Income Tax (Earnings and Pensions) Act 2003

Exemption where offer made to both public and employees

542 Exemption: offer made to public and employees

(1) This section applies if—

(a) there is a genuine offer to the public of shares in a company at a fixed price or by tender,

(b) a director or employee of the company, or of another company or person, is entitled by reason of the office or employment to an allocation of the shares in priority to members of the public, and

(c) conditions A to C are met.

(2) No liability to income tax in respect of earnings arises by virtue of any benefit derived by the director or employee from the entitlement.

(3) Condition A is that the aggregate number of shares subject to the offer that may be allocated as mentioned in subsection (1)(b) (“priority shares”) does not exceed—

(a) if the offer is part of arrangements which include one or more other offers to the public of shares of the same class, either of the limits in subsection (4), or

(b) in any other case, 10% of the shares subject to the offer (including the priority shares).

(4) The limits referred to in subsection (3)(a) are—

(a) 40% of the shares subject to the offer (including the priority shares), and

(b) 10% of all the shares of the class in question that are subject to any of the offers forming part of the arrangements (including the priority shares).

(5) Condition B is that all the persons entitled to an allocation of priority shares are entitled to it on similar terms (see section 546).

(6) Condition C is that those persons are not restricted wholly or mainly to directors or to those whose remuneration exceeds a particular level.

(7) This section has effect subject to section 543 (discount not covered by exemption in this section).

543 Discount not covered by exemption in section 542

(1) This section applies if the total of—

(a) the price payable by the director or employee for the shares of the company allocated to the director or employee under the offer, and

(b) the amount or value of any registrant discount made to the director or employee in respect of the shares,

is less than the fixed price or the lowest price successfully tendered.

(2) Section 542(2) (exemption: offer made to public and employees) does not apply to the benefit (if any) represented by the difference.