foreign securities income for the purposes of section 41F of ITEPA 2003, and
(b)
has not been remitted to the United Kingdom by the end of the tax year in which the disposal mentioned in section 119A(1) occurs.
(3)
The following provisions apply if any of the unremitted F24chargeable foreign securities income is remitted to the United Kingdom after the end of the tax year referred to in subsection (2)(b).
(4)
The person liable for the capital gains tax on any chargeable gains arising on the disposal may make a claim for section 119A(2) to have effect as if the remitted income had been remitted before the end of that tax year.
(5)
All adjustments (by way of repayment of tax, assessment or otherwise) are to be made which are necessary to give effect to a claim under subsection (4).
(6)
Those adjustments may be made at any time, despite anything to the contrary in any enactment relating to capital gains tax.
F25119CSection 119A: unremitted Part 7A income
(1)
This section applies for the purposes of section 119A if an amount deducted under section 480(5)(d) of ITEPA 2003, which (apart from this section) would by virtue of section 119A(5)(a) be added back to an amount counting as employment income, is or includes unremitted Part 7A income.
(2)
So much of the amount deducted as is unremitted Part 7A income is not to be added back.
(3)
In this section “unremitted Part 7A income” means an amount counting as employment income under Chapter 2 of Part 7A of ITEPA 2003—
(a)
to which section 554Z9(2) or 554Z10(2) of that Act applies, and
(b)
which has not been remitted to the United Kingdom by the end of the tax year in which the disposal mentioned in section 119A(1) occurs.
(4)
Section 119B(4) to (6) applies if any of the unremitted Part 7A income is remitted to the United Kingdom after the end of the tax year referred to in subsection (3)(b).
120 Increase in expenditure by reference to tax charged in relation to shares etc.
F26(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.
(2)
Section 38(1)(a) applies as if the relevant amount as defined in the following provisions of this section in the cases there specified had formed part of the consideration given by the person making the disposal for his acquisition of the assets in question.
(3)
Where an amount F27is treated as earnings under section 195(2) of ITEPA 2003 in respect of shares or an interest in shares, then—
(a)
on a disposal of the shares or interest, where that is the event giving rise to the charge; or
(b)
in any case, on the first disposal of the shares or interest after the event,
the relevant amount is a sum equal to the amount F28so treated as earnings.
(4)
(5)
Where an amount is chargeable to tax under section 138 of the Taxes Act on a person acquiring any shares or interest in shares, then on the first disposal (whether by him or another person) of the shares after his acquisition, the relevant amount is an amount equal to the amount so chargeable.
F31(5A)
Where an amount F32counts as employment income under Chapter 2 of Part 7 of ITEPA 2003 in respect of—
(a)
the acquisition or disposal of any interest in shares, or
(b)
any interest in shares ceasing to be only conditional,
the relevant amount is a sum equal to the amount F33so counting as employment income.
(5B)
F36(6)
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F37(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.
F38(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. |
F39(8)
For the purposes of subsection (5A) above this section shall have effect as if references in this section to shares included anything referred to as shares in F40Chapter 2 of Part 7 of ITEPA 2003.
F41(9)
References in this section to ITEPA 2003 are to that Act as originally enacted.