Income Tax (Earnings and Pensions) Act 2003

Chapter 8 U.K. Approved CSOP schemes

Introduction U.K.

521 Approved CSOP schemes U.K.

(1) This Chapter provides—

(a) for the approval of CSOP schemes by [F1 an officer of Revenue and Customs] ,

(b) for exemptions from income tax in connection with share options granted under those schemes, and

(c) for amounts to count as employment income in certain circumstances in connection with such options.

(2) Schedule 4 contains the requirements that have to be met for a CSOP scheme to be approved, together with the approval procedure.

(3) The provisions of—

(a) this and the following sections of this Chapter,

(b) Schedule 4, and

(c) Part 3 of Schedule 7D to TCGA 1992 (approved CSOP schemes: amount of consideration on exercise of option),

together constitute “the CSOP code”.

(4) In the CSOP code—

• “approved” means approved by [F1 an officer of Revenue and Customs] under Schedule 4 (see paragraph 1 of the Schedule);

• “CSOP scheme” means a scheme (commonly referred to as a company share option plan) which—

  (a)

  is established by a company,

  (b)

  provides for share options to be granted to employees and directors, and

  (c)

  is not an SAYE option scheme (within the meaning of the SAYE code: see section 516(4));

• “share option” means a right to acquire shares in a company;

• “shares” includes stock.

(5) Other expressions used in the CSOP code and contained in the index at the end of Schedule 4 have the meaning indicated by the index.

Textual Amendments

F1 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

522 Share options to which this Chapter applies U.K.

(1) This Chapter applies to a share option granted to an individual—

(a) in accordance with the provisions of an approved CSOP scheme, and

(b) by reason of the individual’s office or employment as a director or employee of a company.

(2) The individual may be a director or employee of the company whose shares are the subject of the share option, or of some other company.

Tax advantages U.K.

F2 523 No charge in respect of receipt of option U.K.

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Textual Amendments

F2 S. 523 repealed (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 32(1)(2), Sch. 43 Pt. 3(4); S.I. 2003/1997, art. 2

524 No charge in respect of receipt of option U.K.

(1) No liability to income tax arises in respect of the exercise of the share option if—

(a) the individual exercises it in accordance with the provisions of the CSOP scheme at a time when the scheme is approved, F3 ...

[F4 (b) Condition A or B is met] [F5 and

(c) the avoidance of tax or national insurance contributions is not the main purpose (or one of the main purposes) of any arrangements under which the option was granted or is exercised.]

[F6 (2) Condition A is that the option is exercised—

(a) on or after the third anniversary of the date on which it was granted, but

(b) not later than the tenth anniversary of that date.

(2A) Condition B is that the option—

(a) is exercised before the third anniversary of the date on which it was granted, and

(b) is so exercised by virtue of a provision included in the scheme under paragraph 24 of Schedule 4 (exercise of options after ceasing to be director or employee) in circumstances in which subsection (2B) applies.

(2B) This subsection applies if the individual exercising the option—

(a) has ceased to be a full-time director or qualifying employee of the scheme organiser (or, in the case of a group scheme, a constituent company) because of injury, disability, redundancy or retirement, and

(b) exercises the option within 6 months of the day on which he ceases to be such a director or employee.

(2C) In subsection (2B)—

“redundancy” means redundancy within the meaning of ERA 1996 or ER(NI)O 1996, and

“retirement” means retirement on or after reaching a retirement age specified in the scheme.]

F6 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F7 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) Paragraph 25 of Schedule 4 provides for the exercise of an option where the holder has died.

Textual Amendments

F3 Word in s. 524(1)(a) repealed (with effect in accordance with s. 88(11) of the amending Act) by Finance Act 2004 (c. 12), Sch. 42 Pt. 2(11)

F4 S. 524(1)(b) substituted (with effect in accordance with Sch. 21 para. 14(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 21 para. 14(2)

F5 S. 524(1)(c) and preceding word inserted (18.6.2004 with effect in accordance with s. 88(11)-(13) of the amending Act) by Finance Act 2004 (c. 12), s. 88(7)

F6 S. 524(2)-(2C) substituted for s. 524(2)(3) (with effect in accordance with Sch. 21 para. 14(5) of the amending Act) by Finance Act 2003 (c. 14), Sch. 21 para. 14(3)

F7 S. 524(4) repealed (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 33(1)(2), Sch. 43 Pt. 3(4); S.I. 2003/1997, art. 2

F8 525 No charge in respect of post-acquisition benefits U.K.

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Textual Amendments

F8 S. 525 repealed (16.4.2003 with effect in accordance with Sch. 22 para. 34(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 34(1), Sch. 43 Pt. 3(4)

Tax charge U.K.

526 Charge where option granted at a discount U.K.

(1) This section applies if, at the time when the share option is granted to the individual, the aggregate of—

(a) the amount or value of any consideration given by the individual for the grant of the option, and

(b) the amount payable by the individual, on exercising the option, in order to acquire the maximum number of shares that may be acquired under it,

is less than the market value of the same quantity of issued shares of the same class.

(2) The amount of the difference counts as employment income of the individual for the relevant tax year.

(3) The “relevant tax year” is the tax year in which the option is granted to the individual.

(4) [F9 Section 480(4) (gain realised on acquisition of securities pursuant to option etc) provides for a deduction] to be made to take account of amounts that count as employment income under this section.

Textual Amendments

F9 Words in s. 526(4) substituted (with effect in accordance with Sch. 22 para. 35(2) of the amending Act, otherwise 1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 35(1); S.I. 2003/1997, art. 2