SCHEDULES

SCHEDULE 2U.K.Approved share incentive plans

Part 11U.K.Supplementary provisions

Company reconstructionsU.K.

86(1)In this Part of this Schedule a “company reconstruction” means a transaction to which this paragraph applies.U.K.

(2)This paragraph applies to a transaction which occurs in relation to any of a participant’s plan shares (“the original holding”) and—

(a)results in a new holding being equated with the original holding for the purposes of capital gains tax, or

(b)would have that result but for the fact that what would be the new holding consists of or includes a qualifying corporate bond.

(3)But where an excluded issue of shares is made—

(a)that issue of shares does not by itself count as a transaction within sub-paragraph (2); and

(b)if made as part of a transaction within that sub-paragraph (that is, as part of a company reconstruction), the shares issued are to be regarded as not forming part of the new holding.

(4)An “excluded issue of shares” means an issue of shares of any of the following descriptions (in respect of which a charge to income tax arises)—

(a)redeemable shares or securities issued as mentioned in section 209(2)(c) of ICTA (distributions);

(b)share capital issued in circumstances such that section 210(1) of ICTA (bonus issues) applies;

(c)share capital to which section 249 of ICTA (stock dividends) applies [F1that is issued in a case where section 410(2) or (3) of ITTOIA 2005 applies] .

Textual Amendments

F1Words in Sch. 2 para. 86(4)(c) inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 617(5) (with Sch. 2)

Consequences of company reconstructionsU.K.

87(1)In the SIP code references to a participant’s plan shares in relation to a SIP are to be read, after the time of a company reconstruction—U.K.

(a)as referring to the new shares, or

(b)as including those shares,

as the case may be.

This is subject to the following provisions of this paragraph.

(2)For the purposes of the SIP code—

(a)a company reconstruction is to be treated as not involving a disposal of the shares comprised in the original holding;

(b)new shares are to be treated as having been awarded to the participant on the date on which the corresponding old shares were awarded;

(c)the conditions in Part 4 of this Schedule (types of share that may be awarded) are to be treated as fulfilled with respect to any new shares if they were (or were treated as) fulfilled with respect to the corresponding old shares; and

(d)the provisions of—

(i)sections 489 to 514 (SIPs: income tax advantages and charges under this Act),

[F2(ii)sections 392 to 395 and 405 to 408 of ITTOIA 2005 (SIPs: special rules for charges under Chapters 3 and 4 of Part 4 of that Act (dividends etc. from UK or non-UK resident companies etc.)) and section 770 of that Act (exemption for amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment),]

(iii)sections 686B and 686C of ICTA (SIPs: income tax advantages for trustees), and

(iv)Part 1 of Schedule 7D to TCGA 1992 (SIPs: capital gains tax),

apply in relation to the new shares as they would have applied in relation to the corresponding old shares.

(3)If the corresponding old shares were dividend shares, the reference in sub-paragraph (2)(b) to the corresponding old shares being awarded is a reference to those shares being acquired on behalf of the participant.

(4)Sub-paragraphs (1) to (3) are subject to paragraph 88 (treatment of shares acquired under rights issue).

(5)For the purposes of the SIP code if, as part of a company reconstruction, trustees become entitled to a capital receipt, their entitlement to the capital receipt is to be taken to arise before the new holding comes into being.

(6)In the SIP code, in the context of a new holding, “shares” includes securities and rights of any description which form part of the new holding for the purposes of Chapter 2 of Part 4 of TCGA 1992 (reorganisation of share capital etc.).

(7)In this paragraph—

(a)new shares” means shares comprised in the new holding which were issued in respect of, or otherwise represent, shares comprised in the original holding;

(b)“the new holding” and “the original holding” mean respectively the new and original holdings mentioned in paragraph 86(2);

(c)corresponding old shares”, in relation to any new shares, means the shares in respect of which the new shares are issued or which the new shares otherwise represent.

Textual Amendments

F2Sch. 2 para. 87(2)(d)(ii) substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 617(6) (with Sch. 2)

Treatment of shares acquired under rights issueU.K.

88(1)This paragraph applies for the purposes of the SIP code where the trustees exercise rights arising under a rights issue and conferred in respect of a participant’s plan shares.U.K.

(2)In such a case, any shares or securities or rights allotted are to be treated as if they were plan shares—

(a)identical to the shares in respect of which the rights were conferred, and

(b)appropriated to, or acquired on behalf of, the participant under the plan in the same way and at the same time as those shares.

(3)If, however, either of the conditions set out in sub-paragraph (4) is met, sub-paragraph (5) applies instead.

(4)The conditions are—

(a)that the funds used by the trustees to exercise the rights are not provided by the exercise of the trustees' powers under paragraph 77 (trustees' powers to raise funds to subscribe for rights issue);

(b)that similar rights are not conferred in respect of all ordinary shares in the company.

(5)If either of those conditions is met—

(a)any shares, securities or rights allotted are not plan shares, and

(b)sections 127 to 130 of TCGA 1992 (reorganisation of share capital etc.) do not apply in relation to them.

Termination of planU.K.

89(1)The plan may provide for the company to issue a plan termination notice in respect of the plan in circumstances specified in the plan.U.K.

(2)The plan must provide that, where a plan termination notice is issued, a copy of the notice must be given, without delay, to—

(a)[F3an officer of Revenue and Customs] ,

(b)the trustees,

(c)each individual who has plan shares, and

(d)each individual who has entered into a partnership share agreement which was in force immediately before the notice was issued.

Effect of plan termination noticeU.K.

90(1)This paragraph applies if the company has issued a plan termination notice under paragraph 89.U.K.

(2)No further shares may be awarded to individuals under the plan.

(3)The trustees must remove the plan shares from the plan as soon as practicable after whichever is the later of—

(a)the end of the notice period, or

(b)the first date on which the shares may be removed from the plan without giving rise to a charge to income tax under sections 501 to 507 (SIPs: tax charges) on the participant on whose behalf they are held.

(4)In sub-paragraph (3) “the notice period” means the period of 3 months beginning with the date on which the requirements imposed by the plan in accordance with paragraph 89(2) are met in respect of the plan termination notice.

(5)The trustees may remove a participant’s shares from the plan at an earlier date with the participant’s consent.

(6)Any consent given by the participant before receiving a copy of the plan termination notice is to be disregarded for the purposes of sub-paragraph (5).

(7)As soon as practicable after the plan termination notice is issued, the trustees must pay any money held on an individual’s behalf to the individual.

(8)In this paragraph references to the trustees removing the plan shares from the plan are to their doing the following in the case of each participant—

(a)transferring the shares to the participant on behalf of whom they are held, or to another person, at the participant’s direction, or

(b)disposing of the shares and accounting (or holding themselves ready to account) for the proceeds to the participant or to another person at the participant’s direction.

(9)Where a participant has died, the references in this paragraph to a participant are to the participant’s personal representatives.

Jointly owned companiesU.K.

91(1)This paragraph applies for the purposes of the provisions of the SIP code relating to group plans.U.K.

(2)Each joint owner of a jointly owned company is to be treated as controlling every company within sub-paragraph (3).

(3)The companies within this sub-paragraph are—

(a)the jointly owned company, and

(b)any company controlled by that company.

(4)However, no company within sub-paragraph (3) may be—

(a)a constituent company in more than one group plan, or

(b)a constituent company in a particular group plan if another company within that sub-paragraph is a constituent company in a different group plan.

(5)In this paragraph a “jointly owned company” means a company—

(a)of which 50% of the issued share capital is owned by one person and 50% by another, and

(b)which is not controlled by any one person.

(6)This paragraph does not apply for the purposes of paragraph 27(1)(b) (requirement that plan shares are in a company not under another company’s control).

Determination of market valueU.K.

92(1)For the purposes of the SIP code the “market value” of shares has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.U.K.

(2)Sub-paragraph (1) is subject to paragraph 35(3) (determination of value of shares subject to restrictions or risk of forfeiture).

(3)Where the market value of shares on any date has to be determined for the purposes of the SIP code, [F3an officer of Revenue and Customs] and the trustees may agree that it is to be determined by reference—

(a)to a date or dates, or

(b)to an average of the values on a number of dates,

stated in the agreement.

Power to require informationU.K.

93(1)[F3An officer of Revenue and Customs] may by notice require a person to provide [F4the officer] with information—U.K.

(a)which [F4the officer] reasonably [F5requires] for the performance of [F6the officer's] functions under the SIP code, and

(b)which the person to whom the notice is addressed has or can reasonably obtain.

(2)The power conferred by this paragraph extends, in particular, to—

(a)information to enable [F3an officer of Revenue and Customs]

(i)to decide whether to approve a SIP or to withdraw an approval already given, or

(ii)to determine the liability to tax, including capital gains tax, of any person who has participated in a plan, and

(b)information about the administration of a plan and any proposed alteration of the terms of a plan.

(3)The notice must require the information to be provided within a specified period, which must not end earlier than 3 months after the date when the notice is given.

Meaning of “associated company”U.K.

94(1)For the purposes of the SIP code one company is an “associated company” of another company at a given time if—U.K.

(a)one has control of the other, or

(b)both are under the control of the same person or persons.

(2)Sub-paragraph (1) does not, however, apply for the purposes of paragraph 29 (prohibited shares).

(3)For the purposes of sub-paragraph (1) the question whether a person controls a company is to be determined in accordance with section 416(2) to (6) of ICTA.

Meaning of participant ceasing to be in relevant employmentU.K.

95(1)This paragraph explains what is meant, for the purposes of the SIP code, by a participant ceasing to be in relevant employment.U.K.

(2)For the purposes of the SIP code “relevant employment” means employment by the company or any associated company.

(3)A participant who remains in the employment of the company or any associated company does not cease to be in relevant employment.

Meaning of shares being withdrawn from planU.K.

96(1)For the purposes of the SIP code plan shares are withdrawn from a SIP when—U.K.

(a)they are transferred by the trustees to the participant, or another person, on the direction of the participant,

(b)the participant assigns, charges or otherwise disposes of the beneficial interest in the shares, or

(c)they are disposed of by the trustees, on the direction of the participant, in circumstances where the trustees account (or hold themselves ready to account) for the proceeds to the participant or to another person.

(2)Where the participant has died, the references in sub-paragraph (1) to the participant are to the participant’s personal representatives.

Meaning of shares ceasing to be subject to planU.K.

97(1)For the purposes of the SIP code plan shares cease to be subject to a SIP when—U.K.

(a)they are withdrawn from the plan,

(b)the participant to whom the shares were awarded ceases to be in relevant employment at a time when the shares are subject to the plan, or

(c)the trustees dispose of the shares under provision made in accordance with paragraph 79 (meeting by trustees of PAYE obligations).

(2)If an individual—

(a)participates in an award of partnership shares, and

(b)ceases to be in relevant employment at any time during the acquisition period relating to that award,

the individual is to be treated for the purposes of this paragraph as ceasing to be in relevant employment immediately after the shares are awarded.

(3)In sub-paragraph (2) “the acquisition period” in relation to an award means—

(a)where there was no accumulation period, the period beginning with the deduction of the partnership share money and ending with the acquisition date (as defined by paragraph 50(4)), and

(b)where there was an accumulation period, the period beginning with the end of that period and ending immediately before the acquisition date (as defined by paragraph 52(5)).

(4)If a participant ceases to be in relevant employment, the participant’s plan shares are to be treated as ceasing to be subject to the plan on the date of leaving.

Meaning of “the specified retirement age”U.K.

98(1)In the SIP code, in relation to a SIP, “the specified retirement age” means the retirement age specified in the plan.U.K.

(2)The age so specified—

(a)must be the same for men and women, and

(b)must not be less than 50.

Minor definitionsU.K.

99(1)In the SIP code—U.K.

(2)For the purposes of the SIP code references to “shares” include fractions of shares forming part of the share capital of a company registered in a foreign country the law of which recognises such fractions.

(3)For the purposes of the SIP code a company is a member of a consortium owning another company if it is one of a number of companies—

(a)which between them beneficially own not less than 75% of the other company’s ordinary share capital, and

(b)each of which beneficially owns not less than 5% of that capital.

Index of defined expressionsU.K.

100U.K.In the SIP code the following expressions are defined or otherwise explained by the provisions indicated below:

accumulation periodparagraph 51
approval, approvedsection 488(4) (and see paragraph 83(4))
articles of associationparagraph 99(1)
associated companyparagraph 94 (and see paragraph 29(3))
award of sharesparagraph 5(1)
F7. . .. . .
building society [F8section 989 of ITA 2007]
ceasing to be in relevant employment (in relation to a participant)paragraph 95
ceasing to be subject to plan (in relation to shares)paragraph 97
child [F9section 721(6)]
close company [F10section 989 of ITA 2007] (and see paragraph 20(4))
companyparagraph 99(1)
the company (in relation to a SIP)paragraph 2(2)
company reconstruction (in Part 11 of this Schedule)paragraph 86(1)
connected personsection 718
consortium (member of)paragraph 99(3)
constituent companyparagraph 4(3)
controlsection 719 (and see paragraphs 29(5), 37(6) and 94(3))
distribution [F11section 989 of ITA 2007]
dividend sharesparagraph 62(3)(b)
earningssection 62 and see section 721(7)
eligible shares (in Part 4 of this Schedule)paragraph 25(2)
employee, employed, employer and employmentsection 4
the employment requirementparagraph 15(3)
forfeiture, provision forparagraph 99(1)
free sharesparagraph 2(1)(a)
group companyparagraph 99(1)
group of companiesparagraph 99(1)
group planparagraph 4(2)
holding periodparagraph 36 (and see paragraph 67)
F7. . .
market value (of shares)paragraph 92
matching sharesparagraph 3(1)
notice (except in paragraph 54 or 55) [F12section 989 of ITA 2007]
ordinary share capital [F13section 989 of ITA 2007]
parent companyparagraph 4(1)
participant (in relation to a SIP)paragraph 5(4)
participant’s plan sharesparagraph 99(1) (and see paragraph 87(1))
participation in an award of sharesparagraph 5(3)
partnership share agreementparagraph 44
partnership share moneyparagraph 45(2)
partnership sharesparagraph 2(1)(b)
PAYE deductionsection 488(4)
PAYE obligationsparagraph 99(1)
PAYE regulationssection 684(8)
performance allowancesparagraph 34(4)
personal representatives [F14section 989 of ITA 2007]
plan requirements (in relation to a SIP)paragraph 2(2)
plan shares (in relation to a SIP)paragraph 99(1) (and see paragraphs 86 to 88)
the plan trustparagraph 71(3)
provision for forfeitureparagraph 99(1)
qualifying corporate bondparagraph 99(1)
qualifying employeeparagraph 8(6)
recognised stock exchange [F15section 1005 of ITA 2007]
redundancyparagraph 99(1)
reinvestmentparagraph 62(3)(a)
relevant employmentparagraph 95(2)
rights arising under a rights issueparagraph 99(1)
salaryparagraph 43(4)
share incentive plan (“SIP”)section 488(4)
sharesparagraph 99(2) (and in the context of a new holding, paragraph 87(6))
the SIP codesection 488(3)
F16. . .F16. . .
the specified retirement ageparagraph 98(1)
taxsection 832(3) of ICTA [F17(as applied by section 989 of ITA 2007)]
[F18tribunal section 989 of ITA 2007]
tax year [F19section 4(2) of ITA 2007 (as applied by section 989 of that Act)]
the trusteesparagraphs 2(2), 71(1)
the trust instrumentparagraph 71(3)
withdrawal of shares from planparagraph 96(1)

Textual Amendments

F7Sch. 2 para. 100 entry repealed (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 121(e), Sch. 5; S.I. 2005/1126, art. 2(2)(h)(i)

F8Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(a) (with Sch. 2)

F9Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(b) (with Sch. 2)

F10Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(c) (with Sch. 2)

F11Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(d) (with Sch. 2)

F12Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(e) (with Sch. 2)

F13Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(f) (with Sch. 2)

F14Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(g) (with Sch. 2)

F15Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(h) (with Sch. 2)

F17Words in Sch. 2 para. 100 Table inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(i) (with Sch. 2)

F19Words in Sch. 2 para. 100 Table substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 447(3)(j) (with Sch. 2)