SCHEDULES
SCHEDULE 1Abbreviations and defined expressions
Part 1Abbreviations of Acts and instruments
Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 46(3) of the amending Act) by Finance Act 2008 (c. 9), s. 46(2)
Words in Sch. 1 Pt. 1 omitted (21.7.2009) by virtue of Finance Act 2009 (c. 10), s. 126(4)
Words in Sch. 1 Pt. 1 inserted (12.2.2019) by Finance Act 2019 (c. 1), s. 12(8)
Words in Sch. 1 Pt. 1 inserted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 616(2) (with Sch. 2)
Words in Sch. 1 Pt. 1 inserted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 445 (with Sch. 2)
Words in Sch. 1 Pt. 1 inserted (18.3.2008 for specified purposes, 27.10.2008 in so far as not already in force) by Welfare Reform Act 2007 (c. 5), s. 70(2), Sch. 3 para. 24(6); S.I. 2008/787, art. 2(1), Sch.; S.I. 2008/787, art. 2(4)(f)
Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 1329(1) of the amending Act) by Corporation Tax Act 2009 (c. 4), s. 1329(1), Sch. 1 para. 556(a) (with Sch. 2 Pts. 1, 2)
Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 395(2) (with Sch. 2)
Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 323 (with Sch. 9 paras. 1-9, 22)
Words in Sch. 1 Pt. 1 inserted (8.4.2013 for specified purposes, 10.6.2013 in so far as not already in force) by Welfare Reform Act 2012 (c. 5), s. 150(3), Sch. 9 para. 50; S.I. 2013/358, art. 7(1)(2)(k), Sch. 3; S.I. 2013/1250, art. 2
Words in Sch. 1 Pt. 1 inserted (with effect in accordance with s. 16(4) of the amending Act) by Finance Act 2015 (c. 11), s. 16(3)
Words in Sch. 1 Pt. 1 inserted (with effect in accordance with reg. 2 of the amending S.I.) by The Taxation of Northern Ireland Welfare Supplementary Payments Regulations 2017 (S.I. 2017/338), regs. 1, 16
F310FA followed by a year | The Finance Act of that year |
F(No.2)A followed by a year | The Finance (No.2) Act of that year. |
F267ETA(NI) 1950 | The Employment and Training Act (Northern Ireland) 1950 (c. 29 (N.I.)) |
TMA 1970 | The Taxes Management Act 1970 (c. 9) |
ICTA 1970 | The Income and Corporation Taxes Act 1970 (c. 10) |
F311. . . | F311. . . |
F311. . . | F311. . . |
F267ETA 1973 | The Employment and Training Act 1973 (c. 50) |
OPA 1973 | The Overseas Pensions Act 1973 (c. 21) |
F311. . . | F311. . . |
F311. . . | F311. . . |
F311. . . | F311. . . |
F311. . . | F311. . . |
ICTA | The Income and Corporation Taxes Act 1988 (c. 1) |
F311. . . | F311. . . |
F311. . . | F311. . . |
F637LGFA 1992 | Local Government Finance Act 1992 |
SSCBA 1992 | The Social Security Contributions and Benefits Act 1992 (c. 4) |
SSCB(NI)A 1992 | The Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) |
TCGA 1992 | The Taxation of Chargeable Gains Act 1992 (c. 12) |
VERA 1994 | The Vehicle Excise and Registration Act 1994 (c. 22) |
F311. . . | F311. . . |
JSA 1995 | The Jobseekers Act 1995 (c. 18) |
CSA 1995 | The Child Support Act 1995 (c. 34) |
CS(NI)O 1995 | The Child Support (Northern Ireland) Order 1995 (S.I. 1995/2702 (N.I. 13)) |
JS(NI)O 1995 | The Jobseekers (Northern Ireland) Order 1995 (S.I. 1995/2705 (N.I. 15)) |
F311. . . | F311. . . |
ERA 1996 | The Employment Rights Act 1996 (c. 18) |
ER(NI)O 1996 | The Employment Rights (Northern Ireland) Order 1996 (S.I. 1996/1919 (N.I. 16)) |
F311. . . | F311. . . |
WRPA 1999 | The Welfare Reform and Pensions Act 1999 (c. 30) |
WRP(NI)O 1999 | The Welfare Reform and Pensions (Northern Ireland) Order 1999 (S.I. 1999/3147 (N.I. 11)) |
F311. . . | F311. . . |
F637CSPSSA 2000 | Child Support, Pensions and Social Security Act 2000 |
CAA 2001 | The Capital Allowances Act 2001 (c. 2) |
F311. . . | F311. . . |
SPCA 2002 | The State Pension Credit Act 2002 (c. 16) |
TCA 2002 | The Tax Credits Act 2002 (c. 21) |
SPCA(NI) 2002 | The State Pension Credit Act (Northern Ireland) 2002 (c. 14 (N.I.)) |
F311. . . | F311. . . |
F82ITTOIA 2005 | The Income Tax (Trading and Other Income) Act 2005 |
F311. . . | F311. . . |
F229ITA 2007 | The Income Tax Act 2007 |
F269WRA 2007 | The Welfare Reform Act 2007 |
F292CTA 2009 | The Corporation Tax Act 2009 |
F326CTA 2010 | The Corporation Tax Act 2010 |
F327TIOPA 2010 | The Taxation (International and Other Provisions) Act 2010 |
F370WRA 2012 | The Welfare Reform Act 2012 |
F598PA 2014 | The Pensions Act 2014 |
F637DSR(NI) 2016 | Discretionary Support Regulations (Northern Ireland) 2016 (S.R. (N.I.) 2016 No. 270) |
F632HB(WSP)R(NI) 2017 | The Housing Benefit (Welfare Supplementary Payment) Regulations (Northern Ireland) 2017 S.R. (N.I.) 2017 No. 35 |
WSPR(NI) 2016 | The Welfare Supplementary Payments Regulations (Northern Ireland) 2016 S.R.(N.I.) 2016 No. 178 |
WSP(LDLA)R(NI) 2016 | The Welfare Supplementary Payment (Loss of Disability Living Allowance) Regulations (Northern Ireland) 2016 S.R.(N.I.) 2016 No. 250 |
WSP(LCP)R(NI) 2016 | The Welfare Supplementary Payment (Loss of Carer Payments) Regulations (Northern Ireland) 2016 S.R.(N.I.) 2016 No. 253 |
WSP(LDRP)R(NI) 2016 | The Welfare Supplementary Payment (Loss of Disability-Related Premiums) Regulations (Northern Ireland) 2016 S.R.(N.I.) 2016 No. 254 |
F637SS(S)A 2018 | Social Security (Scotland) Act 2018 |
Part 2Index of expressions defined in this Act or ICTA
Note: this index does not apply to expressions used in any of Chapters 6 to 9 of Part 7 (share incentive plans and other arrangements for acquiring shares): separate indexes appear at the end of Schedules 2 to 5.
accessory (in Chapter 6 of Part 3) | F367sections 125(2) and 125A(2) | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F2the acquisition (in Chapters 1 to 4 of Part 7) | section 421B(8) (see also section 446Q(4)) | |
F1. . . | F1. . . | |
F2the acquisition (in Chapter 5 of Part 7) | section 471(5) | |
F142. . . | F142. . . | |
F368adjusted net income (in Chapter 8 of Part 10) | section 681H | |
age of a car F48... (in Chapter 6 of Part 3) | section 171(3) | |
agency contract (in Chapter 7 of Part 2) | section 47(1) | |
F633amount foregone (in relation to a benefit) (in the benefits code) | section 69B | |
annual rental value (in Chapter 10 of Part 3) | section 207 | |
annual value (in Chapter 5 of Part 3) | section 110 | |
F142. . . | F142. . . | |
F142. . . | F142. . . | |
F142. . . | F142. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
asset (in Chapter 4 of Part 11) | section 701 | |
F1. . . | F1. . . | |
assignment (in the application of the Act to Scotland) | F200section 1008(1) of ITA 2007 | |
associate (in Chapter 8 of Part 2) | section 60 | |
F228associate (in Chapter 9 of Part 2) | section 61I (but see section 61C(4)) | |
associate (in Chapter 11 of Part 7) | section 549(4) | |
associated company (in Chapter 8 of Part 2) | section 61(1) | |
F2associated company (in section 421H(1) and Chapters 2 to 4 of Part 7) | section 421H(2) | |
F1. . . | F1. . . | |
F2associated person (in Chapters 1 to 4 of Part 7) | section 421C | |
F2associated person (in Chapter 5 of Part 7) | section 472 | |
available for private use (in Chapter 6 of Part 3) | section 118(1) | |
basic rate | F201section 6(2) of ITA 2007 (as applied by section 989 of that Act) | |
benefit (in Chapter 10 of Part 3) | section 201(2) | |
benefit (in Chapter 3 of Part 6) | section 402 | |
the benefits code (in the employment income Parts) | section 63(1) | |
F125the Commissioners for Her Majesty’s Revenue and Customs | section 720(2) | |
body of persons | F202section 989 of ITA 2007 | |
business (in Chapter 8 of Part 2) | section 61(1) | |
F228business (in Chapter 9 of Part 2) | section 61J | |
business travel (in Chapter 6 of Part 3) | section 171(1) | |
business travel (in Chapter 2 of Part 4) | F609sections 235A and 236(1) | |
capital allowance | F203section 989 of ITA 2007 | |
car (in Chapter 6 of Part 3) | section 115(1) | |
car (in Chapter 2 of Part 4) | section 235(2) | |
car (in Chapter 3 of Part 4) | section 249 | |
car is available to an employee (in Chapter 6 of Part 3) | section 116(1) | |
car first made available to an employee (in Chapter 6 of Part 3) | section 116(2)(a) | |
car made available by reason of employment (in Chapter 6 of Part 3) | section 117 | |
car with a CO2 emissions figure (in Chapter 6 of Part 3) | section 134(1) | |
car without a CO2 emissions figure (in Chapter 6 of Part 3) | section 134(2) | |
cash voucher | section 721(1) | |
F2chargeable event (in Chapter 3B of Part 7) | section 446P(5) | |
charging provisions of Chapter 4 of Part 2 (in the employment income Parts) | section 14(3) | |
charging provisions of Chapter 5 of Part 2 (in the employment income Parts) | section 20(3) | |
cheque voucher (in Chapter 4 of Part 3) | section 84(4) | |
child, children | F204... section 721(6) | |
F228the client (in Chapter 9 of Part 2) | section 61D(4) | |
close company | F205section 989 of ITA 2007 | |
company | F206section 992 of ITA 2007 | |
company (in Chapter 8 of Part 2) | section 61(1) | |
F581company (in Chapter 10A of Part 4) | section 312I | |
F1. . . | F1. . . | |
company vehicle (in Chapter 2 of Part 4) | section 236(2) | |
connected (in the context of “connected person” or one person being “connected” with another) | F207section 993 of ITA 2007 (see section 718) | |
F2consideration (in Chapters 2 to 5 of Part 7) | sections 421(2) and 421A | |
F2consideration given for the acquisition of employment-related securities (in Chapters 2 to 3A of Part 7) | section 421I | |
F1. . . | F1. . . | |
F68the Contributions and Benefits Act | section 721(1) | |
control | F208section 995 of ITA 2007 (see section 719) | |
control (in the benefits code) | section 69 | |
F1. . . | F1. . . | |
F2convertible securities (in Chapters 2 to 3A of Part 7) | section 436 | |
cost of provision in relation to non-cash voucher (in Chapter 4 of Part 3) | section 87(3) | |
credit-token | section 721(1) | |
cycle (in Chapter 2 of Part 4) | section 235(5) | |
date of first registration (in relation to a car F48...) (in Chapter 6 of Part 3) | section 171(2) | |
deductible payment (in Part 8) | section 558 | |
the deductibility provisions (in Part 5) | section 332 | |
F361dependants' income withdrawal (in Chapter 5A of Part 9) | section 579D | |
F1. . . | F1. . . | |
diesel (in Chapter 6 of Part 3) | section 171(1) | |
director (in the benefits code) | section 67(1) | |
F142. . . | F142. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
director (in Chapter 10 of Part 7) | section 548(1) | |
director, full-time working (in the benefits code) | section 67(3) | |
disabled person’s badge (in Chapter 6 of Part 3) | section 171(4) | |
distribution | F209section 989 of ITA 2007 | |
domiciled in the United Kingdom | section 721(3) | |
donations (in Part 12) | section 714(1) | |
earnings (in the employment income Parts) | section 62 and see section 721(7) | |
earnings (from which deductions are allowed) (in Part 5) | section 327(2)(a) | |
earnings charged on receipt (in Part 5) | section 335(4) | |
earnings charged on remittance (in Part 5) | section 335(4) | |
earnings “for” a tax year (in Chapter 4 of Part 2) | section 16 | |
earnings “for” a tax year (in Chapter 5 of Part 2) | section 29 | |
earnings-only exemption | section 227(2) | |
EC certificate of conformity (in Chapter 6 of Part 3) | section 171(1) | |
EC type-approval certificate (in Chapter 6 of Part 3) | section 171(1) | |
eligible period (in Chapter 6 of Part 5) | section 378(2) | |
employed (in the employment income Parts) | sections 4 and 5(2)(a) | |
employed (in the benefits code) | section 66(1)(b) | |
employee (in the employment income Parts) | sections 4 and 5(2)(b) | |
employee (in the benefits code) | section 66(1)(b) (see also section 216(5)) | |
employee (in Chapter 3 of Part 3) | section 70(4) | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
employee (in Chapter 10 of Part 3) | section 201(5) | |
F142. . . | F142. . . | |
F142. . . | F142. . . | |
F2the employee (in Chapters 1 to 4 of Part 7) | section 421B(8) | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F2the employee (in Chapter 5 of Part 7) | section 471(5) | |
employee (in Chapter 10 of Part 7) | section 548(1) | |
employee (in Chapter 11 of Part 7) | section 549(5) | |
employee (in Part 8) | section 562(2) | |
F142. . . | F142. . . | |
employee (in Chapter 13 of Part 9) | section 628(1) | |
employee (in Part 11) | section 712(1) | |
employee benefit trust (in Chapter 11 of Part 7) | section 550 | |
F2employee-controlled (in Chapters 2 to 4 of Part 7) | section 421H(1) | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
the employee offer (in Chapter 10 of Part 7) | section 544(1) | |
employer (in the employment income Parts) | sections 4 and 5(2)(c) | |
employer (in the benefits code) | section 66(1)(b) | |
the employer (in the benefits code) | section 66(2)(b) | |
F142. . . | F142. . . | |
F2the employer (in Chapters 1 to 4 of Part 7) | section 421B(8) | |
F2the employer (in Chapter 5 of Part 7) | section 471(5) | |
employer (in Part 8) | section 562(2) | |
employer (in Part 11) | section 712(1) | |
F141employer-financed retirement benefits scheme (in Chapter 2 of Part 6) | section 393A | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
employer’s national insurance contributions (in Chapter 8 of Part 2) | section 61(1) | |
F228employer's national insurance contributions (in Chapter 9 of Part 2) | section 61J | |
employment (in the employment income Parts) | sections 4 and 5(1) | |
employment (in the benefits code) | section 66(1)(a) | |
the employment (in the benefits code) | section 66(2)(a) | |
F142. . . | F142. . . | |
F2the employment (in Chapters 1 to 4 of Part 7) | section 421B(8) | |
F2the employment (in Chapter 5 of Part 7) | section 471(5) | |
employment (in Part 8) | section 562(2) | |
employment (in Chapter 5 of Part 11) | section 707 | |
employment as a seafarer (in Chapter 6 of Part 5) | section 384(1) | |
the employment change (in Chapter 7 of Part 4) | section 275 | |
employment income | section 7(2) | |
the employment income Parts | section 3(2) | |
employment income exemption | section 227(3) | |
employment-related benefit (in Chapter 10 of Part 3) | section 201(2) | |
employment-related loan (in Chapter 7 of Part 3) | section 174 | |
F2employment-related securities (in Chapters 1 to 5 of Part 7) | section 421B(8) (see also section 484(4)) | |
F2employment-related securities option (in Chapter 5 of Part 7) | section 471(5) | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
engagement to which Chapter 8 of Part 2 applies (in Chapter 8 of Part 2) | section 49(5) | |
excluded benefits (in Chapter 10 of Part 3) | section 202 | |
F599. . . | F599. . . | |
F599. . . | F599. . . | |
excluded services (in Chapter 7 of Part 2) | section 47(2) | |
F142. . . | F142. . . | |
exempt income (for the purposes of the employment income Parts) | section 8 | |
exempt income (for the purposes of Part 9) | section 566(3) | |
exempt income (for the purposes of Part 10) | section 656(2) | |
F142. . . | F142. . . | |
F142. . . | F142. . . | |
foreign employer | section 721(1) | |
F142. . . | F142. . . | |
F134former civil partner (in Chapter 2 of Part 6) | section 588(1) | |
F134former civil partner (in Chapter 6 of Part 9) | section 588(1) | |
former employee (in Part 8) | section 562(1) | |
former employer (in relation to former employee) (in Part 8) | section 563 | |
former employment (in relation to former employee) (in Part 8) | section 563 | |
F288. . . | F288. . . | |
general earnings | section 7(3) | |
F133generally accepted accounting practice | F210section 997 of ITA 2007 | |
F1. . . | F1. . . | |
House of Commons Members' Fund (in Chapter 12 of Part 9) | section 620 | |
the included amount (in Chapter 5 of Part 5) | section 369(2) | |
F361income withdrawal (in Chapter 5A of Part 9) | section 579D | |
F142. . . | F142. . . | |
individual learning account training (in Chapter 4 of Part 4) | section 256 | |
initial extra accessory (in Chapter 6 of Part 3) | section 126(2) | |
F131. . . | F131. . . | |
F211. . . | F211. . . | |
F2interest, in relation to securities (or shares) (in Chapters 1 to 5 of Part 7) | section 420(8) | |
interest in residence (in Chapter 7 of Part 4) | section 276(3) | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
last day on which car available (in Chapter 6 of Part 3) | section 116(2)(b) | |
later accessory (in Chapter 6 of Part 3) | section 126(3) | |
the limitation day (in Chapter 7 of Part 4) | section 274 | |
list price (of a car) (in Chapter 6 of Part 3) | section 123(1) | |
list price (of accessories) (in Chapter 6 of Part 3) | section 127 | |
listed provision (in Chapter 11 of Part 7) | section 549(2) | |
loan (in Chapter 7 of Part 3) | section 173(2)(a) | |
local authority | F212section 999 of ITA 2007 | |
F599. . . | F599. . . | |
F600lower-paid employment as a minister of religion (in the benefits code) | section 66(5) | |
lower-paid employment as a minister of religion (in Part 4) | section 290D | |
making a loan (in Chapter 7 of Part 3) | section 173(2)(b) | |
F228managed service company (in Chapter 9 of Part 2) | section 61B | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F2market value (in Chapters 1 to 5 of Part 7) | section 421(1) | |
F1. . . | F1. . . | |
market value (of asset) (in Chapter 10 of Part 3) | section 208 | |
material interest (in company) (in the benefits code) | section 68 | |
members of a person’s family | section 721(4) | |
member of a person’s family or household | section 721(5) | |
mileage allowance payments (in Chapter 2 of Part 4) | section 229(2) | |
motor cycle (in Chapter 2 of Part 4) | section 235(4) | |
national insurance contributions (in Chapter 8 of Part 2) | section 61(1) | |
F228national insurance contributions (in Chapter 9 of Part 2) | section 61J | |
F213net income | section 23 of ITA 2007 (as applied by section 989 of that Act | |
net taxable earnings (for the purposes of Part 2) | section 11 | |
net taxable specific income (for the purposes of Part 2) | section 12 | |
F142. . . | F142. . . | |
F142. . . | F142. . . | |
non-cash voucher | section 721(1) | |
F2non-commercial increase (in Chapter 3B of Part 7) | section 446K(4) | |
F2non-commercial reduction (in Chapter 3B of Part 7) | section 446K(4) | |
non-standard accessory (in Chapter 6 of Part 3) | section 125(4) | |
the normal self-assessment filing date | F214section 989 of ITA 2007 | |
notice | F215section 989 of ITA 2007 | |
F2the notional loan (in Chapter 3C of Part 7) | section 446S(1) | |
notional price (of a car) (in Chapter 6 of Part 3) | section 124(1) | |
notional price (of accessories) (in Chapter 6 of Part 3) | section 130(1) | |
office (in the employment income Parts) | section 5(3) | |
office (in Part 8) | section 564(3) | |
official rate of interest (in Chapter 7 of Part 3) | section 181 | |
F47offshore installation | F216sections 1001 and 1002 of ITA 2007 | |
F1. . . | F1. . . | |
F633optional remuneration arrangements (in the benefits code) | section 69A | |
ordinary commuting (in Chapter 3 of Part 4) | section 249 | |
ordinary share capital | F217section 989 of ITA 2007 | |
original pensioner (in Chapter 14 of Part 9) | section 630(1) | |
F397the overseas part | section 989 of ITA 2007 | |
passenger payments (in Chapter 2 of Part 4) | section 233(3) | |
F368partner (in Chapter 8 of Part 10) | section 681G | |
PAYE income | section 683 | |
PAYE provisions (in Chapter 8 of Part 2) | section 61(1) | |
F228PAYE provisions (in Chapter 9 of Part 2) | section 61J | |
PAYE regulations | section 684(8) | |
F1. . . | F1. . . | |
pension (in Chapter 3 of Part 9) | section 570 | |
pension (in Chapter 4 of Part 9) | section 574 | |
pension (in Chapter 11 of Part 9) | section 615(7) | |
pension (in Chapter 18 of Part 9) | section 647(4) | |
pension income | section 566(2) | |
F140pension under a registered pension scheme (in Chapter 5A of Part 9) | section 579D | |
permanent workplace (in Chapter 3 of Part 4) | section 249 | |
permanent workplace (in Part 5) | section 339(2) | |
person involved in providing the accommodation (in Chapter 5 of Part 3) | section 112 | |
person paying an amount (in Chapter 2 of Part 5) | section 333(2) | |
F142. . . | F142. . . | |
F142. . . | F142. . . | |
personal representatives | F218section 989 of ITA 2007 | |
persons providing a benefit (in Chapter 10 of Part 3) | section 209 | |
post-employment earnings (in relation to former employee) (in Part 8) | section 563 | |
premium (in relation to qualifying insurance contract) (in Chapter 2 of Part 5) | section 346(3)(a) | |
premium (in relation to qualifying insurance contract) (in Part 8) | section 558(3)(a) | |
pre-1973 pension (in Chapter 14 of Part 9) | section 630(2) | |
prescribed (in Chapter 5 of Part 11) | section 707 | |
price of a car (in Chapter 6 of Part 3) | section 122 | |
private use (in Chapter 6 of Part 3) | section 118(2) | |
the property, in relation to living accommodation (in Chapter 5 of Part 3) | section 113 | |
F142. . . | F142. . . | |
provision of cash voucher for employee (in Chapter 4 of Part 3) | section 74 | |
provision of credit-token for employee (in Chapter 4 of Part 3) | section 91(a) | |
provision of non-cash voucher for employee (in Chapter 4 of Part 3) | section 83 | |
F142. . . | F142. . . | |
the public offer (in Chapter 10 of Part 7) | section 544(1) | |
published price of the manufacturer, importer or distributor of the accessory (in Chapter 6 of Part 3) | section 129(1) | |
published price of the manufacturer, importer or distributor of the car (in relation to accessory) (in Chapter 6 of Part 3) | section 128(1) | |
qualifying accessory (in Chapter 6 of Part 3) | section 125(1) | |
qualifying journey (in Chapter 3 of Part 4) | section 249 | |
readily convertible asset (in Chapter 4 of Part 11) | section 702 | |
receipt of cash voucher by employee (in Chapter 4 of Part 3) | section 74 | |
receipt of money earnings (in Chapter 4 of Part 2) | section 18 | |
F265. . . | F265. . . | |
receipt of non-cash voucher by employee (in Chapter 4 of Part 3) | section 83 | |
receipt of non-money earnings (in Chapter 4 of Part 2) | section 19 | |
F266. . . | F266. . . | |
F2recognised stock exchange | F219section 1005 of ITA 2007 | |
F139registered pension scheme | F220section 150(2) of FA 2004 (as applied by section 989 of ITA 2007) | |
registrant discount (in Chapter 10 of Part 7) | section 547 | |
F142. . . | F142. . . | |
F1. . . | F1. . . | |
F142. . . | F142. . . | |
F141relevant benefits (in Chapter 2 of Part 6) | section 393B | |
F363relevant debt (in Part 11) | section 684(7AA) | |
F142. . . | F142. . . | |
relevant engagements (in Chapter 8 of Part 2) | section 50(4) | |
F2relevant period (in Chapter 3B of Part 7) | section 446O | |
relevant retirement benefit (in relation to former employee) (in Part 8) | section 563 | |
F228the relevant services (in Chapter 9 of Part 2) | section 61D(4) | |
F142. . . | F142. . . | |
relevant taxes (in Chapter 6 of Part 3) | section 171(1) | |
remittance of earnings (in Chapter 5 of Part 2) | section 33 | |
remuneration (in Chapter 7 of Part 2) | section 47(3) | |
residence, former residence and new residence (in Chapter 7 of Part 4) | section 276(1), (2) | |
F141responsible person (in Chapter 2 of Part 6) | section 399A | |
F2restricted securities and restricted interest in securities (in Chapters 2, 3A and 3B of Part 7) | sections 423 and 424 | |
F2restriction (in Chapters 2, 3A and 3B of Part 7) | section 432(8) | |
F142. . . | F142. . . | |
retirement benefits scheme (in Chapter 1 of Part 6) | section 387(1) | |
F142. . . | F142. . . | |
road fuel gas (in Chapter 6 of Part 3) | section 171(1) | |
F291. . . | F291. . . | |
F1. . . | F1. . . | |
F2secondary Class 1 contributions (in Chapter 5 of Part 7) | section 484(7) | |
F2securities (in Chapters 1 to 5 of Part 7) | section 420 | |
F2securities option (in Chapters 1 to 5 of Part 7) | section 420(8) | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F2shares (in Chapters 1 to 5 of Part 7) | section 420(8) | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
shares (in Chapter 10 of Part 7) | section 548(1) | |
ship (in Chapter 6 of Part 5) | section 385 | |
social security income | section 657(2) | |
F289. . . | F289. . . | |
specific employment income | section 7(4) | |
F397split year | section 989 of ITA 2007 | |
standard accessory (in Chapter 6 of Part 3) | section 125(4) | |
F134stepchild (in Parts 4 and 5 | F221section 246 of the Civil Partnership Act 2004 (as applied by section 989 of ITA 2007) | |
51% subsidiary | F222section 989 of ITA 2007 | |
Table A (in Part 10) | section 657(5) | |
Table B (in Part 10) | section 657(6) | |
tax | F328section 989 of ITA 2007 | |
F611. . . | F611. . . | |
taxable benefit (in Chapter 5 of Part 11) | section 707 | |
taxable benefits (in Part 10) | section 657(3) | |
taxable cheap loan (in Chapter 7 of Part 3) | section 175(2) | |
taxable earnings (in the employment income Parts) | section 10(2) | |
taxable employment under Part 2 (in the benefits code) | section 66(3) | |
taxable pension income (in Part 9) | section 567(3), (4) | |
the taxable period (in Chapter 5 of Part 3) | section F634102(1) | |
taxable person (in Chapter 3 of Part 6) | section 403(6) | |
taxable social security income (in Part 10) | section 658(4)-(7) | |
taxable specific income (in the employment income Parts) | section 10(3) | |
tax year | F223section 4(2) of ITA 2007 (as applied by section 989 of that Act) | |
the tax year (in Part 5) | section 327(2)(b) | |
the tax year 2003-04 etc. | F224section 4(4) of ITA 2007 (as applied by section 989 of that Act) | |
F1. . . | F1. . . | |
F1. . . | F1. . . | |
total income | F225section 23 of ITA 2007 (as applied by section 989 of that Act) | |
trade | F226section 989 of ITA 2007 | |
F581trade (in Chapter 10A of Part 4) | section 312I | |
transport voucher (in Chapter 4 of Part 3) | section 84(3) | |
F290tribunal | section 989 of ITA 2007 | |
United Kingdom | F227section 1013 of ITA 2007 | |
UK approval certificate (in Chapter 6 of Part 3) | section 171(1) | |
F397the UK part | section 989 of ITA 2007 | |
F291. . . | F291. . . | |
use of credit-token by employee (in Chapter 4 of Part 3) | section 91(b) | |
F2valuation date (in Chapter 3B of Part 7) | section 446O | |
F1. . . | F1. . . | |
van (in Chapter 6 of Part 3) | section 115(1) | |
van (in Chapter 2 of Part 4) | section 235(3) | |
van is available to an employee (in Chapter 6 of Part 3) | section 116(1) | |
van made available by reason of employment (in Chapter 6 of Part 3) | section 117 | |
F2variation, in relation to a restriction (in Chapter 2 of Part 7) | section 427(4) | |
F368week (in Chapter 8 of Part 10) | section 681H | |
F228the worker (in Chapter 9 of Part 2) | section 61D(4) | |
workplace (in Chapter 3 of Part 4) | section 249 | |
workplace (in Part 5) | section 339(1) | |
work-related training (in Chapter 4 of Part 4) | section 251(1) |
SCHEDULE 2F486... share incentive plans
Word in Sch. 2 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 14, 89 (with Sch. 8 paras. 90-96)
Part 1Introduction
Group plans
4
1
A SIP established by a company that controls other companies (a “parent company”) may extend to all or any of those other companies.
2
In the SIP code a SIP established by a parent company which so extends is referred to as a “group plan”.
3
In relation to a group plan a “constituent company” means—
a
the parent company, or
b
any other company to which for the time being the plan is expressed to extend.
4
Paragraph 91 deals with jointly owned companies and companies controlled by them.
Part 2General requirements
General requirements F488...: introduction
Words in Sch. 2 para. 6 cross-heading omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 17, 89 (with Sch. 8 paras. 90-96)
6
F5471
A SIP must meet the plan requirements contained in—
paragraph 7 (the purpose of the plan),
paragraph 8 (all-employee nature of plan),
paragraph 9 (participation on same terms),
paragraph 10 (no preferential treatment for directors and senior employees),
paragraph 11 (no further conditions), and
paragraph 12 (no loan arrangements).
F5462
The requirements of this Part are also to be taken to include the requirements of paragraphs 89 and 90 (plan termination notices etc).
The purpose of the plan
7
1
F4781A
The plan must not provide benefits to employees otherwise than in accordance with this Schedule.
1B
For example, the plan must not provide cash to employees as an alternative to shares.
1C
Sub-paragraph (1A) does not prohibit an employee receiving a benefit from a company as a result of any shares in that company being held on the employee's behalf under the plan where the employee would have received the same benefit from the company had the shares been acquired by the employee otherwise than by virtue of the plan.
F4812
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All-employee nature of plan
8
1
The plan must provide that every employee who—
a
meets the requirements of Part 3 of this Schedule (eligibility of individuals) in relation to an award of shares under the plan, and
b
is a UK resident taxpayer,
is eligible to participate in the award, and is invited to do so.
F2592
An employee is a UK resident taxpayer if—
a
the employee's earnings from the employment by reference to which the employee meets the employment requirement are (or would be if there were any) general earnings to which section 15 applies (earnings for year when employee UK resident) F431...
F431b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
The plan must not contain any feature which has or is likely to have the effect of discouraging any description of employees within sub-paragraph (1) from participating in an award of shares under the plan.
4
Sub-paragraph (3) does not apply to any provision required or authorised by this Schedule.
5
The plan may provide that an employee who—
a
meets the requirements of Part 3 of this Schedule (eligibility of individuals) in relation to an award of shares under the plan, but
b
is not a UK resident taxpayer (see sub-paragraph (2)),
is eligible to participate in the award, and may be invited to do so.
6
For the purposes of the SIP code an individual is a “qualifying employee”, in relation to an award of shares, if the individual—
a
is eligible to participate in it under sub-paragraph (1), or
b
is eligible to participate in it under sub-paragraph (5) and has been invited to do so.
Participation on same terms
9
1
The requirement of this paragraph is that—
a
every employee who is invited to participate in an award must be invited to participate on the same terms, and
b
those who do participate must actually do so on the same terms.
2
The requirement of this paragraph is infringed by the awarding of free shares by reference to factors other than those mentioned in sub-paragraph (3).
3
The requirement of this paragraph is not infringed by the awarding of free shares by reference to—
a
an employee’s remuneration,
b
an employee’s length of service, or
c
hours worked by an employee;
but this is subject to sub-paragraph (4).
4
If the awarding of free shares is by reference to more than one of the factors mentioned in sub-paragraph (3), the requirement of this paragraph is infringed unless—
a
each factor gives rise to a separate entitlement related to the level of remuneration, length of service or (as the case may be) hours worked, and
b
the total entitlement is the sum of those separate entitlements.
5
In the case of an award of free shares which provides for performance allowances, this paragraph has effect as provided in—
a
paragraph 41 (performance allowances: method one), or
b
paragraph 42 (performance allowances: method two).
6
In sub-paragraph (5) “performance allowances” has the meaning given in paragraph 34(4).
7
In the case of an award of partnership shares, the requirement of this paragraph is not infringed by the operation of any percentage limit specified in or under paragraph 46(2) or (3) (maximum amount of deductions) so far as the application of that limit to employees with different levels of remuneration results in deductions of different amounts or in the award of different numbers of shares.
No preferential treatment for directors and senior employees
10
1
The first requirement of this paragraph is that no feature of the plan has or is likely to have the effect of conferring benefits wholly or mainly—
a
on directors, or
b
on employees receiving the higher or highest levels of remuneration.
2
The second requirement of this paragraph applies only if the plan is established by a company that is a member of a group.
3
The requirement is that the identity of the company (or, if it is a group plan, the constituent companies) must not be such that the plan has or is likely to have the effect of conferring benefits wholly or mainly—
a
on employees of companies that are members of the group who receive the higher or highest levels of remuneration, or
b
on directors of such companies.
4
The requirements of this paragraph are not infringed by the awarding of free shares in circumstances where (as a result of paragraph 9(3) and (4)) that would not constitute an infringement of the requirements of paragraph 9.
No further conditions
11
No conditions apart from those required or authorised by this Schedule may be imposed on an employee’s participation in an award of shares under the plan.
No loan arrangements
12
1
The arrangements for the plan must not make any provision, or be associated in any way with any provision made, for loans to some or all of the employees of—
a
the company, or
b
in the case of a group plan, of any constituent company.
2
The operation of the plan must not be associated in any way with such loans.
3
In sub-paragraph (1) “arrangements” includes any scheme, agreement, undertaking or understanding, whether or not legally enforceable.
Part 3Eligibility of individuals
Eligibility of individuals: introduction
13
Time of eligibility to participate
14
1
The plan must provide that an individual may only participate in an award of shares if the individual is eligible to participate in the award at the appropriate time mentioned below.
2
In the case of an award of free shares, the appropriate time is the time when the award is made.
3
In the case of an award of partnership shares where the plan does not provide for an accumulation period, the appropriate time is the time of the deduction of the partnership share money relating to the award.
4
In the case of an award of partnership shares where the plan does provide for an accumulation period, the appropriate time is the time of the first deduction of partnership share money relating to the award.
5
In the case of an award of matching shares where the plan does not provide for an accumulation period, the appropriate time is the time of the deduction of the partnership share money relating to the award of partnership shares to which the matching shares relate.
6
In the case of an award of matching shares where the plan does provide for an accumulation period, the appropriate time is the time of the first deduction of partnership share money relating to the award of partnership shares to which the matching shares relate.
7
For the purposes of this paragraph an individual is eligible to participate in an award of shares under the plan if and only if the requirements of the plan are met as to—
a
employment (see paragraph 15),
ba
successive participation in connected SIPs (see paragraph 18A), F466...
F466c
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8
In the case of an individual within paragraph 8(5) (all-employee nature of plan: non-UK resident taxpayer), the individual is not eligible to participate in an award of shares under the plan unless (in addition to the requirements mentioned in sub-paragraph (7)) any further eligibility requirements of the plan are met.
The employment requirement
15
1
The plan must provide that an individual is not eligible to participate in an award of shares unless the individual meets the requirement in sub-paragraph (2).
2
The requirement is that the individual—
a
is an employee of—
i
the company, or
ii
in the case of a group plan, a constituent company, and
b
if the plan provides for a qualifying period, has at all times during that period been an employee of a qualifying company.
3
In the SIP code “the employment requirement” means the requirement in sub-paragraph (2).
4
This paragraph is supplemented—
a
as regards qualifying periods, by paragraph 16, and
b
as regards the meaning of “qualifying company”, by paragraph 17.
Qualifying periods
16
1
This paragraph applies if the plan provides for a qualifying period in relation to an award.
2
In the case of an award of free shares, the qualifying period must be a period of not more than 18 months ending with the date on which the award is made.
3
In the case of an award of partnership shares where the plan does not provide for an accumulation period, the qualifying period must be a period of not more than 18 months ending with the deduction of partnership share money relating to the award.
4
In the case of an award of partnership shares where the plan does provide for an accumulation period, the qualifying period must be a period of not more than 6 months ending with the start of the accumulation period relating to the award.
5
In the case of an award of matching shares where the plan does not provide for an accumulation period, the qualifying period must be a period of not more than 18 months ending with the deduction of partnership share money relating to the award of partnership shares to which the matching shares relate.
6
In the case of an award of matching shares where the plan does provide for an accumulation period, the qualifying period must be a period of not more than 6 months ending with the start of the accumulation period relating to the award of partnership shares to which the matching shares relate.
7
In relation to an award, the same qualifying period must apply in relation to all employees—
a
of the company, or
a
in the case of a group plan, of the constituent companies.
8
The plan may authorise the company to specify different qualifying periods in respect of different awards of shares, but the requirements in sub-paragraphs (2) to (7) apply to periods so specified.
Meaning of “qualifying company”
17
1
For the purposes of paragraph 15(2) “qualifying company” has the meaning given by this paragraph.
2
Except in the case of a group plan, “qualifying company” means—
a
the company, or
b
a company that, when the individual was employed by it, was an associated company—
i
of the company, or
ii
of another company qualifying under this paragraph.
3
In the case of a group plan, “qualifying company” means—
a
a company that is a constituent company at the end of the qualifying period mentioned in paragraph 15(2),
b
a company that, when the individual was employed by it, was a constituent company, or
c
a company that, when the individual was employed by it, was an associated company of—
i
(i)a company qualifying under paragraph (a) or (b), or
ii
another company qualifying under this paragraph.
Requirement not to participate in other SIPs
18
1
The plan must provide that an individual is not eligible to participate in an award of free, matching or partnership shares under the plan in a tax year if the individual—
F465a
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b
is at the same time to participate, in an award of shares under another F482Schedule 2 SIP established by the company or a connected company.
2
For the purposes of this paragraph an individual is to be treated as having participated in an award of free shares under a SIP if the individual would have participated in that award but for the individual’s failure to obtain a performance allowance (see paragraph 34).
3
In this paragraph “connected company” means— (a)a company which controls or is controlled by the company or which is controlled by a company which also controls the company, or (b)a company which is a member of a consortium owning the company or which is owned in part by the company as a member of a consortium.
F463Participation in more than one connected SIP in a tax year
Sch. 2 para. 18A and cross-heading inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 2
18A
1
The plan must provide that, if an individual participates in an award of shares under the plan in a tax year in which he has already participated in an award of shares under one or more other F564Schedule 2 SIPs established by the company or a connected company—
a
paragraph 35 (maximum annual award of free shares),
b
paragraph 46 (maximum amount of partnership share money deductions), and (c)paragraph 64 (limit on amount reinvested), apply as if the plan and the other plan or plans were a single plan.
2
In this paragraph “connected company” has the same meaning as in paragraph 18.
The “no material interest” requirement
F37119
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “material interest”
F37120
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Material interest: options and interests in SIPs
F37121
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “associate”
F37122
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “associate”: trustees of employee benefit trust
F37123
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “associate”: trustees of discretionary trust
F37124
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part 4Types of shares that may be awarded
Requirement as to listing etc.
27
1
Eligible shares must be—
a
shares of a class listed on a recognised stock exchange,
b
shares in a company which is not under the control of another company, F588...
F589ba
shares in a company which is subject to an employee-ownership trust, or
c
shares in a company which is under the control of a listed company.
2
A “listed company” is a company whose shares are listed on a recognised stock exchange, other than—
a
a close company, or
b
a company that would be a close company if resident in the United Kingdom.
F5873
But a company is not a close company for the purposes of sub-paragraph (2) if it is subject to an employee-ownership trust.
4
A company (“C”) is “subject to an employee-ownership trust” if—
a
C meets the trading requirement set out in section 312D,
b
C meets the indirect employee-ownership requirement,
c
neither C, nor any other company which is a member of the same group of companies as C, is a service company, and
d
C is not under the control of another company (ignoring for this purpose another company acting in its capacity as the trustee of the settlement by virtue of which C meets the indirect employee-ownership requirement).
5
Section 312E (the indirect employee-ownership requirement) applies for the purposes of sub-paragraph (4), subject to the following modifications—
a
subsection (3) of that section has effect as if—
i
the words “during the qualifying period” were omitted, and
ii
in paragraph (a) for “10 December 2013” there were substituted “
1 October 2014
”
, and
b
subsection (4) has effect as if for paragraph (b) there were substituted—
b
section 236L of that Act applies as if the reference in subsection (1)(c) of that section to the period of 12 months ending with the time in question were a reference to any time on or after 1 October 2014.
6
Section 312G (meaning of “service company”) applies for the purposes of sub-paragraph (4)(c), subject to the following modifications—
a
in subsection (3)(b), the reference to the company which makes the payment is to be read as a reference to C,
b
in subsection (4)(a), the reference to the time the payment is made is to be read as a reference to any time, and
c
in subsection (4)(b), the reference to any time before the time the payment is made is to be read as a reference to any time.
Only certain kinds of restriction allowed
F37330
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permitted restrictions: voting rights
F37331
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permitted restrictions: provision for forfeiture
F37332
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Permitted restrictions: pre-emption conditions
F37333
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part 5Free shares
Maximum annual award
35
1
The plan must provide that the initial market value of the free shares awarded to a participant in a tax year is not to exceed F565£3,600 .
2
The “initial market value” of shares means their market value on the date on which they are awarded.
F5822A
The Treasury may by order amend sub-paragraph (1) by substituting for any amount for the time being specified there an amount specified in the order.
F4093
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F4094
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The holding period
36
1
The plan must require the company in respect of each award of free shares to specify a period (“the holding period”) during which a participant is bound by contract with the company—
a
to permit the free shares awarded to the participant to remain in the hands of the trustees, and
b
not to assign, charge or otherwise dispose of the beneficial interest in the shares.
2
The holding period—
a
must be a period of at least 3 years but not more than 5 years, beginning with the date on which the shares in question are awarded to the participant, and
b
must be the same for all shares in the same award.
3
The plan—
a
may authorise the company to specify different holding periods from time to time, but
b
must prevent the company from increasing the holding period specified in respect of free shares that have been awarded under the plan.
4
The participant’s obligations with respect to the holding period are subject to—
a
paragraph 37 (power to authorise trustees to accept general offers etc.),
b
paragraph 79 (meeting by trustees of PAYE obligations), and
c
paragraph 90(5) (termination of plan: early removal of shares with participant’s consent).
5
If at any time in the holding period the participant ceases to be in relevant employment, the participant’s obligations with respect to that period come to an end.
Holding period: power of participant to direct trustees to accept general offers etc.
37
1
A participant may direct the trustees to do any of the following during the holding period.
2
The participant may direct the trustees to accept an offer for any of the participant’s free shares (“the original shares”) if the acceptance or agreement will result in a new holding being equated with the original shares for the purposes of capital gains tax.
3
The participant may direct the trustees to agree to a transaction affecting the participant’s free shares, or such of them as are of a particular class, if the transaction would be entered into as a result of a compromise, arrangement or scheme applicable to or affecting—
a
all the ordinary share capital of the company or, as the case may be, all the shares of the class in question, or
b
all the shares, or all the shares of the class in question, which are held by a class of shareholders identified otherwise than by reference to their employment or their participation in F566a Schedule 2 SIP.
4
The participant may direct the trustees to accept an offer for the participant’s free shares of—
a
cash, with or without other assets, or
b
a qualifying corporate bond (whether alone or with other assets or cash or both),
if the offer forms part of a general offer falling within sub-paragraph (5).
5
A general offer falls within this sub-paragraph if—
a
it is made to holders of shares of the same class as the participant’s or to holders of shares in the same company, and
b
it is made in the first instance on a condition such that if it is satisfied the person making the offer will have control of that company.
6
In sub-paragraph (5) “control” has the meaning given by F335sections 450 and 451 of CTA 2010.
F4347
For the purposes of sub-paragraph (5) it does not matter if the general offer is made to different shareholders by different means.
8
If in the case of a takeover offer (as defined in section 974 of the Companies Act 2006) there arises a right under section 983 of that Act to require the offeror to acquire the participant's free shares, or such of them as are of a particular class, the participant may direct the trustees to exercise that right.
Performance allowances: general application
38
A plan that provides for performance allowances in relation to an award must make provision for such allowances for all qualifying employees in relation to that award.
Performance allowances: targets and measures
39
1
A plan that provides for performance allowances must comply with the following requirements with respect to performance targets and performance measures.
2
The performance targets must be set for performance units comprising one or more employees.
3
The performance measures used must—
a
be based on business results or other objective criteria, and
b
be fair and objective measures of the performance of the units to which they are or may be applied.
4
For the purposes of an award of free shares under the plan an employee must not be a member of more than one performance unit.
Performance allowances: information to be given to employees
40
1
A plan that provides for performance allowances in relation to an award of shares must require the company—
a
to notify each qualifying employee who has accepted an invitation to participate in the award of the performance targets and measures which, under the plan, will be used to determine the number or value of free shares awarded to the employee, and
b
to notify all qualifying employees—
i
of the company, or
ii
in the case of a group plan, of any constituent company,
in general terms, of the performance measures to be used to determine the number or value of free shares to be awarded to each employee participating in the award.
2
The notices must be given as soon as reasonably practicable.
3
The company may exclude from the notice mentioned in sub-paragraph (1)(b) any information whose disclosure the company reasonably considers would prejudice commercial confidentiality.
Performance allowances: method one
41
1
The requirements of this paragraph are those contained in sub-paragraph (2).
2
In the case of an award in relation to which the plan provides for performance allowances—
a
at least 20% of the shares in the award must be awarded without reference to performance in accordance with the requirement of paragraph 9 (participation on same terms),
b
the remaining shares must be awarded by reference to performance, and
c
the highest number of shares within paragraph (b) awarded to an individual must not be more than four times the highest number of shares within paragraph (a) awarded to an individual.
3
In determining for the purposes of sub-paragraph (2)(a) whether the requirement of paragraph 9 is met, the shares to which sub-paragraph (2)(a) applies are to be treated as a separate award of free shares.
4
If the plan meets the requirements of this paragraph, the requirement of paragraph 9 does not apply to any provision of the plan relating to the awarding of shares within sub-paragraph (2)(b).
5
If free shares of different classes are awarded, the requirements of this paragraph apply separately in relation to each class.
Performance allowances: method two
42
1
The requirements of this paragraph are those contained in sub-paragraphs (2) and (3).
2
In the case of an award in relation to which the plan provides for performance allowances—
a
some or all of the shares in the award must be awarded by reference to performance, and
b
the awarding of the shares to qualifying employees who are members of the same performance unit must meet the requirement of paragraph 9 (participation on same terms).
3
The performance targets set in connection with such an award must be consistent targets (see sub-paragraph (6)).
4
In determining for the purposes of sub-paragraph (2)(b) whether the requirement of paragraph 9 is met, the free shares awarded in respect of each performance unit are to be treated as a separate award of free shares.
5
If this method is used, nothing in paragraph 9 requires the awarding of shares to members of different performance units to be on the same terms.
6
In sub-paragraph (3) “consistent targets” means targets which, at the time when they are set in accordance with the plan, can reasonably be viewed as being comparable in terms of the likelihood of their being met by the performance units to which they apply.
Part 6Partnership shares
Deductions from salary
45
1
The plan must provide for a partnership share agreement to be given effect by deductions from the employee’s salary.
2
Amounts so deducted are referred to in the SIP code as “partnership share money”.
3
The partnership share agreement must specify—
a
what amounts are to be deducted, and
b
at what intervals;
but this does not prevent the employee and the company agreeing to vary those amounts or intervals.
4
For the purposes of sub-paragraph (3)(a) the agreement may specify a percentage of the employee’s salary.
5
The plan must require the employer company to calculate the amounts and intervals having regard to paragraph 46 (maximum amount of deductions from salary).
6
In sub-paragraph (5) “the employer company” means the company by reference to which the employee meets the employment requirement in relation to the plan.
Maximum amount of deductions
46
1
The amount of partnership share money deducted from an employee’s salary must not exceed F569£1,800 in any tax year.
2
The amount of partnership share money deducted from an employee’s salary F17for any tax year must not exceed 10% of the employee’s salary for the tax year.
3
The plan may authorise the company to specify lower limits than those specified in sub-paragraphs (1) and (2).
4
If it does so, different limits may be specified in relation to different awards of shares.
F164A
A limit lower than that specified in sub-paragraph (2) may be framed—
a
as a proposition substituting a percentage lower than that so specified, or
b
as a proposition that a particular description of earnings is not to be regarded as forming part of an employee’s salary for the purposes of that sub-paragraph.
5
Any amount deducted in excess of that allowed by sub-paragraph (1) or (2), or any lower limit in the plan, must be paid over to the employee as soon as practicable.
F5836
The Treasury may by order amend sub-paragraph (1) by substituting for any amount for the time being specified there an amount specified in the order.
Minimum amount of deductions
47
1
The plan may provide that the amount to be deducted under a partnership share agreement F18on any occasion must not be less than a minimum amount specified in the plan.
2
The specified minimum amount must not be greater than £10.
F193
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notice of possible effect of deductions on benefit entitlement
48
1
The plan must provide that the company may not enter into a partnership share agreement with an employee unless the agreement contains a notice under this paragraph.
2
A notice under this paragraph is a notice in a prescribed form containing prescribed information as to the possible effect of deductions on an employee’s entitlement to social security benefits, statutory sick pay and statutory maternity pay.
3
In this paragraph “prescribed” means prescribed by regulations made by F125the Commissioners for Her Majesty’s Revenue and Customs.
Application of money deducted where no accumulation periods
50
1
If the plan does not provide for an accumulation period, it must provide for partnership share money to be applied by the trustees in acquiring partnership shares on behalf of the employee on the acquisition date.
2
The number of shares awarded to each employee must be determined in accordance with the market value of the shares on the acquisition date.
3
Sub-paragraphs (1) and (2) are subject to paragraph 53 (restriction on number of shares awarded).
4
In those sub-paragraphs “the acquisition date” means the date set by the trustees in relation to the award of partnership shares, which must be not later than 30 days after the last date on which the partnership share money to be applied in acquiring the shares was deducted.
5
Any surplus partnership share money remaining after the acquisition of shares by the trustees—
a
may with the agreement of the employee be carried forward and added to the amount of the next deduction, and
b
in any other case must be paid over to the employee as soon as practicable.
Accumulation periods
51
1
The plan may provide for accumulation periods not exceeding 12 months.
2
If the plan does so, the following provisions apply.
3
The partnership share agreements—
a
must specify when each accumulation period begins and ends;
b
may specify that an accumulation period comes to an end on the occurrence of a specified event.
4
However—
a
the beginning of the first accumulation period must not be later than the date on which the first deduction of partnership share money is made; and
b
the accumulation period which applies in relation to each award of partnership shares must be the same for all individuals entering into the partnership share agreements.
5
The plan may also provide that if—
a
during an accumulation period, a transaction occurs in relation to any of the shares (“the original holding”) to be acquired under a partnership share agreement which results in a new holding of shares being equated with the original holding for the purposes of capital gains tax, and
b
the employee consents,
the partnership share agreement is to have effect after the time of the transaction as if it were an agreement for the purchase of the shares comprised in the new holding.
Application of money deducted in accumulation period
52
1
This paragraph applies if the plan provides for one or more accumulation periods.
2
The plan must provide for the partnership share money deducted in each accumulation period under a partnership share agreement to be applied by the trustees in acquiring partnership shares on behalf of the employee on the acquisition date.
F3742A
The number of shares awarded to the employee must be determined in accordance with one of sub-paragraphs (3), (3A) and (3B) and the partnership share agreement must specify which one of those sub-paragraphs is to apply for the purposes of the agreement.
3
F376If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the lower of—
a
the market value of the shares at the beginning of the accumulation period, and
b
the market value of the shares on the acquisition date.
F3753A
If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares at the beginning of the accumulation period.
3B
If the agreement specifies that this sub-paragraph is to apply, the number of shares awarded to the employee must be determined in accordance with the market value of the shares on the acquisition date.
4
Sub-paragraphs (2) F377to (3B) are subject to sub-paragraphs (7) and (8) and to paragraph 53 (restriction on number of shares awarded).
5
In sub-paragraphs (2) F377to (3B) “the acquisition date” means the date set by the trustees in relation to the award of partnership shares, which must be not later than 30 days after the end of the accumulation period which applies in relation to the award.
6
Any surplus partnership share money remaining after the acquisition of shares by the trustees—
a
may with the agreement of the employee be carried forward to the next accumulation period, and
b
in any other case must be paid over to the employee as soon as practicable.
7
The plan must provide that where the employee ceases to be in relevant employment during an accumulation period, any partnership share money deducted in the period is to be paid over to the individual as soon as practicable.
8
The partnership share agreement may provide that, where an accumulation period comes to an end on the occurrence of a specified event, the partnership share money deducted in that period must be paid over to the individual as soon as practicable instead of being applied in acquiring shares.
Stopping and re-starting deductions
54
1
The plan must provide that an employee may at any time give notice to the company to stop deductions under a partnership share agreement.
2
The plan must provide that, unless a later date is specified in the notice, the company must, on receiving a notice within sub-paragraph (1), ensure within 30 days after receipt of the notice that no further deductions are made by it under the partnership share agreement.
3
The plan must also provide that an employee who has stopped deductions—
a
may subsequently give notice to the company to re-start deductions under the agreement, but
b
may not make up deductions that have been missed.
4
If the plan makes provision for one or more accumulation periods, it may prevent an employee re-starting deductions more than once in any accumulation period.
5
The plan must provide that, unless a later date is specified in the notice, the company must, on receiving a notice within sub-paragraph (3), re-start deductions under the partnership share agreement not later than the re-start date.
6
“The re-start date” means the date of the first deduction due under the partnership share agreement more than 30 days after receipt of the notice under sub-paragraph (3).
7
In this paragraph “notice” means notice in writing.
Part 7Matching shares
Part 8Cash dividends and dividend shares
Reinvestment of cash dividends
62
1
A SIP may provide that, where the company so directs, the trustees must apply F392some or all of the cash dividends in respect of plan shares held on behalf of—
a
all participants, or
b
all participants who elect to reinvest their dividends,
in acquiring further shares on their behalf.
F3911A
The company's direction must set out—
a
the amount of the cash dividends to be applied as mentioned in sub-paragraph (1), or
b
how that amount is to be determined.
2
Sub-paragraph (1) is subject to paragraph 63 (requirements to be met as regards cash dividends).
3
In the SIP code—
a
the application of cash dividends as mentioned in sub-paragraph (1) is referred to as “reinvestment”; and
b
the further plan shares acquired are referred to as “dividend shares”.
4
The company may F393modify or revoke a direction requiring the reinvestment of cash dividends.
5
References in the SIP code to the trustees acquiring dividend shares on behalf of a participant include their appropriating to a participant shares already held by them.
Requirements to be met as regards cash dividends
63
1
If a SIP makes the provision authorised by paragraph 62(1) (reinvestment of cash dividends), the following paragraphs apply—
F437...
paragraph 65 (general requirements as to dividend shares),
paragraph 66 (acquisition of dividend shares),
paragraph 67 (holding period for dividend shares), and
paragraph 68 (reinvestment: amounts to be carried forward).
2
The plan must meet any plan requirements contained in those paragraphs.
3
A SIP must in any event meet the plan requirement contained in paragraph 69 (cash dividends not required to be reinvested).
Limit on amount reinvested
F43864
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinvestment: amounts to be carried forward
68
F3781
This paragraph applies where an amount is not reinvested because it is not sufficient to acquire a share.
2
The amount may be retained by the trustees and carried forward to be added to the amount of the next cash dividend to be reinvested.
3
If so retained, the trustees must hold the amount so as to be separately identifiable for the purposes of sub-paragraphs (4) and (5).
4
An amount retained under this paragraph must be paid over to the participant—
F379a
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b
if F380... the participant ceases to be in relevant employment (see paragraph 95), or
c
if F380... a plan termination notice is issued in respect of the plan (see paragraph 90).
5
An amount required to be paid over to the participant under sub-paragraph (4) must be paid over as soon as practicable.
F3816
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash dividends where no requirement to reinvest
69
1
The plan must require any distributable cash dividends in respect of plan shares held on behalf of a participant to be paid over to the participant as soon as practicable.
2
“Distributable cash dividends” means cash dividends F439so far as they are not required to be reinvested under the plan.
Part 9Trustees
Requirements etc. relating to trustees: introduction
70
1
A SIP must meet the plan requirements contained in—
paragraph 71(1) and (2) (establishment of trustees), and
paragraph 79 (meeting by trustees of PAYE obligations).
2
The following provisions also relate to the trustees—
paragraph 71(3) to (6) (the trust instrument and classes of trustees)
paragraph 72 (duty to act in accordance with participant’s directions),
paragraph 73 (duty not to dispose of plan shares),
paragraph 74 (duty to make payments to participants),
paragraph 75 (duty to give notice of award of shares etc.),
paragraph 76 (power to borrow),
paragraph 77 (power to raise funds to subscribe for rights issue), F411and
F412...
paragraph 80 (other duties in relation to tax liabilities).
Establishment of trustees
71
1
The plan must provide for the establishment of a body of trustees consisting of persons resident in the United Kingdom (“the trustees”).
2
The plan must provide that the trustees are required—
a
in the case of free or matching shares, to acquire shares and appropriate them to employees in accordance with the plan,
b
in the case of partnership shares, to apply partnership share money in acquiring shares on behalf of employees in accordance with the plan, and
c
in the case of dividend shares, to apply cash dividends in acquiring shares on behalf of participants in accordance with the plan.
3
The functions of the trustees with respect to shares held by them must be regulated by a trust (“the plan trust”)—
a
which is constituted under the law of a part of the United Kingdom, and
b
the terms of which are embodied in an instrument which complies with the requirements of this Part of this Schedule (“the trust instrument”).
4
The trust instrument must not contain any terms which are neither essential nor reasonably incidental to complying with the requirements of this Part of this Schedule.
5
The trust instrument may contain terms that—
a
define who is a professional trustee and who is a non-professional trustee;
b
require the trustees to include at least one person who is a professional trustee and at least two who are non-professional trustees;
c
require at least half of the non-professional trustees to have been, before being appointed as trustees, selected in accordance with a specified process of selection;
d
require the trustees so selected to be persons who are employees of the company or, in the case of a group plan, of a participating company.
6
The terms mentioned in sub-paragraph (5) are to be regarded as reasonably incidental to complying with the requirements of this Part of this Schedule for the purposes of sub-paragraph (4).
F10Duty to monitor participants in connected schemes
Sch. 2 para. 71A and cross-heading inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 6
71A
The trust instrument must require the trustees to maintain records of participants who have participated in one or more other F568Schedule 2 SIPs established by the company or a connected company.
Duty to act in accordance with participant’s directions
72
1
The trust instrument must require the trustees—
a
to dispose of a participant’s plan shares, and
b
to deal with any right conferred in respect of any of a participant’s plan shares to be allotted other shares, securities or rights of any description,
only in accordance with a direction given by or on behalf of the participant.
2
Sub-paragraph (1) is subject to—
a
paragraph 73 (duty not to dispose of plan shares), and
b
any provision in the plan made in accordance with paragraph 79 (meeting by trustees of PAYE obligations).
3
The plan may provide for participants to give such general directions, to such effect and in such terms, as are specified in the plan.
Duty to make payments to participants
74
1
The trust instrument must require the trustees to pay over to a participant as soon as practicable—
a
any money received by them in respect of, or by reference to, any of the participant’s shares, or
b
any money’s worth so received unless it consists of new shares within the meaning of paragraph 87 (company reconstructions).
2
Sub-paragraph (1) is subject to—
a
paragraphs 62 to 69 (cash dividends and dividend shares),
b
the trustees' obligations under sections 510 to 514 (PAYE: shares ceasing to be subject to plan; capital receipts), and
c
the trustees' PAYE obligations.
Power of trustees to borrow
76
The trust instrument may provide that the trustees have power to borrow—
a
to acquire shares for the purposes of the plan, and
b
for such other purposes as may be specified in the trust instrument.
Power of trustees to raise funds to subscribe for rights issue
77
1
The trustees may dispose of some of the rights arising under a rights issue in order to be able to obtain sufficient funds to exercise other such rights.
2
The power conferred by sub-paragraph (1) is subject to paragraph 72 (duty to act in accordance with participant’s directions).
Meeting by trustees of PAYE obligations
79
1
The plan must make provision to ensure that, where a PAYE obligation is imposed on the trustees as a result of any of a participant’s plan shares ceasing to be subject to the plan, the trustees are able to meet that obligation—
a
by disposing of any of those shares, or
b
if there are any remaining plan shares of the participant, by disposing of any of those shares, or
c
by the participant paying to the trustees a sum equal to the amount required to discharge the obligation.
2
A “PAYE obligation” includes an obligation under any of sections 510 to 512 (PAYE: shares ceasing to be subject to the plan).
3
For the purposes of sub-paragraph (1) any reference to the trustees disposing of shares includes a reference to their acquiring the shares as trustees for the purposes of the trust.
4
A disposal of any of the participant’s plan shares in accordance with provision made under sub-paragraph (1)(b) may give rise to a charge to tax under—
section 505 (charge on free or matching shares ceasing to be subject to plan),
section 506 (charge on partnership shares ceasing to be subject to plan), or
F84Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.) as a result of section 394(2) or 407(2) of that Act (distribution or dividend payment when dividend shares cease to be subject to plan).
Other duties of trustees in relation to tax liabilities
80
1
The trust instrument must require the trustees to maintain such records as may be necessary for the purposes of—
a
their own PAYE obligations, or
b
the PAYE obligations of the employer company so far as they relate to the plan.
2
In sub-paragraph (1)—
“PAYE obligations”, in relation to the trustees, includes obligations under sections 510 to 514 (PAYE: shares ceasing to be subject to plan and capital receipts);
“the employer company” has the same meaning as in section 513.
3
The trust instrument must require the trustees, where the participant becomes liable to income tax under—
a
this Act, or
b
F85Chapter 3 or 4 of Part 4 of ITTOIA 2005 (dividends etc. from UK or non-UK resident companies etc.),
by reason of the occurrence of any event, to inform the participant of any facts relevant to determining that liability.
4
F329Sections 1105 to 1108 of CTA 2010 (information relating to distributions to be provided by nominee) apply in relation to—
a
the balance of any cash dividend paid over to the participant under paragraph 64(3),
b
any amount paid over to a participant under paragraph 68(4) (dividend retained for reinvestment and later paid out), or
c
any relevant dividend (see sub-paragraph (5)),
as if it were a payment to which F330section 1105(1)(b) of that Act applied (and, in the case of an amount within paragraph (b) above, as if the cash dividend had been paid at the time of the payment to the participant under paragraph 68(4)).
5
In a case where dividend shares cease to be subject to the plan before the end of the period of 3 years beginning with the date on which they were acquired on a participant’s behalf, the cash dividend applied to acquire dividend shares on the participant’s behalf is a “relevant dividend” for the purposes of sub-paragraph (4)(c).
F490PART 10Notification of plans, annual returns and enquiries
Sch. 2 Pt. 10 substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 28, 89 (with Sch. 8 paras. 90-96)
Notice of SIP to be given to HMRC
81A
1
For a SIP to be a Schedule 2 SIP, notice of the SIP must be given to Her Majesty's Revenue and Customs (“HMRC”).
2
The notice must—
a
be given by the company,
b
contain, or be accompanied by, such information as HMRC may require, and
c
contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.
3
A declaration within this sub-paragraph is a declaration—
a
that the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP, and
b
if the declaration is made after the first date on which awards of shares are made under the SIP (“the first award date”), that those requirements—
i
were met in relation to those awards of shares, and
ii
have otherwise been met in relation to the SIP at all times on or after the first award date when shares appropriated to, or acquired on behalf of, individuals under the SIP have been held under the SIP.
4
If notice is given under this paragraph in relation to a SIP, for the purposes of the SIP code the SIP is to be a Schedule 2 SIP at all times on and after the relevant date (but not before that date).
5
But if the notice is given after the initial notification deadline, the SIP is to be a Schedule 2 SIP only from the beginning of the relevant tax year.
F6285A
Sub-paragraph (5) does not apply if the company satisfies HMRC (or, on an appeal under paragraph 81K, the tribunal) that there is a reasonable excuse for failing to give notice on or before the initial notification deadline.
5B
Paragraph 81C(9) (what constitutes a reasonable excuse) applies for the purposes of sub-paragraph (5A).
5C
Where HMRC are required under sub-paragraph (5A) to consider whether there was a reasonable excuse, HMRC must notify the company of their decision within the period of 45 days beginning with the day on which HMRC received the company's request to consider the excuse.
5D
Where HMRC are required to notify the company as specified in sub-paragraph (5C) but do not do so—
a
HMRC are to be treated as having decided that there was no reasonable excuse, and
b
HMRC must notify the company of the decision which they are treated as having made.
6
For the purposes of this Part—
“the initial notification deadline” is 6 July in the tax year following that in which the first award date falls,
“the relevant date” is—
- a
the date on which the declaration within sub-paragraph (3) is made, or
- b
if that declaration is made after the first award date, the first award date, and
- a
“the relevant tax year” is—
- a
the tax year in which the notice under this paragraph is given, or
- b
if that notice is given on or before 6 July in that tax year, the preceding tax year.
- a
7
Sub-paragraph (4) is subject to the following paragraphs of this Part.
Annual returns
81B
1
This paragraph applies if notice is given in relation to a SIP under paragraph 81A.
2
The company must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).
3
If paragraph 81A(5) applies in relation to the SIP, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.
4
A return for a tax year must—
a
contain, or be accompanied by, such information as HMRC may require, and
b
be given on or before 6 July in the following tax year.
5
The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—
a
any person who has participated in the SIP, or
b
any other person whose liability to tax the operation of the SIP is relevant to.
6
If during a tax year an alteration is made in a key feature of—
a
the SIP, or
b
the plan trust,
the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.
7
A declaration within this sub-paragraph is a declaration that the alteration has not caused the requirements of Parts 2 to 9 of this Schedule not to be met in relation to the SIP.
8
For the purposes of sub-paragraph (6) a “key feature” of a SIP or plan trust is a provision of the SIP or plan trust which is necessary in order for the requirements of Parts 2 to 9 of this Schedule to be met in relation to the SIP.
9
A return is not required for any tax year following that in which the termination condition is met in relation to the SIP.
10
For the purposes of this Part “the termination condition” is met in relation to a SIP when—
a
a plan termination notice has been issued in relation to it under paragraph 89, and
b
all the requirements under paragraphs 56(3), 68(4)(c) and 90 have been met by the trustees.
11
If the company becomes aware that—
a
anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,
b
anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or
c
any other error or inaccuracy has occurred in relation to a return for a tax year,
the company must give an amended return correcting the position to HMRC without delay.
81C
1
This paragraph applies if the company fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 81B(4)(b) (“the date for delivery”).
2
The company is liable for a penalty of £100.
3
If the company's failure continues after the end of the period of 3 months beginning with the date for delivery, the company is liable for a further penalty of £300.
4
If the company's failure continues after the end of the period of 6 months beginning with the date for delivery, the company is liable for a further penalty of £300.
5
The company is liable for a further penalty under this sub-paragraph if—
a
the company's failure continues after the end of the period of 9 months beginning with the date for delivery,
b
HMRC decide that such a penalty should be payable, and
c
HMRC give notice to the company specifying the period in respect of which the penalty is payable.
(The company may be liable for more than one penalty under this sub-paragraph.)
6
The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).
7
The period specified in the notice under sub-paragraph (5)(c)—
a
may begin earlier than the date on which the notice is given, but
b
may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.
8
Liability for a penalty under this paragraph does not arise if the company satisfies HMRC (or, on an appeal under paragraph 81K, the tribunal) that there is a reasonable excuse for its failure.
9
For the purposes of sub-paragraph (8)—
a
an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the company's control,
b
where the company relies on any other person to do anything, that is not a reasonable excuse unless the company took reasonable care to avoid the failure, and
c
where the company had a reasonable excuse for the failure but the excuse ceased, the company is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.
Notices and returns to be given electronically etc
81D
1
A notice under paragraph 81A, and any information accompanying the notice, must be given electronically.
2
A return under paragraph 81B, and any information accompanying the return, must be given electronically.
3
But, if HMRC consider it appropriate to do so, HMRC may allow the company to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.
4
The Commissioners for Her Majesty's Revenue and Customs—
a
must prescribe how notices, returns and accompanying information are to be given electronically;
b
may make different provision for different cases or circumstances.
81E
1
This paragraph applies if a return under paragraph 81B, or any information accompanying such a return—
a
is given otherwise than in accordance with paragraph 81D, or
b
contains a material inaccuracy—
i
which is careless or deliberate, or
ii
which is not corrected as required by paragraph 81B(11).
2
The company is liable for a penalty of an amount decided by HMRC.
3
The penalty must not exceed £5,000.
4
For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the company to take reasonable care.
Enquiries
81F
1
This paragraph applies if notice is given in relation to a SIP under paragraph 81A.
2
HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than—
a
6 July in the tax year following the tax year in which the initial notification deadline falls, or
b
if the notice under paragraph 81A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.
3
HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 81B(7) is given to HMRC.
4
Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 9 of this Schedule—
a
are not met in relation to the SIP, or
b
have not been met in relation to the SIP.
5
HMRC may enquire into the SIP if HMRC give notice to the company of HMRC's intention to do so.
6
Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition has been met in relation to the SIP.
81G
1
An enquiry under paragraph 81F(2), (3) or (5) is completed when HMRC give the company a notice (a “closure notice”) stating—
a
that HMRC have completed the enquiry, and
b
that—
i
paragraph 81H is to apply,
ii
paragraph 81I is to apply, or
iii
neither paragraph 81H nor paragraph 81I is to apply.
2
If the company receives notice under paragraph 81F(2), (3) or (5), the company may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.
3
The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).
4
The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.
81H
1
This paragraph applies if HMRC decide—
a
that requirements of Parts 2 to 9 of this Schedule—
i
are not met in relation to the SIP, or
ii
have not been met in relation to the SIP, and
b
that the situation is, or was, so serious that this paragraph should apply.
2
If this paragraph applies—
a
the SIP is not to be a Schedule 2 SIP with effect from—
i
such relevant time as is specified in the closure notice, or
ii
if no relevant time is specified, the time of the giving of the closure notice, and
b
the company is liable for a penalty of an amount decided by HMRC.
3
Sub-paragraph (2)(a) does not affect the operation of the SIP code in relation to shares appropriated to, or acquired on behalf of, an individual under the SIP before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
4
In particular, if the SIP was a Schedule 2 SIP when the shares were appropriated to, or acquired on behalf of, the individual, the SIP is to continue to be a Schedule 2 SIP in relation to those shares.
5
The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
a
the total income tax for which participants in the SIP have not been liable, or will not be liable in the future, and
b
the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the SIP having been a Schedule 2 SIP at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
6
The liabilities covered by sub-paragraph (5) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraphs (3) and (4).
7
In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 9 of this Schedule were not met in relation to the SIP.
81I
1
This paragraph applies if HMRC decide—
a
that requirements of Parts 2 to 9 of this Schedule—
i
are not met in relation to the SIP, or
ii
have not been met in relation to the SIP, but
b
that the situation is not, or was not, so serious that paragraph 81H should apply.
2
If this paragraph applies, the company—
a
is liable for a penalty of an amount decided by HMRC, and
b
must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 9 of this Schedule are met in relation to the SIP.
3
The penalty under sub-paragraph (2)(a) must not exceed £5,000.
4
In sub-paragraph (2)(b) “the relevant day” means—
a
the last day of the period in which notice of an appeal under paragraph 81K(2)(b) may be given, or
b
if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.
5
Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the SIP before the giving of the closure notice or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).
6
If the company fails to comply with sub-paragraph (2)(b), HMRC may give the company a notice stating that that is the case (a “default notice”).
7
If the company is given a default notice—
a
the SIP is not to be a Schedule 2 SIP with effect from—
i
such relevant time as is specified in the default notice, or
ii
if no relevant time is specified, the time of the giving of the default notice, and
b
the company is liable for a further penalty of an amount decided by HMRC.
8
Sub-paragraph (7)(a) does not affect the operation of the SIP code in relation to shares appropriated to, or acquired on behalf of, an individual under the SIP before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
9
In particular, if the SIP was a Schedule 2 SIP when the shares were appropriated to, or acquired on behalf of, the individual, the SIP is to continue to be a Schedule 2 SIP in relation to those shares.
10
The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
a
the total income tax for which participants in the SIP have not been liable, or will not be liable in the future, and
b
the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the SIP having been a Schedule 2 SIP at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
11
The liabilities covered by sub-paragraph (10) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraphs (8) and (9).
12
In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 9 of this Schedule were not met in relation to the SIP.
Assessment of penalties
81J
1
This paragraph applies if the company is liable for a penalty under this Part.
2
HMRC must assess the penalty and notify the company of the assessment.
3
Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the company becomes liable for the penalty.
4
In the case of a penalty under paragraph 81E(1)(b), the assessment must be made no later than—
a
12 months after the date on which HMRC become aware of the inaccuracy, and
b
6 years after the date on which the company becomes liable for the penalty.
5
In the case of a penalty under paragraph 81H(2)(b) or 81I(2)(a) or (7)(b) where notice of appeal is given under paragraph 81K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.
6
A penalty payable under this Part must be paid—
a
no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the company, or
b
if notice of appeal is given against the penalty under paragraph 81K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.
7
The penalty may be enforced as if it were corporation tax or, if the company is not within the charge to corporation tax, income tax charged in an assessment and due and payable.
8
Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.
Appeals
81K
F615A1
The company may appeal against a decision of HMRC under paragraph 81A(5A) that there was no reasonable excuse for its failure to give notice on or before the initial notification deadline.
1
The company may appeal against a decision of HMRC that the company is liable for a penalty under paragraph 81C or 81E.
2
The company may appeal against—
a
a decision of HMRC mentioned in paragraph 81H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;
b
a decision of HMRC mentioned in paragraph 81I(1).
3
The company may appeal against a decision of HMRC—
a
to give the company a default notice under paragraph 81I;
b
to specify, or not to specify, a relevant time in the default notice.
4
The company may appeal against a decision of HMRC as to the amount of a penalty payable by the company under this Part.
5
The company may appeal against a decision of an officer of Revenue and Customs to give a direction under section 998 of CTA 2009 (withdrawal of corporation tax deductions in relation to a Schedule 2 SIP).
6
Notice of appeal must be given to HMRC no later than 30 days after the date on which—
F616za
in the case of an appeal under sub-paragraph (A1), notice of HMRC's decision is given to the company;
a
in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 81J(2) is given to the company;
b
in the case of an appeal under sub-paragraph (2), the closure notice is given;
c
in the case of an appeal under sub-paragraph (3), the default notice is given;
d
in the case of an appeal under sub-paragraph (5), notice of the officer's decision is given to the company.
7
On an appeal under sub-paragraph F617(A1), (1), (3)(a) or (5) which is notified to the tribunal, the tribunal may affirm or cancel the decision.
8
On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—
a
affirm or cancel the decision, or
b
substitute for the decision another decision which HMRC had power to make.
9
On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—
a
affirm the amount of the penalty decided, or
b
substitute another amount for that amount.
10
Subject to this paragraph and paragraph 81J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the company is not within the charge to corporation tax, income tax.
F610PART 10ADisqualifying events
Sch. 2 Pt. 10A inserted (with effect in accordance with Sch. 3 para. 2(4) of the amending Act) by Finance Act 2016 (c. 24), Sch. 3 para. 2(3)
85A
1
A SIP ceases to be a Schedule 2 SIP if (and with effect from the time when) a disqualifying event occurs.
2
The following are disqualifying events—
a
an alteration being made in—
i
the share capital of a company any of whose shares are subject to the plan trust, or
ii
the rights attaching to any shares of such a company,
that materially affects the value of the shares that are subject to the plan trust;
b
shares of a class of shares that is subject to the plan trust receiving different treatment in any respect from the other shares of that class.
3
Sub-paragraph (2)(b) applies in particular to different treatment in respect of—
a
the dividend payable,
b
repayment, or
c
any offer of substituted or additional shares, securities or rights of any description in respect of the shares.
4
Sub-paragraph (2)(b) does not however apply where the difference in treatment arises from—
a
a key feature of the plan, or
b
any of the participants' shares being subject to any restriction.
5
Nor does sub-paragraph (2)(b) apply as a result only of the fact that shares which have been newly issued receive, in respect of dividends payable with respect to a period beginning before the date on which they were issued, treatment less favourable than that accorded to shares issued before that date.
6
For the purposes of this paragraph a “key feature” of a plan is a provision of it that is necessary to meet the requirements of this Schedule.
7
This paragraph does not affect the operation of the SIP code in relation to shares awarded to participants in the plan before the disqualifying event occurred.
Part 11Supplementary provisions
Company reconstructions
86
1
In this Part of this Schedule a “company reconstruction” means a transaction to which this paragraph applies.
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 F321paragraph C or D in section 1000(1) of CTA 2010 (distributions);
b
share capital issued in circumstances such that F322section 1022(3) of CTA 2010 (bonus issues) applies;
c
share capital to which F320section 410 of ITTOIA 2005 (stock dividends) applies that is issued in a case where subsection (2) or (3) of that section applies.
Consequences of company reconstructions
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—
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),
F86ii
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.
Termination of plan
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.
2
The plan must provide that, where a plan termination notice is issued, a copy of the notice must be given, without delay, to—
F570a
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
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 notice
90
1
This paragraph applies if the company has issued a plan termination notice under paragraph 89.
2
No further shares may be F571appropriated to, or acquired on behalf of, 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 companies
91
1
This paragraph applies for the purposes of the provisions of the SIP code relating to group plans.
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 value
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.
C3C2F4412
For the purposes of this Schedule the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.
3
Where the market value of shares on any date has to be determined for the purposes of the SIP code, F124an 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 information
93
F5081
An officer of Revenue and Customs may by notice require a person to provide the officer with any information—
a
which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs 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 F124an officer of Revenue and Customs —
F509i
to check anything contained in a notice under paragraph 81A or a return under paragraph 81B or to check any information accompanying such a notice or return, or”, and
ii
to determine the liability to tax, including capital gains tax, of any person who has participated in a plan F510or any other person whose liability to tax the operation of a plan is relevant to, 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”
94
1
For the purposes of the SIP code one company is an “associated company” of another company at a given time if—
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 F336sections 450 and 451 of CTA 2010.
Meaning of participant ceasing to be in relevant employment
95
1
This paragraph explains what is meant, for the purposes of the SIP code, by a participant ceasing to be in relevant employment.
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 “the specified retirement age”
F44298
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minor definitions
99
1
In the SIP code—
“articles of association”, in relation to a company, includes any other written agreement between the shareholders of the company;
“company” means a body corporate;
“group of companies” means a company and any other companies of which it has control, and “group company” has a corresponding meaning;
“participant’s plan shares”, in relation to a SIP, means plan shares that have been awarded to an individual participant;
“PAYE obligations” means (subject to paragraphs 79(2) and 80(2)) obligations of any person under—
- a
Part 11 of this Act, or
- b
PAYE regulations;
- a
“plan shares”, in relation to a SIP, means—
- a
free, partnership or matching shares which have been awarded to participants under the plan,
- b
dividend shares which have been acquired on behalf of participants under the plan, and
- c
shares in relation to which paragraph 87(1) applies (company reconstructions: new shares),
and which (in each case) remain subject to the plan;
- a
“provision for forfeiture” means a provision to the effect that a participant ceases to be beneficially entitled to shares on the occurrence of certain events, and “forfeiture” is to be read accordingly;
“qualifying corporate bond” has the meaning given by section 117 of TCGA 1992;
“redundancy” has the same meaning as in ERA 1996 or ER(NI)O 1996;
“rights arising under a rights issue” means rights conferred in respect of a participant’s plan shares to be allotted, on payment, other shares or securities or rights of any description in the same company.
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.
F4434
For the purposes of the SIP code—
a
shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and
b
the “restriction” is that provision.
Index of defined expressions
100
In the SIP code the following expressions are defined or otherwise explained by the provisions indicated below:
accumulation period | paragraph 51 |
F550. . . | F550. . . |
articles of association | paragraph 99(1) |
associated company | paragraph 94 (and see paragraph 29(3)) |
award of shares | paragraph 5(1) |
F137. . . | . . . |
building society | F187section 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 | F188section 721(6) |
close company | |
company | paragraph 99(1) |
the company (in relation to a SIP) | paragraph 2(2) |
company reconstruction (in Part 11 of this Schedule) | paragraph 86(1) |
connected person | section 718 |
consortium (member of) | paragraph 99(3) |
constituent company | paragraph 4(3) |
control | section 719 (and see paragraphs 29(5), 37(6) and 94(3)) |
distribution | F190section 989 of ITA 2007 |
dividend shares | paragraph 62(3)(b) |
earnings | section 62 and see section 721(7) |
eligible shares (in Part 4 of this Schedule) | paragraph 25(2) |
employee, employed, employer and employment | section 4 |
the employment requirement | paragraph 15(3) |
forfeiture, provision for | paragraph 99(1) |
free shares | paragraph 2(1)(a) |
group company | paragraph 99(1) |
group of companies | paragraph 99(1) |
group plan | paragraph 4(2) |
holding period | paragraph 36 (and see paragraph 67) |
F137. . . | |
market value (of shares) | paragraph 92 |
matching shares | paragraph 3(1) |
notice (except in paragraph 54 or 55) | F191section 989 of ITA 2007 |
ordinary share capital | F192section 989 of ITA 2007 |
parent company | paragraph 4(1) |
participant (in relation to a SIP) | paragraph 5(4) |
participant’s plan shares | paragraph 99(1) (and see paragraph 87(1)) |
participation in an award of shares | paragraph 5(3) |
partnership share agreement | paragraph 44 |
partnership share money | paragraph 45(2) |
partnership shares | paragraph 2(1)(b) |
PAYE deduction | section 488(4) |
PAYE obligations | paragraph 99(1) |
PAYE regulations | section 684(8) |
performance allowances | paragraph 34(4) |
personal representatives | F193section 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 trust | paragraph 71(3) |
provision for forfeiture | paragraph 99(1) |
qualifying corporate bond | paragraph 99(1) |
qualifying employee | paragraph 8(6) |
recognised stock exchange | F194section 1005 of ITA 2007 |
redundancy | paragraph 99(1) |
reinvestment | paragraph 62(3)(a) |
relevant employment | paragraph 95(2) |
F400restriction (in relation to shares) | paragraph 99(4) |
rights arising under a rights issue | paragraph 99(1) |
salary | paragraph 43(4) |
share incentive plan (“SIP”) | section 488(4) |
F551Schedule 2 SIP | paragraph 1 and Part 10 of this Schedule |
shares | paragraph 99(2) (and in the context of a new holding, paragraph 87(6)) |
the SIP code | section 488(3) |
F279. . . | F279. . . |
F398. . . | F398. . . |
tax | F337section 989 of ITA 2007 |
F280tribunal | section 989 of ITA 2007 |
tax year | F195section 4(2) of ITA 2007 (as applied by section 989 of that Act) |
the trustees | paragraphs 2(2), 71(1) |
the trust instrument | paragraph 71(3) |
withdrawal of shares from plan | paragraph 96(1) |
SCHEDULE 3F491... SAYE option schemes
Word in Sch. 3 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 103, 146 (with Sch. 8 paras. 147-157)
Part 1Introduction
F493Introduction to Schedule 3SAYE option schemes
Words in Sch. 3 para. 1 cross-heading substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 104, 146 (with Sch. 8 paras. 147-157)
1
F552A1
For the purposes of the SAYE code an SAYE option scheme is a Schedule 3 SAYE option scheme if the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme.
3
The requirements consist of general requirements (see Part 2) and requirements as to—
the eligibility of individuals to participate in a scheme (see Part 3),
the shares to which schemes can apply (see Part 4),
the existence of a linked F87savings arrangement (see Part 5),
the share options that may be granted under the scheme (see Part 6), and
the exchange of share options (see Part 7).
F5534
Sub-paragraph (A1) is subject to Part 8 of this Schedule which—
a
requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 3 SAYE option scheme (see paragraph 40A(1)),
b
provides for a scheme in relation to which such notice is given to be a Schedule 3 SAYE option scheme (see paragraph 40A(4)), and
c
gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 3 SAYE option scheme (see paragraphs 40F to 40I).
SAYE option schemes
2
1
In the SAYE code an “SAYE option scheme” means (in accordance with section 516(4)) a scheme established by a company which provides—
a
for share options to be granted to employees and directors, and
b
for the shares acquired by the exercise of the share options to be paid for in the way mentioned in paragraph 24 (payments for shares to be linked to approved F88savings arrangements).
2
In the SAYE code, in relation to an SAYE option scheme—
“participant” means an individual who has been granted (but has not yet exercised) share options under the scheme (“the options”);
“participate” means obtain and exercise share options under the scheme;
“the scheme organiser” means the company which has established the scheme.
Group schemes
3
1
An SAYE option scheme established by a company that controls one or more other companies (a “parent scheme company”) may extend to all or any of those other companies.
2
In the SAYE code an SAYE option scheme established by a parent scheme company which so extends is called a “group scheme”.
3
In relation to a group scheme a “constituent company” means—
a
the parent scheme company, or
b
any other company to which for the time being the scheme is expressed to extend.
4
Paragraph 46 deals with jointly owned companies and companies controlled by them.
Part 2General requirements F494...
Words in Sch. 3 Pt. 2 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 106, 146 (with Sch. 8 paras. 147-157)
General requirements F495...: introduction
Words in Sch. 3 para. 4 cross-heading omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 107, 146 (with Sch. 8 paras. 147-157)
4
An SAYE option scheme must meet the requirements of—
paragraph 5 (general restriction on contents of scheme),
paragraph 6 (all-employee nature of scheme),
paragraph 7 (participation on similar terms), and
paragraph 8 (no preferential treatment for directors and senior employees).
General restriction on contents of scheme
F5035
1
The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options.
2
The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.
3
For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.
All-employee nature of scheme
6
1
The scheme must provide that every person who meets the conditions in sub-paragraph (2) is eligible to participate in the scheme.
2
A person (“E”) meets the conditions in this sub-paragraph if—
a
E is an employee or a full-time director of the scheme organiser or (in the case of a group scheme) of a constituent company,
b
E has been such an employee or director at all times during a qualifying period of not more than 5 years,
F260c
E's earnings from the office or employment within paragraph (a) are (or would be if there were any) general earnings to which section 15 applies (earnings for year when employee UK resident), F413and
F414ca
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
d
E is not ineligible under paragraph 11 (the “no material interest” requirement).
3
The scheme must not contain any feature which has or is likely to have the effect of discouraging any description of persons who—
a
meet the conditions in sub-paragraph (2), or
b
met those conditions before ceasing to be persons within sub-paragraph (2)(a),
from actually participating in the scheme.
4
Sub-paragraph (3) does not apply to any provision required or authorised by a provision of this Schedule.
Participation on similar terms
7
1
The requirements of this paragraph are—
a
that every person who meets the conditions in paragraph 6(2) (all-employee nature of scheme) must be eligible to participate in the scheme on similar terms, and
b
that every person who participates in the scheme must actually do so on similar terms.
2
The requirements of this paragraph are not infringed by the fact that the rights of those participating in the scheme to obtain and exercise share options vary according to—
a
the levels of their remuneration,
b
the length of their service, or
c
any similar factors.
No preferential treatment for directors and senior employees
8
1
The requirement of this paragraph is that, if the scheme organiser is a member of a group of companies, the scheme does not and is not likely to have the effect of conferring benefits wholly or mainly—
a
on directors of companies in the group, or
b
on employees of companies in the group who receive the higher or highest levels of remuneration.
2
“A group of companies” means a company and any other companies of which it has control.
Part 3Eligibility of individuals to participate in scheme
Requirements relating to the eligibility of individuals: introduction
9
An SAYE option scheme must meet the requirements of—
paragraph 10 (the employment requirement),
F444...
The employment requirement
10
1
The scheme must ensure that an individual is not eligible to participate in the scheme at a particular time unless the individual is then a director or employee of—
a
the scheme organiser, or
b
in the case of a group scheme, a constituent company.
2
The requirement of this paragraph is not infringed by a provision of the scheme required or authorised by a provision of this Schedule.
The “no material interest” requirement
F37211
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “material interest”
F37212
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Material interest: options and interests in SIPs
F37213
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “associate”
F37214
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “associate”: trustees of employee benefit trust
F37215
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Meaning of “associate”: trustees of discretionary trust
F37216
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part 4Shares to which schemes can apply
Requirements as to listing
19
1
Eligible shares must be—
a
shares of a class listed on a recognised stock exchange,
b
shares in a company which is not under the control of another company, F591...
F592ba
shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2), or
c
shares in a company which is under the control of a listed company.
2
A “listed company” is a company whose shares are listed on a recognised stock exchange, other than—
a
a close company, or
b
a company that would be a close company if resident in the United Kingdom.
F5903
But a company is not a close company for the purposes of sub-paragraph (2) if it is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).
Only certain kinds of restriction allowed
F44521
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part 5Requirement for linked savings F83arrangement
Word in Sch. 3 Pt. 5 heading substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(5)(a) (with Sch. 2)
Requirements as to linked savings F72arrangement : introduction
Word in Sch. 3 para. 23 heading substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(5)(a) (with Sch. 2)
23
Requirements as to contributions to savings F70arrangements
Word in Sch. 3 para. 25 heading substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(8)(a) (with Sch. 2)
25
1
The scheme must provide for a person’s contributions under the F77the approved savings arrangement to be of an amount that will secure, as nearly as possible, repayment of an amount equal to the option price.
2
The “option price” means the amount payable, on exercising share options granted under the scheme, in order to acquire the maximum number of shares that may be acquired under them (see paragraph 28).
3
The scheme must neither—
a
b
impose a minimum on the amount of a person’s contributions which exceeds £10 per month.
4
The Treasury may by order amend sub-paragraph (3) by substituting for any amount for the time being specified there an amount specified in the order.
Repayments under a savings F71arrangement : whether bonuses included
Word in Sch. 3 para. 26 heading substituted (6.4.2005) by Income Tax (Trading and Other Income) Act 2005 (c. 5), s. 883(1), Sch. 1 para. 618(9)(a) (with Sch. 2)
26
1
For the purposes of this Schedule repayments under a F78certified SAYE savings arrangement may be taken as including, or as not including, a bonus.
2
The bonus may either be the maximum bonus under that F79arrangement or a lesser bonus.
3
An SAYE option scheme must require the question whether repayments are to be taken as including bonuses to be determined at the time when share options are granted.
Part 6Requirements etc. relating to share options
Time for exercising options: general
30
1
The scheme must ensure that share options granted under it must not be capable of being exercised—
a
before the bonus date, or
b
later than 6 months after that date.
2
However, in sub-paragraph (1)—
a
b
paragraph (b) is subject to paragraph 32.
3
In the SAYE code “the bonus date” means the date on which repayments under F90the approved savings arrangement are due.
4
For this purpose repayments are to be regarded as due as follows—
a
if the repayments are to be taken as including the maximum bonus (see paragraph 26(2)), on the earliest date on which that bonus is payable, and
b
in any other case, on the earliest date on which a bonus is payable.
Requirement to have a “specified age”
F44731
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of options: death
32
The scheme must provide that, if a participant dies before exercising the options, they may be exercised F574at any time on or after the date of death but not later than—
a
12 months after the date of death, in a case where the participant dies before the bonus date, or
b
12 months after the bonus date, in a case where the participant dies on or within 6 months after that date.
Exercise of options: reaching specified age without retiring
F44833
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of options: employment in associated company at bonus date
36
The scheme may provide that if at the bonus date a participant holds an office or employment in a company which is—
a
an associated company of the scheme organiser, but
b
not a constituent company,
the options may be exercised within 6 months after that date.
Exercise of options: company events
37
1
2
The relevant date for the purposes of this sub-paragraph is the date when—
a
a person has obtained control of the company as a result of making an offer falling within sub-paragraph (3), and
b
any condition subject to which the offer is made has been satisfied.
3
An offer falls within this sub-paragraph if it is—
a
a general offer to acquire the whole of the issued ordinary share capital of the company, which is made on a condition such that, if it is met, the person making the offer will have control of the company, or
b
a general offer to acquire all the shares in the company which are of the same class as the shares in question obtained under the scheme.
F3873A
In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.
3B
For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.
4
The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under F248section 899 of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement F390applicable to or affecting—
a
all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or
b
all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in F514a Schedule 3SAYE option scheme.
F6404ZA
The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under section 901F of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement applicable to or affecting—
a
all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or
b
all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in a Schedule 3 SAYE option scheme.
F5114A
The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—
a
all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or
b
all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 3 SAYE option scheme,
becomes binding on the shareholders covered by it.
5
The relevant date for the purposes of this sub-paragraph is the date when the company passes a resolution for voluntary winding up.
6
The scheme may provide that share options relating to shares in a company may be exercised at any time when any person is bound or entitled to acquire shares in the company under F230sections 979 to 982 F388or 983 to 985 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder F389etc).
F5126A
Sub-paragraphs (6B) to (6F) apply if the scheme makes provision under sub-paragraph (1) or (6).
6B
The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (6) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.
6C
In sub-paragraph (6B) “relevant event” means—
a
a person obtaining control of the company as mentioned in sub-paragraph (2)(a);
b
a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (4) F642or (4ZA);
c
a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (4A);
d
a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6) obtaining control of the company.
6D
Provision made under sub-paragraph (6B) may not authorise the exercise of a share option, as the case may be—
a
at a time outside the 6 month period mentioned in sub-paragraph (1), or
b
at a time not covered by sub-paragraph (6).
6E
The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—
a
the relevant date for the purposes of sub-paragraph (2), (4) F643, (4ZA) or (4A), or
b
the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6),
is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (6) (as the case may be).
6F
If the scheme makes provision under sub-paragraph (6E) it must also provide that if—
a
a share option is exercised in reliance on that provision in anticipation of—
i
an event mentioned in sub-paragraph (2), (4) F644, (4ZA) or (4A) occurring, or
ii
a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6), but
b
as the case may be—
i
the relevant date for the purposes of sub-paragraph (2), (4) F645, (4ZA) or (4A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or
ii
the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,
the exercise of the share option is to be treated as having had no effect.
7
For the purposes of this paragraph—
a
“share options” means share options granted under the scheme; and
b
a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.
8
This paragraph has effect subject to paragraph 30(1)(b) (options must not be capable of being exercised later than 6 months after bonus date).
Part 7Exchange of share options
Exchange of options on company reorganisation
38
1
An SAYE option scheme may provide that if—
a
there is a company reorganisation affecting a scheme company (that is, a company whose shares may be acquired by the exercise of share options obtained under the scheme: see paragraph 18), and
b
a participant has obtained share options under the scheme which are to acquire shares of the scheme company (“the old options”),
the participant may agree with the acquiring company to release the old options in consideration of the participant being granted new share options.
2
For the purposes of this paragraph there is a company reorganisation affecting a scheme company if another company (“the acquiring company”)—
a
obtains control of the scheme company—
i
as a result of making a general offer to acquire the whole of the issued ordinary share capital of the scheme company which is made on a condition such that, if it is met, the person making the offer will have control of that company, or
ii
as a result of making a general offer to acquire all the shares in the scheme company which are of the same class as those subject to the old options;
F250b
F518ba
obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or
F4042A
In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.
2B
For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.
3
A scheme that makes provision under sub-paragraph (1) must require the agreement referred to in that sub-paragraph to be made—
a
where control is obtained in the way set out in sub-paragraph (2)(a)(i) or (ii), within the period of 6 months beginning with the time when the acquiring company obtains control and any condition subject to which the offer is made is met,
b
where control is obtained in the way set out in sub-paragraph (2)(b), within the period of 6 months beginning with the time when the court sanctions the compromise or arrangement, F521...
F520ba
where control is obtained in the way set out in sub-paragraph (2)(ba), within the period of 6 months beginning with the date on which the non-UK company reorganisation arrangement becomes binding on the shareholders covered by it, and
c
where sub-paragraph (2)(c) applies, within the period during which the acquiring company remains bound or entitled as mentioned in that provision.
F483PART 8Notification of schemes, annual returns and enquiries
Sch. 3 Pt. 8 substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 117, 146 (with Sch. 8 paras. 147-157)
40ANotice of scheme to be given to HMRC
1
For an SAYE option scheme to be a Schedule 3 SAYE option scheme, notice of the scheme must be given to Her Majesty's Revenue and Customs (“HMRC”).
2
The notice must—
a
be given by the scheme organiser,
b
contain, or be accompanied by, such information as HMRC may require, and
c
contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.
3
A declaration within this sub-paragraph is a declaration—
a
that the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme, and
b
if the declaration is made after the first date on which share options are granted under the scheme (“the first grant date”), that those requirements—
i
were met in relation to those grants of share options, and
ii
have otherwise been met in relation to the scheme at all times on or after the first grant date when share options granted under the scheme are outstanding.
4
If notice is given under this paragraph in relation to an SAYE option scheme, for the purposes of the SAYE code the scheme is to be a Schedule 3 SAYE option scheme at all times on and after the relevant date (but not before that date).
5
But if the notice is given after the initial notification deadline, the scheme is to be a Schedule 3 SAYE option scheme only from the beginning of the relevant tax year.
F6295A
Sub-paragraph (5) does not apply if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 40K, the tribunal) that there is a reasonable excuse for the failure to give notice on or before the initial notification deadline.
5B
Paragraph 40C(9) (what constitutes a reasonable excuse) applies for the purposes of sub-paragraph (5A).
5C
Where HMRC are required under sub-paragraph (5A) to consider whether there was a reasonable excuse, HMRC must notify the scheme organiser of their decision within the period of 45 days beginning with the day on which HMRC received the scheme organiser's request to consider the excuse.
5D
Where HMRC are required to notify the scheme organiser as specified in sub-paragraph (5C) but do not do so—
a
HMRC are to be treated as having decided that there was no reasonable excuse, and
b
HMRC must notify the scheme organiser of the decision which they are treated as having made.
6
For the purposes of this Part—
“the initial notification deadline” is 6 July in the tax year following that in which the first grant date falls,
“outstanding”, in relation to a share option, means that the option—
- a
has not been exercised, but
- b
is capable of being exercised in accordance with the scheme (whether on the meeting of any condition or otherwise),
- a
“the relevant date” is—
- a
the date on which the declaration within sub-paragraph (3) is made, or
- b
if that declaration is made after the first grant date, the first grant date, and
- a
“the relevant tax year” is—
- a
the tax year in which the notice under this paragraph is given, or
- b
if that notice is given on or before 6 July in that tax year, the preceding tax year.
- a
7
Sub-paragraph (4) is subject to the following paragraphs of this Part.
40BAnnual returns
1
This paragraph applies if notice is given in relation to an SAYE option scheme under paragraph 40A.
2
The scheme organiser must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).
3
If paragraph 40A(5) applies in relation to the scheme, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.
4
A return for a tax year must—
a
contain, or be accompanied by, such information as HMRC may require, and
b
be given on or before 6 July in the following tax year.
5
The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—
a
any person who has participated in the scheme, or
b
any other person whose liability to tax the operation of the scheme is relevant to.
6
If during a tax year—
a
an alteration is made in a key feature of the scheme, or
b
variations are made under a provision made under paragraph 28(3) to take account of a variation in any share capital,
the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.
7
A declaration within this sub-paragraph is a declaration, as the case may be—
a
that the alteration has, or
b
that the variations have,
not caused the requirements of Parts 2 to 7 of this Schedule not to be met in relation to the scheme.
8
For the purposes of sub-paragraph (6)(a) a “key feature” of a scheme is a provision of the scheme which is necessary in order for the requirements of Parts 2 to 7 of this Schedule to be met in relation to the scheme.
9
A return is not required for any tax year following that in which the termination condition is met in relation to the scheme.
10
For the purposes of this Part “the termination condition” is met in relation to a scheme when—
a
all share options granted under the scheme—
i
have been exercised, or
ii
are no longer capable of being exercised in accordance with the scheme (because, for example, they have lapsed or been cancelled), and
b
no more share options will be granted under the scheme.
11
If the scheme organiser becomes aware that—
a
anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,
b
anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or
c
any other error or inaccuracy has occurred in relation to a return for a tax year,
the scheme organiser must give an amended return correcting the position to HMRC without delay.
40C
1
This paragraph applies if the scheme organiser fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 40B(4)(b) (“the date for delivery”).
2
The scheme organiser is liable for a penalty of £100.
3
If the scheme organiser's failure continues after the end of the period of 3 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.
4
If the scheme organiser's failure continues after the end of the period of 6 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.
5
The scheme organiser is liable for a further penalty under this sub-paragraph if—
a
the scheme organiser's failure continues after the end of the period of 9 months beginning with the date for delivery,
b
HMRC decide that such a penalty should be payable, and
c
HMRC give notice to the scheme organiser specifying the period in respect of which the penalty is payable.
(The scheme organiser may be liable for more than one penalty under this sub-paragraph.)
6
The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).
7
The period specified in the notice under sub-paragraph (5)(c)—
a
may begin earlier than the date on which the notice is given, but
b
may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.
8
Liability for a penalty under this paragraph does not arise if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 40K, the tribunal) that there is a reasonable excuse for its failure.
9
For the purposes of sub-paragraph (8)—
a
an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the scheme organiser's control,
b
where the scheme organiser relies on any other person to do anything, that is not a reasonable excuse unless the scheme organiser took reasonable care to avoid the failure, and
c
where the scheme organiser had a reasonable excuse for the failure but the excuse ceased, the scheme organiser is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.
40DNotices and returns to be given electronically etc
1
A notice under paragraph 40A, and any information accompanying the notice, must be given electronically.
2
A return under paragraph 40B, and any information accompanying the return, must be given electronically.
3
But, if HMRC consider it appropriate to do so, HMRC may allow the scheme organiser to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.
4
The Commissioners for Her Majesty's Revenue and Customs—
a
must prescribe how notices, returns and accompanying information are to be given electronically;
b
may make different provision for different cases or circumstances.
40E
1
This paragraph applies if a return under paragraph 40B, or any information accompanying such a return—
a
is given otherwise than in accordance with paragraph 40D, or
b
contains a material inaccuracy—
i
which is careless or deliberate, or
ii
which is not corrected as required by paragraph 40B(11).
2
The scheme organiser is liable for a penalty of an amount decided by HMRC.
3
The penalty must not exceed £5,000.
4
For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the scheme organiser to take reasonable care.
40FEnquiries
1
This paragraph applies if notice is given in relation to an SAYE option scheme under paragraph 40A.
2
HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than—
a
6 July in the tax year following the tax year in which the initial notification deadline falls, or
b
if the notice under paragraph 40A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.
3
HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 40B(7) is given to HMRC.
4
Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 7 of this Schedule—
a
are not met in relation to the scheme, or
b
have not been met in relation to the scheme.
5
HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so.
6
Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition is met in relation to the scheme.
40G
1
An enquiry under paragraph 40F(2), (3) or (5) is completed when HMRC give the scheme organiser a notice (a “closure notice”) stating—
a
that HMRC have completed the enquiry, and
b
that—
i
paragraph 40H is to apply,
ii
paragraph 40I is to apply, or
iii
neither paragraph 40H nor paragraph 40I is to apply.
2
If the scheme organiser receives notice under paragraph 40F(2), (3) or (5), the scheme organiser may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.
3
The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).
4
The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.
40H
1
This paragraph applies if HMRC decide—
a
that requirements of Parts 2 to 7 of this Schedule—
i
are not met in relation to the scheme, or
ii
have not been met in relation to the scheme, and
b
that the situation is, or was, so serious that this paragraph should apply.
2
If this paragraph applies—
a
the scheme is not to be a Schedule 3 SAYE option scheme with effect from—
i
such relevant time as is specified in the closure notice, or
ii
if no relevant time is specified, the time of the giving of the closure notice, and
b
the scheme organiser is liable for a penalty of an amount decided by HMRC.
3
Sub-paragraph (4) applies in relation to a share option granted under the scheme if the option—
a
is granted at a time before that mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be) when the scheme is a Schedule 3 SAYE option scheme, but
b
is exercised at or after the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
4
For the purposes of section 519 (exemption in respect of exercise of share option) in its application to the option, the scheme is to be taken still to be a Schedule 3 SAYE option scheme at the time of the exercise of the option.
5
The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
a
the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and
b
the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the scheme having been a Schedule 3 SAYE option scheme at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
6
The liabilities covered by sub-paragraph (5) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraph (4).
7
In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 7 of this Schedule were not met in relation to the scheme.
40I
1
This paragraph applies if HMRC decide—
a
that requirements of Parts 2 to 7 of this Schedule—
i
are not met in relation to the scheme, or
ii
have not been met in relation to the scheme, but
b
that the situation is not, or was not, so serious that paragraph 40H should apply.
2
If this paragraph applies, the scheme organiser—
a
is liable for a penalty of an amount decided by HMRC, and
b
must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme.
3
The penalty under sub-paragraph (2)(a) must not exceed £5,000.
4
In sub-paragraph (2)(b) “the relevant day” means—
a
the last day of the period in which notice of an appeal under paragraph 40K(2)(b) may be given, or
b
if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.
5
Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the scheme before the closure notice was given or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).
6
If the scheme organiser fails to comply with sub-paragraph (2)(b), HMRC may give the scheme organiser a notice stating that that is the case (a “default notice”).
7
If the scheme organiser is given a default notice—
a
the scheme is not to be a Schedule 3 SAYE option scheme with effect from—
i
such relevant time as is specified in the default notice, or
ii
if no relevant time is specified, the time of the giving of the default notice, and
b
the scheme organiser is liable for a further penalty of an amount decided by HMRC.
8
Sub-paragraph (9) applies in relation to a share option granted under the scheme if the option—
a
is granted at a time before that mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be) when the scheme is a Schedule 3 SAYE option scheme, but
b
is exercised at or after the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
9
For the purposes of section 519 (exemption in respect of exercise of share option) in its application to the option, the scheme is to be taken still to be a Schedule 3 SAYE option scheme at the time of the exercise of the option.
10
The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
a
the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and
b
the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the scheme having been a Schedule 3 SAYE option scheme at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
11
The liabilities covered by sub-paragraph (10) include liabilities for income tax or contributions which a person has not had, or will not have, in consequence of sub-paragraph (9).
12
In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 7 of this Schedule were not met in relation to the scheme.
40JAssessment of penalties
1
This paragraph applies if the scheme organiser is liable for a penalty under this Part.
2
HMRC must assess the penalty and notify the scheme organiser of the assessment.
3
Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the scheme organiser becomes liable for the penalty.
4
In the case of a penalty under paragraph 40E(1)(b), the assessment must be made no later than—
a
12 months after the date on which HMRC become aware of the inaccuracy, and
b
6 years after the date on which the scheme organiser becomes liable for the penalty.
5
In the case of a penalty under paragraph 40H(2)(b) or 40I(2)(a) or (7)(b) where notice of appeal is given under paragraph 40K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.
6
A penalty payable under this Part must be paid—
a
no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the scheme organiser, or
b
if notice of appeal is given against the penalty under paragraph 40K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.
7
The penalty may be enforced as if it were corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax charged in an assessment and due and payable.
8
Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.
40KAppeals
F618A1
The scheme organiser may appeal against a decision of HMRC under paragraph 40A(5A) that there was no reasonable excuse for the failure to give notice on or before the initial notification deadline.
1
The scheme organiser may appeal against a decision of HMRC that the scheme organiser is liable for a penalty under paragraph 40C or 40E.
2
The scheme organiser may appeal against—
a
a decision of HMRC mentioned in paragraph 40H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;
b
a decision of HMRC mentioned in paragraph 40I(1).
3
The scheme organiser may appeal against a decision of HMRC—
a
to give the scheme organiser a default notice under paragraph 40I;
b
to specify, or not to specify, a relevant time in the default notice.
4
The scheme organiser may appeal against a decision of HMRC as to the amount of a penalty payable by the scheme organiser under this Part.
5
Notice of appeal must be given to HMRC no later than 30 days after the date on which—
F619za
in the case of an appeal under sub-paragraph (A1), notice of HMRC's decision is given to the scheme organiser;
a
in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 40J(2) is given to the scheme organiser;
b
in the case of an appeal under sub-paragraph (2), the closure notice is given;
c
in the case of an appeal under sub-paragraph (3), the default notice is given.
6
On an appeal under sub-paragraph F620(A1), (1) or (3)(a) which is notified to the tribunal, the tribunal may affirm or cancel the decision.
7
On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—
a
affirm or cancel the decision, or
b
substitute for the decision another decision which HMRC had power to make.
8
On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—
a
affirm the amount of the penalty decided, or
b
substitute another amount for that amount.
9
Subject to this paragraph and paragraph 40J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax.
Part 9Supplementary provisions
Power to require information
45
F5291
An officer of Revenue and Customs may by notice require a person to provide the officer with any information—
a
which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the SAYE 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 F124an officer of Revenue and Customs —
F530i
to check anything contained in a notice under paragraph 40A or a return under paragraph 40B or to check any information accompanying such a notice or return, or”, and
ii
to determine the liability to tax, including capital gains tax, of any person who has participated in a scheme F531or any other person whose liability to tax the operation of a scheme is relevant to, and
b
information about the administration of a scheme and any alteration of the terms of a scheme.
3
The notice must require the information to be provided within a specified time, which must not end earlier than 3 months after the date when the notice is given.
Jointly owned companies
46
1
This paragraph applies for the purposes of the provisions of the SAYE code relating to group schemes.
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 scheme, or
b
a constituent company in a particular group scheme if another company within that sub-paragraph is a constituent company in a different group scheme.
5
In this paragraph a “jointly owned company” means a company which (apart from sub-paragraph (2)) is not controlled by any one person and—
a
of which 50% of the issued share capital is owned by one person and 50% by another, or
b
which is otherwise controlled by two persons taken together.
6
In this paragraph “joint owner” means one of the persons mentioned in sub-paragraph (5)(a) or (b).
Meaning of “associated company”
47
1
For the purposes of the SAYE code, except in paragraph 35(3) (time when “scheme-related employment” ends), one company is an “associated company” of another company at a given time if, at that time or at any other time within one year previously—
a
one has control of the other, or
b
both are under the control of the same person or persons.
2
For the purposes of sub-paragraph (1) the question whether a person controls a company is to be determined in accordance with F339sections 450 and 451 of CTA 2010.
F492Non-UK company reorganisation arrangements
Sch. 3 para. 47A and cross-heading inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 119, 146 (with Sch. 8 paras. 147-157)
47A
1
For the purposes of the SAYE code a “non-UK company reorganisation arrangement” is an arrangement made in relation to a company under the law of a territory outside the United Kingdom—
a
which gives effect to a reorganisation of the company's share capital by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both of those methods, and
b
which is approved by a resolution of members of the company.
2
A resolution does not count for the purposes of sub-paragraph (1)(b) unless the members who vote in favour of approving the arrangement represent more than 50% of the total voting rights of all the members having the right to vote on the issue.
Minor definitions
48
1
In the SAYE code—
“F80certified SAYE savings arrangement” has the meaning given in F81section 703(1) of ITTOIA 2005;
“company” means a body corporate;
“market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.
2
For the purposes of the SAYE 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.
F4503
For the purposes of the SAYE code—
a
shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and
b
the “restriction” is that provision.
Index of defined expressions
49
In the SAYE code the following expressions are defined or otherwise explained by the provisions indicated below:
F558. . . | F558. . . |
associated company | paragraph 47(1) |
the bonus date | paragraph 30(3) |
F91certified SAYE savings arrangement | paragraph 48(1) |
child | F178section 721(6) |
close company | |
company | paragraph 48(1) |
connected person | section 718 |
constituent company | paragraph 3(3) |
control | section 719 (and see paragraphs 35(4) and 47(2)) |
distribution | F180section 989 of ITA 2007 |
earnings | section 62 and see section 721(7) |
eligible shares (in Part 4 of this Schedule) | paragraph 17(2) |
employee and employment | section 4 |
group scheme | paragraph 3(2) (and see paragraph 46) |
F138. . . | F138. . . |
F181. . . | F181. . . |
market value | paragraph 48(1) |
member of a consortium | paragraph 48(2) |
F559non-UK company reorganisation arrangement | paragraph 47A |
notice | F182section 989 of ITA 2007 |
the options (in relation to a participant) | paragraph 2(2) |
ordinary share capital | F183section 989 of ITA 2007 |
participant | paragraph 2(2) |
participate | paragraph 2(2) |
personal representatives | F184section 989 of ITA 2007 |
recognised stock exchange | F185section 1005 of ITA 2007 |
F419restriction (in relation to shares) | paragraph 48(3) |
the SAYE code | section 516(3) |
SAYE option scheme | section 516(4) |
F559Schedule 3 SAYE option scheme | paragraph 1 and Part 8 of this Schedule |
the scheme organiser | paragraph 2(2) |
share option | section 516(4) |
shares | section 516(4) |
F281. . . | F281. . . |
F417. . . | paragraph 31 |
tax | F340section 989 of ITA 2007 |
F282tribunal | section 989 of ITA 2007 |
F186. . . | F186. . . |
SCHEDULE 4F496... CSOP schemes
Word in Sch. 4 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 164, 204 (with Sch. 8 paras. 205-215)
Part 1Introduction
F500Introduction to Schedule 4CSOP schemes
Words in Sch. 4 para. 1 cross-heading substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 165, 204 (with Sch. 8 paras. 205-215)
1
F560A1
For the purposes of the CSOP code a CSOP scheme is a Schedule 4 CSOP scheme if the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme.
3
The requirements consist of general requirements (see Part 2) and requirements as to—
the eligibility of individuals to participate in a scheme (see Part 3),
the shares to which a scheme can apply (see Part 4),
the share options which may be granted under a scheme (see Part 5), and
the exchange of share options (see Part 6).
F5614
Sub-paragraph (A1) is subject to Part 7 of this Schedule which—
a
requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 4 CSOP scheme (see paragraph 28A(1)),
b
provides for a scheme in relation to which such notice is given to be a Schedule 4 CSOP scheme (see paragraph 28A(4)), and
c
gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 4 CSOP scheme (see paragraphs 28F to 28I).
CSOP schemes
2
1
In the CSOP code a “CSOP scheme” means (in accordance with section 521(4)) a scheme 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)).
2
In the CSOP code, in relation to a CSOP scheme—
“participant” means an individual who has been granted (but has not yet exercised) share options under the scheme (“the options”);
“participate” means obtain and exercise share options under the scheme;
“the scheme organiser” means the company which has established the scheme.
Group schemes
3
1
A CSOP scheme established by a company that controls one or more other companies (a “parent scheme company”) may extend to all or any of those other companies.
2
In the CSOP code a CSOP scheme established by a parent scheme company which so extends is called a “group scheme”.
3
In relation to a group scheme a “constituent company” means—
a
the parent scheme company, or
b
any other company to which for the time being the scheme is expressed to extend.
4
Paragraph 34 deals with jointly owned companies and companies controlled by them.
Part 2General requirements F502...
Words in Sch. 4 Pt. 2 title omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 167, 204 (with Sch. 8 paras. 205-215)
General requirements F499...: introduction
Words in Sch. 4 para. 4 cross-heading omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 168, 204 (with Sch. 8 paras. 205-215)
4
A CSOP scheme must meet the requirements of—
paragraph 5 (general restriction on contents of scheme), and
paragraph 6 (limit on value of shares subject to options).
General restriction on contents of scheme
F5045
1
The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options.
2
The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.
3
For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.
Part 3Eligibility of individuals to participate in scheme
Requirements relating to the eligibility of individuals: introduction
7
A CSOP scheme must meet the requirements of—
paragraph 8 (the employment requirement), and
paragraph 9 (the “no material interest” requirement).
The employment requirement
8
1
The scheme must ensure that an individual is not eligible to be granted share options under the scheme at a particular time unless the individual is then a full-time director or a qualifying employee of—
a
the scheme organiser, or
b
in the case of a group scheme, a constituent company.
2
A “qualifying employee”, in relation to a company, means an employee of the company other than one who is a director of—
a
the company, or
b
in the case of a group scheme, a constituent company.
The “no material interest” requirement
9
1
The scheme must ensure that an individual is not eligible to participate in the scheme on any date if the individual has on that date, or has had within the 12 months preceding that date, a material interest in a close company—
a
whose shares may be acquired as a result of exercising share options granted under the scheme, or
b
which has control of a company whose shares may be acquired as a result of exercising share options granted under the scheme, or
c
which is a member of a consortium which owns a company within paragraph (b).
2
For the purposes of this paragraph an individual is to be regarded as having a material interest in a company if—
a
the individual, or
b
the individual together with one or more of the individual’s associates, or
c
any such associate, with or without any other such associates,
has a material interest in the company.
3
This paragraph is supplemented—
a
as regards the meaning of “material interest”, by paragraphs 10 and 11, and
b
as regards the meaning of “associate”, by paragraph 12 (read with paragraphs 13 and 14).
4
In this paragraph and paragraph 10 “close company” includes a company that would be a close company but for—
a
F323section 442(a) of CTA 2010 (exclusion of companies not resident in the United Kingdom), or
b
F324sections 446 and 447 of CTA 2010 (exclusion of certain quoted companies).
Meaning of “material interest”
10
1
In paragraph 9 (the “no material interest” requirement) references to a “material interes” in a company are to—
a
a material interest in the share capital of the company, or
b
a material interest in its assets.
2
A material interest in the share capital of a company means—
a
beneficial ownership of, or
b
the ability to control (directly or through the medium of other companies or by any other indirect means),
more than F42530% of the ordinary share capital of the company.
3
A material interest in the assets of a company means—
a
possession of, or
b
an entitlement to acquire,
such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive more than F42530% of the assets that would then be available for distribution among the participators.
4
In this paragraph “participator” has the meaning given by F341section 454 of CTA 2010.
5
This paragraph is supplemented by paragraph 11 (material interest: options etc.).
Material interest: options and interests in SIPs
11
1
For the purposes of paragraph 10 (meaning of “material interest”) a right to acquire shares (however arising) is to be treated as a right to control them.
2
Sub-paragraph (3) also applies for the purposes of paragraph 10 in a case where—
a
the shares to be attributed to an individual consist of or include shares which the individual or another person has a right to acquire, and
b
the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company would be contractually bound to issue in the event of the exercise of the right.
3
In determining at any time prior to the exercise of the right whether the number of shares to be attributed to the individual exceeds F42630% of the ordinary share capital of the company, that ordinary share capital is to be treated as increased by the number of unissued shares referred to in sub-paragraph (2)(b).
4
The references in sub-paragraphs (2) and (3) to the shares to be attributed to an individual are to the shares which—
a
for the purposes of paragraph 10(2) (material interest in share capital), and
b
in accordance with paragraph 9(2) (material interest can consist of or include that of individual’s associates),
fall to be brought into account in the individual’s case so that it can be determined whether their number exceeds F42630% of the company’s ordinary share capital.
5
In applying paragraph 10 the following are to be disregarded—
a
the interest of the trustees of any F576Schedule 2SIP (within the meaning of the SIP code: see section 488(4)) in any shares which are held by them in accordance with the plan but which have not been appropriated to, or acquired on behalf of, an individual, and
b
any rights exercisable by the trustees as a result of that interest.
Meaning of “associate”
12
1
In paragraph 9(2) (the “no material interest” requirement) “associate”, in relation to an individual, means—
a
any relative or partner of that individual,
b
the trustee or trustees of any settlement in relation to which that individual, or any of the individual’s relatives (living or dead), is or was a settlor, or
c
where that individual is interested in any shares or obligations of the company mentioned in paragraph 9(2) which are subject to any trust or are part of the estate of a deceased person—
i
the trustee or trustees of the settlement concerned, or
ii
the personal representatives of the deceased,
as the case may be.
2
Sub-paragraph (1)(c) needs to be read with paragraphs 13 and 14 (which relate to employee benefit trusts and discretionary trusts).
3
In this paragraph—
Meaning of “associate”: trustees of employee benefit trust
13
1
This paragraph applies for the purposes of paragraph 12(1)(c) (meaning of “associate”: trustees of settlement) where the individual is interested as a beneficiary of an employee benefit trust in shares or obligations of the company mentioned in paragraph 9(2).
2
The trustees of the employee benefit trust are not to be regarded as associates of the individual as a result only of the individual’s being so interested if neither—
a
the individual, nor
b
the individual together with one or more of the individual’s associates, nor
c
any such associate, with or without any other such associates,
has at any time after 13th March 1989 been the beneficial owner of, or been able (directly or through the medium of other companies or by any other indirect means) to control, more than F45230% of the ordinary share capital of the company.
3
In sub-paragraph (2)(b) and (c) “associate” has the meaning given by paragraph 12(1), but does not include the trustees of an employee benefit trust as a result only of the individual’s having an interest in shares or obligations of the trust.
4
Chapter 11 of Part 7 of this Act (which deals with the attribution of interests in companies to beneficiaries of employee benefit trusts) applies for the purposes of sub-paragraph (2).
5
In this paragraph “employee benefit trust” has the same meaning as in that Chapter (see sections 550 and 551).
Meaning of “associate”: trustees of discretionary trust
14
1
This paragraph applies for the purposes of paragraph 12(1)(c) (meaning of “associate”: trustees of settlement) where—
a
the individual (“the beneficiary”) is one of the objects of a discretionary trust,
b
the property subject to the trust has at any time consisted of, or included, shares or obligations of the company mentioned in paragraph 9(2),
c
the beneficiary has ceased to be eligible to benefit under the trust as a result of—
i
an irrevocable disclaimer or release executed by the beneficiary, or
ii
the irrevocable exercise by the trustees of a power to exclude the beneficiary from the objects of the trust,
d
immediately after the beneficiary ceased to be so eligible, no associate of the beneficiary was interested in the shares or obligations of the company that were subject to the trust, and
e
during the period of 12 months ending with the date on which the beneficiary ceased to be so eligible, neither the beneficiary nor any associate of the beneficiary received any benefit under the trust.
2
The beneficiary is not, as a result only of the matters referred to in sub-paragraph (1)(a) and (b), to be regarded as having been interested in the shares or obligations of the company at any time during that period of 12 months.
3
In sub-paragraph (1) “associate” has the meaning given by paragraph 12(1) but with the omission of paragraph (c).
Part 4Shares to which schemes can apply
Requirements as to listing
17
1
Eligible shares must be —
a
shares of a class listed on a recognised stock exchange, F593...
ba
shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).
F354c
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F3532
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Only certain kinds of restriction allowed
F45319
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part 5Requirements etc. relating to share options
F497General requirements as to terms of option
Sch. 4 para. 21A and cross-heading inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 173, 204 (with Sch. 8 paras. 205-215)
21A
1
The following terms of a share option which is granted under the scheme must be stated at the time the option is granted—
a
the price at which shares may be acquired by the exercise of the option,
b
the number and description of the shares which may be acquired by the exercise of the option,
c
the restrictions to which those shares may be subject,
d
the times at which the option may be exercised (in whole or in part), and
e
the circumstances under which the option will lapse or be cancelled (in whole or in part), including any conditions to which the exercise of the option is subject (in whole or in part).
2
Terms stated as required by sub-paragraph (1) may be varied after the grant of the option, but—
a
in the case of the price, only as provided for in paragraph 22,
b
in the case of the number or description of shares, only as provided for in paragraph 22 or by way of a mechanism which is stated at the time the option is granted, and
c
in any other case, only by way of a mechanism which is stated at the time the option is granted.
3
Any mechanism stated for the purposes of sub-paragraph (2)(b) or (c) must be applied in a way that is fair and reasonable.
4
Terms stated as required by sub-paragraph (1), and any mechanism stated for the purposes of sub-paragraph (2)(b) or (c), must be notified to the participant as soon as practicable after the grant of the option.
Exercise of options: ceasing to be director or employee
24
1
The scheme may provide that an individual may exercise share options under it after ceasing to be a full-time director or qualifying employee.
2
“Qualifying employee” has the same meaning as in paragraph 8 (the employment requirement).
Exercise of options: death
25
F5361
The scheme may provide that, if a participant dies before exercising the options, they may be exercised on or after the date of death F537....
F5352
Provision made under sub-paragraph (1) must permit the exercise of the options at any time on or after the date of death but not later than 12 months after that date.
F410Exercise of options: company events
Sch. 4 para. 25A and cross-heading inserted (17.7.2013) by Finance Act 2013 (c. 29), Sch. 2 para. 29
25A
1
2
The relevant date for the purposes of this sub-paragraph is the date when—
a
a person has obtained control of the company as a result of making an offer falling within sub-paragraph (3), and
b
any condition subject to which the offer is made has been satisfied.
3
An offer falls within this sub-paragraph if it is—
a
a general offer to acquire the whole of the issued ordinary share capital of the company which is made on a condition such that, if it is met, the person making the offer will have control of the company, or
b
a general offer to acquire all the shares in the company which are of the same class as the shares to which the option relates.
4
In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.
5
For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.
6
The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement applicable to or affecting—
a
all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or
b
all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in F525a Schedule 4CSOP scheme.
F6466ZA
The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under section 901F of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement applicable to or affecting—
a
all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or
b
all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in a Schedule 4 CSOP scheme.
F5226A
The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—
a
all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or
b
all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 4 CSOP scheme,
becomes binding on the shareholders covered by it.
7
The scheme may provide that share options relating to shares in a company may be exercised at any time when any person is bound or entitled to acquire shares in the company under sections 979 to 982 or 983 to 985 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder etc).
F5237A
Sub-paragraphs (7B) to (7F) apply if the scheme makes provision under sub-paragraph (1) or (7).
7B
The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (7) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.
7C
In sub-paragraph (7B) “relevant event” means—
a
a person obtaining control of the company as mentioned in sub-paragraph (2)(a);
b
a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (6) F648or (6ZA);
c
a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (6A);
d
a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7) obtaining control of the company.
7D
Provision made under sub-paragraph (7B) may not authorise the exercise of a share option, as the case may be—
a
at a time outside the 6 month period mentioned in sub-paragraph (1), or
b
at a time not covered by sub-paragraph (7).
7E
The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—
a
the relevant date for the purposes of sub-paragraph (2), (6) F649, (6ZA) or (6A), or
b
the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7),
is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (7) (as the case may be).
7F
If the scheme makes provision under sub-paragraph (7E) it must also provide that if—
a
a share option is exercised in reliance on that provision in anticipation of—
i
an event mentioned in sub-paragraph (2), (6) F650, (6ZA) or (6A) occurring, or
ii
a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (7), but
b
as the case may be—
i
the relevant date for the purposes of sub-paragraph (2), (6) F651, (6ZA) or (6A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or
ii
the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,
the exercise of the share option is to be treated as having had no effect.
8
For the purposes of this paragraph a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.
Part 6Exchange of share options
Exchange of options on company reorganisation
26
1
A CSOP scheme may provide that if—
a
there is a company reorganisation affecting a scheme company (that is, a company whose shares may be acquired by the exercise of share options obtained under the scheme: see paragraph 16), and
b
a participant has obtained share options under the scheme which are to acquire shares of the scheme company (“the old options”),
the participant may agree with the acquiring company to release the old options in consideration of the participant being granted new share options.
2
For the purposes of this paragraph there is a company reorganisation affecting a scheme company if another company (“the acquiring company”)—
a
obtains control of the scheme company—
i
as a result of making a general offer to acquire the whole of the issued ordinary share capital of the scheme company which is made on a condition such that, if it is met, the person making the offer will have control of that company, or
ii
as a result of making a general offer to acquire all the shares in the scheme company which are of the same class as those subject to the old options;
F251b
obtains control of the scheme company as a result of a compromise or arrangement sanctioned by the court under section 899 F653or 901F of the Companies Act 2006 (court sanction for compromise or arrangement);
F532ba
obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or
F4202A
In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.
2B
For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.
3
A scheme that makes provision under sub-paragraph (1) must require the agreement referred to in that sub-paragraph to be made—
a
where control is obtained in the way set out in sub-paragraph (2)(a)(i) or (ii), within the period of 6 months beginning with the time when the acquiring company obtains control and any condition subject to which the offer is made is met,
b
where control is obtained in the way set out in sub-paragraph (2)(b), within the period of 6 months beginning with the time when the court sanctions the compromise or arrangement, F534...
F533ba
where control is obtained in the way set out in sub-paragraph (2)(ba), within the period of 6 months beginning with the date on which the non-UK company reorganisation arrangement becomes binding on the shareholders covered by it, and
c
where sub-paragraph (2)(c) applies, within the period during which the acquiring company remains bound or entitled as mentioned in that provision.
F485PART 7Notification of schemes, annual returns and enquiries
Sch. 4 Pt. 7 substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 179, 204 (with Sch. 8 paras. 205-215)
Notice of scheme to be given to HMRC
28A
1
For a CSOP scheme to be a Schedule 4 CSOP scheme, notice of the scheme must be given to Her Majesty's Revenue and Customs (“HMRC”).
2
The notice must—
a
be given by the scheme organiser,
b
contain, or be accompanied by, such information as HMRC may require, and
c
contain a declaration within sub-paragraph (3) made by such persons as HMRC may require.
3
A declaration within this sub-paragraph is a declaration—
a
that the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme, and
b
if the declaration is made after the first date on which share options are granted under the scheme (“the first grant date”), that those requirements—
i
were met in relation to those grants of share options, and
ii
have otherwise been met in relation to the scheme at all times on or after the first grant date when share options granted under the scheme are outstanding.
4
If notice is given under this paragraph in relation to a CSOP scheme, for the purposes of the CSOP code the scheme is to be a Schedule 4 CSOP scheme at all times on and after the relevant date (but not before that date).
5
But if the notice is given after the initial notification deadline, the scheme is to be a Schedule 4 CSOP scheme only from the beginning of the relevant tax year.
F6305A
Sub-paragraph (5) does not apply if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 28K, the tribunal) that there is a reasonable excuse for the failure to give notice on or before the initial notification deadline.
5B
Paragraph 28C(9) (what constitutes a reasonable excuse) applies for the purposes of sub-paragraph (5A).
5C
Where HMRC are required under sub-paragraph (5A) to consider whether there was a reasonable excuse, HMRC must notify the scheme organiser of their decision within the period of 45 days beginning with the day on which HMRC received the scheme organiser's request to consider the excuse.
5D
Where HMRC are required to notify the scheme organiser as specified in sub-paragraph (5C) but do not do so—
a
HMRC are to be treated as having decided that there was no reasonable excuse, and
b
HMRC must notify the scheme organiser of the decision which they are treated as having made.
6
For the purposes of this Part—
“the initial notification deadline” is 6 July in the tax year following that in which the first grant date falls,
“outstanding”, in relation to a share option, means that the option—
- a
has not been exercised, but
- b
is capable of being exercised in accordance with the scheme (whether on the meeting of any condition or otherwise),
- a
“the relevant date” is—
- a
the date on which the declaration within sub-paragraph (3) is made, or
- b
if that declaration is made after the first grant date, the first grant date, and
- a
“the relevant tax year” is—
- a
the tax year in which the notice under this paragraph is given, or
- b
if that notice is given on or before 6 July in that tax year, the preceding tax year.
- a
7
Sub-paragraph (4) is subject to the following paragraphs of this Part.
Annual returns
28B
1
This paragraph applies if notice is given in relation to a CSOP scheme under paragraph 28A.
2
The scheme organiser must give to HMRC a return for the tax year in which the relevant date falls and for each subsequent tax year (subject to sub-paragraph (9)).
3
If paragraph 28A(5) applies in relation to the scheme, in sub-paragraph (2) the reference to the tax year in which the relevant date falls is to be read as a reference to the relevant tax year.
4
A return for a tax year must—
a
contain, or be accompanied by, such information as HMRC may require, and
b
be given on or before 6 July in the following tax year.
5
The information which may be required under sub-paragraph (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of—
a
any person who has participated in the scheme, or
b
any other person whose liability to tax the operation of the scheme is relevant to.
6
If during a tax year—
a
an alteration is made in a key feature of the scheme, or
b
variations are made under a provision made under paragraph 22(3) to take account of a variation in any share capital,
the return for the tax year must contain a declaration within sub-paragraph (7) made by such persons as HMRC may require.
7
A declaration within this sub-paragraph is a declaration, as the case may be—
a
that the alteration has, or
b
that the variations have,
not caused the requirements of Parts 2 to 6 of this Schedule not to be met in relation to the scheme.
8
For the purposes of sub-paragraph (6)(a) a “key feature” of a scheme is a provision of the scheme which is necessary in order for the requirements of Parts 2 to 6 of this Schedule to be met in relation to the scheme.
9
A return is not required for any tax year following that in which the termination condition is met in relation to the scheme.
10
For the purposes of this Part “the termination condition” is met in relation to a scheme when—
a
all share options granted under the scheme—
i
have been exercised, or
ii
are no longer capable of being exercised in accordance with the scheme (because, for example, they have lapsed or been cancelled), and
b
no more share options will be granted under the scheme.
11
If the scheme organiser becomes aware that—
a
anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,
b
anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or
c
any other error or inaccuracy has occurred in relation to a return for a tax year,
the scheme organiser must give an amended return correcting the position to HMRC without delay.
28C
1
This paragraph applies if the scheme organiser fails to give a return for a tax year (containing, or accompanied by, all required information and declarations) on or before the date mentioned in paragraph 28B(4)(b) (“the date for delivery”).
2
The scheme organiser is liable for a penalty of £100.
3
If the scheme organiser's failure continues after the end of the period of 3 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.
4
If the scheme organiser's failure continues after the end of the period of 6 months beginning with the date for delivery, the scheme organiser is liable for a further penalty of £300.
5
The scheme organiser is liable for a further penalty under this sub-paragraph if—
a
the scheme organiser's failure continues after the end of the period of 9 months beginning with the date for delivery,
b
HMRC decide that such a penalty should be payable, and
c
HMRC give notice to the scheme organiser specifying the period in respect of which the penalty is payable.
(The scheme organiser may be liable for more than one penalty under this sub-paragraph.)
6
The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).
7
The period specified in the notice under sub-paragraph (5)(c)—
a
may begin earlier than the date on which the notice is given, but
b
may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.
8
Liability for a penalty under this paragraph does not arise if the scheme organiser satisfies HMRC (or, on an appeal under paragraph 28K, the tribunal) that there is a reasonable excuse for its failure.
9
For the purposes of sub-paragraph (8)—
a
an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the scheme organiser's control,
b
where the scheme organiser relies on any other person to do anything, that is not a reasonable excuse unless the scheme organiser took reasonable care to avoid the failure, and
c
where the scheme organiser had a reasonable excuse for the failure but the excuse ceased, the scheme organiser is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.
Notices and returns to be given electronically etc
28D
1
A notice under paragraph 28A, and any information accompanying the notice, must be given electronically.
2
A return under paragraph 28B, and any information accompanying the return, must be given electronically.
3
But, if HMRC consider it appropriate to do so, HMRC may allow the scheme organiser to give a notice or return or any accompanying information in another way; and, if HMRC do so, the notice, return or information must be given in that other way.
4
The Commissioners for Her Majesty's Revenue and Customs—
a
must prescribe how notices, returns and accompanying information are to be given electronically;
b
may make different provision for different cases or circumstances.
28E
1
This paragraph applies if a return under paragraph 28B, or any information accompanying such a return—
a
is given otherwise than in accordance with paragraph 28D, or
b
contains a material inaccuracy—
i
which is careless or deliberate, or
ii
which is not corrected as required by paragraph 28B(11).
2
The scheme organiser is liable for a penalty of an amount decided by HMRC.
3
The penalty must not exceed £5,000.
4
For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the scheme organiser to take reasonable care.
Enquiries
28F
1
This paragraph applies if notice is given in relation to a CSOP scheme under paragraph 28A.
2
HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than—
a
6 July in the tax year following that in which the initial notification deadline falls, or
b
if the notice under paragraph 28A is given after the initial notification deadline, 6 July in the second tax year following the relevant tax year.
3
HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so no later than 12 months after the date on which a declaration within paragraph 28B(7) is given to HMRC.
4
Sub-paragraph (5) applies if (at any time) HMRC have reasonable grounds for believing that requirements of Parts 2 to 6 of this Schedule—
a
are not met in relation to the scheme, or
b
have not been met in relation to the scheme.
5
HMRC may enquire into the scheme if HMRC give notice to the scheme organiser of HMRC's intention to do so.
6
Notice may be given, and an enquiry may be conducted, under sub-paragraph (2), (3) or (5) even though the termination condition is met in relation to the scheme.
28G
1
An enquiry under paragraph 28F(2), (3) or (5) is completed when HMRC give the scheme organiser a notice (a “closure notice”) stating—
a
that HMRC have completed the enquiry, and
b
that—
i
paragraph 28H is to apply,
ii
paragraph 28I is to apply, or
iii
neither paragraph 28H nor paragraph 28I is to apply.
2
If the scheme organiser receives notice under paragraph 28F(2), (3) or (5), the scheme organiser may make an application to the tribunal for a direction requiring a closure notice for the enquiry to be given within a specified period.
3
The application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).
4
The tribunal must give a direction unless satisfied that HMRC have reasonable grounds for not giving the closure notice within the specified period.
28H
1
This paragraph applies if HMRC decide—
a
that requirements of Parts 2 to 6 of this Schedule—
i
are not met in relation to the scheme, or
ii
have not been met in relation to the scheme, and
b
that the situation is, or was, so serious that this paragraph should apply.
2
If this paragraph applies—
a
the scheme is not to be a Schedule 4 CSOP scheme with effect from—
i
such relevant time as is specified in the closure notice, or
ii
if no relevant time is specified, the time of the giving of the closure notice, and
b
the scheme organiser is liable for a penalty of an amount decided by HMRC.
3
The penalty under sub-paragraph (2)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
a
the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and
b
the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the scheme having been a Schedule 4 CSOP scheme at any relevant time before the time mentioned in sub-paragraph (2)(a)(i) or (ii) (as the case may be).
4
In this paragraph “relevant time” means any time before the giving of the closure notice when requirements of Parts 2 to 6 of this Schedule were not met in relation to the scheme.
28I
1
This paragraph applies if HMRC decide—
a
that requirements of Parts 2 to 6 of this Schedule—
i
are not met in relation to the scheme, or
ii
have not been met in relation to the scheme, but
b
that the situation is not, or was not, so serious that paragraph 28H should apply.
2
If this paragraph applies, the scheme organiser—
a
is liable for a penalty of an amount decided by HMRC, and
b
must, no later than 90 days after the relevant day, secure that the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme.
3
The penalty under sub-paragraph (2)(a) must not exceed £5,000.
4
In sub-paragraph (2)(b) “the relevant day” means—
a
the last day of the period in which notice of an appeal under paragraph 28K(2)(b) may be given, or
b
if notice of such an appeal is given, the day on which the appeal is determined or withdrawn.
5
Sub-paragraph (2)(b) does not apply if the termination condition was met in relation to the scheme before the closure notice was given or is met before the end of the 90 day period mentioned in sub-paragraph (2)(b).
6
If the scheme organiser fails to comply with sub-paragraph (2)(b), HMRC may give the scheme organiser a notice stating that that is the case (a “default notice”).
7
If the scheme organiser is given a default notice—
a
the scheme is not to be a Schedule 4 CSOP scheme with effect from—
i
such relevant time as is specified in the default notice, or
ii
if no relevant time is specified, the time of the giving of the default notice, and
b
the scheme organiser is liable for a further penalty of an amount decided by HMRC.
8
The penalty under sub-paragraph (7)(b) must not exceed an amount equal to twice HMRC's reasonable estimate of—
a
the total income tax for which persons who have been granted share options under the scheme have not been liable, or will not be liable in the future, and
b
the total contributions under Part 1 of SSCBA 1992 or SSCB(NI)A 1992 for which any persons have not been liable, or will not be liable in the future,
in consequence of the scheme having been a Schedule 4 CSOP scheme at any relevant time before the time mentioned in sub-paragraph (7)(a)(i) or (ii) (as the case may be).
9
In this paragraph “relevant time” means any time before the giving of the default notice when requirements of Parts 2 to 6 of this Schedule were not met in relation to the scheme.
Assessment of penalties
28J
1
This paragraph applies if the scheme organiser is liable for a penalty under this Part.
2
HMRC must assess the penalty and notify the scheme organiser of the assessment.
3
Subject to sub-paragraphs (4) and (5), the assessment must be made no later than 12 months after the date on which the scheme organiser becomes liable for the penalty.
4
In the case of a penalty under paragraph 28E(1)(b), the assessment must be made no later than—
a
12 months after the date on which HMRC become aware of the inaccuracy, and
b
6 years after the date on which the scheme organiser becomes liable for the penalty.
5
In the case of a penalty under paragraph 28H(2)(b) or 28I(2)(a) or (7)(b) where notice of appeal is given under paragraph 28K(2) or (3), the assessment must be made no later than 12 months after the date on which the appeal is determined or withdrawn.
6
A penalty payable under this Part must be paid—
a
no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the scheme organiser, or
b
if notice of appeal is given against the penalty under paragraph 28K(1) or (4), no later than 30 days after the date on which the appeal is determined or withdrawn.
7
The penalty may be enforced as if it were corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax charged in an assessment and due and payable.
8
Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.
Appeals
28K
F624A1
The scheme organiser may appeal against a decision of HMRC under paragraph 28A(5A) that there was no reasonable excuse for the failure to give notice on or before the initial notification deadline.
1
The scheme organiser may appeal against a decision of HMRC that the scheme organiser is liable for a penalty under paragraph 28C or 28E.
2
The scheme organiser may appeal against—
a
a decision of HMRC mentioned in paragraph 28H(1) or a decision of HMRC to specify, or not to specify, a relevant time in the closure notice;
b
a decision of HMRC mentioned in paragraph 28I(1).
3
The scheme organiser may appeal against a decision of HMRC—
a
to give the scheme organiser a default notice under paragraph 28I;
b
to specify, or not to specify, a relevant time in the default notice.
4
The scheme organiser may appeal against a decision of HMRC as to the amount of a penalty payable by the scheme organiser under this Part.
5
Notice of appeal must be given to HMRC no later than 30 days after the date on which—
F625za
in the case of an appeal under sub-paragraph (A1), notice of HMRC's decision is given to the scheme organiser;
a
in the case of an appeal under sub-paragraph (1) or (4), the notice under paragraph 28J(2) is given to the scheme organiser;
b
in the case of an appeal under sub-paragraph (2), the closure notice is given;
c
in the case of an appeal under sub-paragraph (3), the default notice is given.
6
On an appeal under sub-paragraph F626(A1), (1) or (3)(a) which is notified to the tribunal, the tribunal may affirm or cancel the decision.
7
On an appeal under sub-paragraph (2) or (3)(b) which is notified to the tribunal, the tribunal may—
a
affirm or cancel the decision, or
b
substitute for the decision another decision which HMRC had power to make.
8
On an appeal under sub-paragraph (4) which is notified to the tribunal, the tribunal may—
a
affirm the amount of the penalty decided, or
b
substitute another amount for that amount.
9
Subject to this paragraph and paragraph 28J, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the scheme organiser is not within the charge to corporation tax, income tax.
Part 8Supplementary provisions
Power to require information
33
F5411
An officer of Revenue and Customs may by notice require a person to provide the officer with any information—
a
which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the CSOP 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 F124an officer of Revenue and Customs—
F542i
to check anything contained in a notice under paragraph 28A or a return under paragraph 28B or to check any information accompanying such a notice or return, or”, and
ii
to determine the liability to tax, including capital gains tax, of any person who has participated in a scheme F543or any other person whose liability to tax the operation of a scheme is relevant to, and
b
information about the administration of a scheme and any alteration of the terms of a scheme.
3
The notice must require the information to be provided within a specified time, which must not end earlier than 3 months after the date when the notice is given.
Jointly owned companies
34
1
This paragraph applies for the purposes of the provisions of the CSOP code relating to group schemes.
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 scheme, or
b
a constituent company in a particular group scheme if another company within that sub-paragraph is a constituent company in a different group scheme.
5
In this paragraph a “jointly owned company” means a company which (apart from sub-paragraph (2)) is not controlled by any one person and—
a
of which 50% of the issued share capital is owned by one person and 50% by another, or
b
which is otherwise controlled by two persons taken together.
6
In this paragraph “joint owner” means one of the persons mentioned in sub-paragraph (5)(a) or (b).
Meaning of “associated company”
35
1
For the purposes of the CSOP code one company is an “associated company” of another company at a given time if, at that time or at any other time within one year previously—
a
one has control of the other, or
b
both are under the control of the same person or persons.
2
For the purposes of sub-paragraph (1) the question whether a person controls a company is to be determined in accordance with F342sections 450 and 451 of CTA 2010.
F498Non-UK company reorganisation arrangements
Sch. 4 para. 35ZA and cross-heading inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 181, 204 (with Sch. 8 paras. 205-215)
35ZA
1
For the purposes of the CSOP code a “non-UK company reorganisation arrangement” is an arrangement made in relation to a company under the law of a territory outside the United Kingdom—
a
which gives effect to a reorganisation of the company's share capital by the consolidation of shares of different classes, or by the division of shares into shares of different classes, or by both of those methods, and
b
which is approved by a resolution of members of the company.
2
A resolution does not count for the purposes of sub-paragraph (1)(b) unless the members who vote in favour of approving the arrangement represent more than 50% of the total voting rights of all the members having the right to vote on the issue.
F11Retirement age
Sch. 4 para. 35A and cross-heading inserted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 21 para. 15(2)
F45635A
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minor definitions
36
1
In the CSOP code—
“company” means a body corporate;
“market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.
2
For the purposes of the CSOP 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.
F4573
For the purposes of the CSOP code—
a
shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and
b
the “restriction” is that provision.
Index of defined expressions
37
In the CSOP code the following expressions are defined or otherwise explained by the provisions indicated below:
F562. . . | F562. . . |
associated company | paragraph 35(1) |
child | F157section 721(6) |
close company | F158section 989 of ITA 2007, (and see paragraph 9(4)) |
company | paragraph 36(1) |
connected person | section 718 |
constituent company | paragraph 3(3) |
control | section 719 (and see paragraph 35(2)) |
the CSOP code | section 521(3) |
CSOP scheme | section 521(4) |
distribution | F159section 989 of ITA 2007 |
eligible shares (in Part 4 of this Schedule) | paragraph 15(2) |
employee and employment | section 4 |
group scheme | paragraph 3(2) (and see paragraph 34) |
F129. . . | F129. . . |
market value | paragraph 36(1) |
member of a consortium | paragraph 36(2) |
F563non-UK company reorganisation arrangement | paragraph 35ZA |
notice | F160section 989 of ITA 2007 |
the options (in relation to a participant) | paragraph 2(2) |
ordinary share capital | F161section 989 of ITA 2007 |
participant | paragraph 2(2) |
participate | paragraph 2(2) |
personal representatives | F162section 989 of ITA 2007 |
recognised stock exchange | F163section 1005 of ITA 2007 |
F458restriction (in relation to shares) | paragraph 36(3) |
F563Schedule 4 CSOP scheme | paragraph 1 and Part 7 of this Schedule |
the scheme organiser | paragraph 2(2) |
share option | section 521(4) |
shares | section 521(4) |
F284tribunal | section 989 of ITA 2007 |
F283. . . | F283. . . |
F164. . . | F164. . . |
SCHEDULE 5Enterprise management incentives
Part 1Introduction
Enterprise management incentives: qualifying options
1
1
This Schedule makes provision for establishing what is a qualifying option for the purposes of the EMI code.
2
In the EMI code a “qualifying option” means (in accordance with section 527(4)) a share option—
a
in relation to which the requirements of this Schedule are met at the time when the option is granted, and
b
which is notified to F124an officer of Revenue and Customs in accordance with Part 7.
3
The requirements of this Schedule are—
a
the general requirements in Part 2,
b
that the company whose shares are the subject of the option (“the relevant company”) is a qualifying company (see Part 3),
c
that the individual to whom it is granted is an eligible employee in relation to that company (see Part 4),
d
that the option is granted to the employee by reason of the employee’s employment—
i
with that company, or
ii
if that company is a parent company, with that company or another member of the group, and
e
the requirements of Part 5 as to the terms of the option, the types of shares that may be subject to it, and other matters.
4
In the EMI code, as it applies to a share option, “the appropriate time” means the time when the option is granted.
Meaning of “the relevant company” and “the employer company”
2
In the EMI code, in relation to a share option—
“the relevant company” means (in accordance with paragraph 1(3)(b)) the company whose shares are subject to the option;
“the employer company” means the company by reference to which the requirement in paragraph 1(3)(d) (the employment requirement) is met.
Part 2General requirements
General requirements: introduction
3
A share option is not a qualifying option unless the requirements of this Part of this Schedule as to the following are met at the appropriate time—
the purpose for which the option is granted (see paragraph 4),
the maximum entitlement of an employee (see paragraphs 5 and 6),
the maximum value of the relevant company’s shares in respect of which unexercised options can exist (see paragraph 7).
Purpose of granting the option
4
To be a qualifying option a share option must be granted for commercial reasons in order to recruit or retain an employee in a company, and not as part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.
Maximum entitlement of employee: financial limit on unexercised options
5
1
An employee may not hold unexercised qualifying options which—
a
are in respect of shares with a total value of more than F366£250,000 , and
b
were granted by reason of the employee’s employment—
i
with one company, or
ii
with two or more companies which are members of the same group of companies.
2
A share option cannot be a qualifying option if the limit in sub-paragraph (1) is already exceeded at the time when it is granted.
3
If the grant of a share option causes that limit to be exceeded, the option cannot be a qualifying option so far as it relates to the excess.
4
Where, at the time when a share option is granted to an employee (“E”), E holds unexercised CSOP options granted by reason of E’s employment—
a
with the employer company, or
b
if it is a member of a group of companies, with any member of that group,
those options are to be treated for the purposes of this paragraph as if they were unexercised qualifying options.
5
A “CSOP option” is an option to acquire shares under a scheme F579which is a Schedule 4 CSOP scheme (see Schedule 4).
6
For the purposes of this paragraph—
a
“the value” of shares in respect of which a particular share option is or has been granted means the market value, at the time when the option is or was granted, of issued shares of the same class as those that may be acquired by exercise of the option; and
b
a share option is to be treated as granted in respect of the maximum number of shares that may be acquired under it.
F377
For the purposes of this paragraph the market value of restricted shares is to be determined as if they were not.
8
Shares are “restricted shares” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares.
Maximum entitlement of employee: further limit of 3 years
6
1
Sub-paragraph (2) applies if an employee (“E”) has already been granted, by reason of E’s employment with one company, qualifying options in respect of shares with a total value of F364£250,000 .
2
Any further option granted by reason of E’s employment—
a
with that company, or
b
if it is a member of a group of companies, with any member of that group,
within the 3-year restriction period cannot be a qualifying option.
3
Sub-paragraph (4) applies if an employee (“E”) has already been granted, by reason of E’s employment with two or more companies which are members of the same group of companies, qualifying options in respect of shares with a total value of F365£250,000 .
4
Any further option granted, by reason of E’s employment with any member of that group, within the 3-year restriction period cannot be a qualifying option.
5
Sub-paragraph (2) or (4) applies whether or not the qualifying options already granted have been exercised or released.
6
In those sub-paragraphs “the 3-year restriction period” means the period of three years after the date of the grant of the last qualifying option.
7
Paragraph 5(6) to (8) (determination of value of shares) apply for the purposes of this paragraph as they apply for the purposes of paragraph 5.
Part 3Qualifying companies
Qualifying companies: introduction
8
A “qualifying company” is a company in relation to which the requirements of this Part of this Schedule as to the following are met at the appropriate time—
independence (see paragraph 9),
having only qualifying subsidiaries (see paragraphs 10 and 11),
F52property managing subsidiaries (see paragraphs 11A and 11B),
gross assets (see paragraph 12), F255...
trading activities (see paragraphs 13 and 14, read with paragraphs 15 to 23)F357, and
UK permanent establishment (see paragraph 14A).
The independence requirement
9
1
The independence requirement consists of two conditions.
2
The first condition is that the company is not—
a
a 51% subsidiary of another company, or
b
a company which is under the control of—
i
another company, or
ii
another company and any other person connected with that other company,
without being a 51% subsidiary of that other company.
3
The second condition is that no arrangements are in existence by virtue of which the company could become such a subsidiary or fall under such control.
4
Arrangements with a view to a qualifying exchange of shares (see paragraph 40) do not count for the purposes of the second condition.
F5955
But the independence requirement is treated as met if the company is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).
The qualifying subsidiaries requirement
10
1
A company that has one or more subsidiaries is not a qualifying company unless every subsidiary of the company is a qualifying subsidiary (see paragraph 11).
F532
In this paragraph “subsidiary” means any company which the company controls, either on its own or together with any person connected with it.
3
For the purpose of sub-paragraph (2), the question whether a person controls a company is to be determined in accordance with F343sections 450 and 451 of CTA 2010 (“control” in the context of close companies).
Meaning of “qualifying subsidiary”
11
1
A company (“the subsidiary”) is a qualifying subsidiary of a company (“the holding company”) if the following conditions are met.
2
The conditions are—
F49a
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F49b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F49c
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F64ca
that the subsidiary is a 51% subsidiary of the holding company;
d
that no person other than the holding company F65or another of its subsidiaries has control of the subsidiary; and
e
that no arrangements are in existence by virtue of which F66either of the conditions in paragraphs (ca) and (d) would cease to be met.
F673
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Sub-paragraph (5) applies at a time when the subsidiary or another company is being wound up.
5
The subsidiary is not to be regarded as having ceased, on account of the winding up, to be a company in relation to which the conditions in sub-paragraph (2) are met if—
a
the conditions in that sub-paragraph would be met apart from the winding up, and
b
the winding up is for commercial reasons and is not part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.
6
Sub-paragraph (7) applies at a time when arrangements are in existence for the disposal by—
a
the holding company, or
b
another subsidiary of the holding company,
of all of its interest in the subsidiary.
7
The subsidiary is not to be regarded as having ceased, on account of those arrangements, to be a company in relation to which the conditions in sub-paragraph (2) are met if the disposal is to be for commercial reasons and is not to be part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.
F508
Sub-paragraph (9) applies at a time when the subsidiary or another company is in administration or receivership.
9
The subsidiary is not to be regarded, by reason only of anything done as a consequence of the company concerned being in administration or receivership, as having ceased to be a company in relation to which the conditions in sub-paragraph (2) are met if—
a
the entry into administration or receivership, and
b
everything done as a consequence of the company concerned being in administration or receivership,
is for commercial reasons and is not part of a scheme or arrangement the main purpose (or one of the main purposes) of which is the avoidance of tax.
10
F51The property managing subsidiaries requirement
Sch. 5 paras. 11A, 11B and cross-headings inserted (with effect in accordance with s. 96(6) of the amending Act) by Finance Act 2004 (c. 12), s. 96(5)
11A
1
A company is not a qualifying company if it has a property managing subsidiary which is not a qualifying 90% subsidiary of the company (see paragraph 11B).
2
“Property managing subsidiary” means a qualifying subsidiary of a company whose business consists wholly or mainly in the holding or managing of land or any property deriving its value from land.
F3443
In sub-paragraph (2) “property deriving its value from land” has the meaning given by section 188(3) of ITA 2007.
Meaning of “qualifying 90% subsidiary”
11B
1
A company (“the subsidiary”) is a qualifying 90% subsidiary of a company (“the holding company”) if the following conditions are met.
2
The conditions are—
a
that the holding company possesses not less than 90% of the issued share capital of, and not less than 90% of the voting power in, the subsidiary;
b
that the holding company would—
i
in the event of a winding up of the subsidiary, or
ii
in any other circumstances,
be beneficially entitled to not less than 90% of the assets of the subsidiary which would then be available for distribution to the shareholders of the subsidiary;
c
that the holding company is beneficially entitled to not less than 90% of any profits of the subsidiary which are available for distribution to the shareholders of the subsidiary;
d
that no person other than the holding company has control of the subsidiary; and
e
that no arrangements are in existence by virtue of which any of the conditions in paragraphs (a) to (d) would cease to be met.
3
Sub-paragraphs (4) to (10) of paragraph 11 (but not sub-paragraph (6)(b)) apply in relation to the conditions in sub-paragraph (2) above as they apply in relation to the conditions in sub-paragraph (2) of that paragraph.
The gross assets requirement
12
1
The gross assets requirement in the case of a single company is that the value of the company’s gross assets does not exceed £30 million.
2
The gross assets requirement in the case of a parent company is that the value of the group assets does not exceed £30 million.
3
The “value of the group assets” means the aggregate of the values of the gross assets of each of the members of the group, disregarding any that consist in rights against, or shares in or securities of, another member of the group.
F257The number of employees requirement
Sch. 5 para. 12A and cross-heading inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2008 (c. 9), s. 33(3)
12A
1
The number of employees requirement in the case of a single company is that the full-time equivalent employee number for it is less than 250.
2
The number of employees requirement in the case of a parent company is that the sum of—
a
the full-time equivalent employee number for it, and
b
the full-time equivalent employee numbers for each of its qualifying subsidiaries,
is less than 250.
3
The full-time equivalent employee number for a company is calculated as follows—
Step 1
Find the number of full-time employees of the company.
Step 2
Add, for each employee of the company who is not a full-time employee, such fraction as is just and reasonable.
The result is the full-time equivalent employee number.
4
In this paragraph references to an employee—
a
include a director, but
The trading activities requirement: single company
13
1
The trading activities requirement in the case of a single company is that the company—
a
disregarding any purposes within sub-paragraph (2), exists wholly for the purpose of carrying on one or more qualifying trades, and
b
is carrying on a qualifying trade or preparing to do so.
2
The purposes referred to in sub-paragraph (1)(a) are—
a
the holding and managing of property used by the company for one or more qualifying trades carried on by it, and
b
any purposes having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities.
3
This paragraph is supplemented by paragraph 15 (meaning of “qualifying trade”) read with paragraphs 16 to 23 (excluded activities).
The trading activities requirement: parent company
14
1
The trading activities requirement in the case of a parent company is that—
a
at least one group company—
i
disregarding any purposes within sub-paragraph (4), exists wholly for the purpose of carrying on one or more qualifying trades, and
ii
is carrying on a qualifying trade or preparing to do so, and
b
the business of the group does not consist (either wholly or as to a substantial part) in the carrying on of non-qualifying activities.
2
The “business of the group” means what would be the business of the group if the activities of the group companies taken together were regarded as one business.
3
For the purpose of determining the business of a group, activities of a group company are to be disregarded to the extent that they consist in—
a
the holding of shares in or securities of, or the making of loans to, another group company,
b
the holding and managing of property used by a group company for the purposes of one or more qualifying trades carried on by a group company, or
c
incidental activities of a company which meets the trading activities requirement for a single company (see paragraph 13).
4
The purposes referred to in sub-paragraph (1)(a)(i) are—
a
the carrying on of any activities within sub-paragraph (3), and
b
any purposes having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities.
5
In this paragraph—
a
“group company” means any member of the group;
b
“incidental activities” means activities carried on in pursuance of purposes having no significant effect (other than in relation to incidental matters) on the extent of the company’s activities;
c
“non-qualifying activities” means—
i
excluded activities, or
ii
activities carried on otherwise than in the course of a trade.
6
This paragraph is supplemented by paragraph 15 (meaning of “qualifying trade”) read with paragraphs 16 to 23 (excluded activities).
F358 The UK permanent establishment requirement
Sch. 5 para. 14A and cross-heading inserted (with effect in accordance with s. 6(5) of the amending Act) by Finance (No. 3) Act 2010 (c. 33), s. 6(3)
14A
1
The UK permanent establishment requirement is met if condition A or B is met.
2
Condition A is that the company has a permanent establishment in the United Kingdom.
3
Condition B is that—
a
the company is a parent company, and
b
any other member of the group—
i
meets the conditions in paragraph 14(1)(a) (trading activities requirement), and
ii
has a permanent establishment in the United Kingdom.
Meaning of “qualifying trade”
15
1
A trade is a qualifying trade if—
F359a
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
b
it is conducted on a commercial basis and with a view to the realisation of profits, and
c
it does not consist (either wholly or as to a substantial part) in the carrying on of excluded activities.
2
The carrying on of activities of research and development from which it is intended that a connected qualifying trade will be derived or benefit counts as the carrying on of a qualifying trade.
3
But preparing to carry on such activities does not count as preparing to carry on a qualifying trade.
4
In sub-paragraph (2) “connected qualifying trade” means a qualifying trade carried on—
a
by the company carrying on the activities of research and development, or
b
if that company is a member of a group, by any other member of the group.
Excluded activities
16
The following are excluded activities—
a
dealing in land, in commodities or futures or in shares, securities or other financial instruments;
b
dealing in goods otherwise than in the course of an ordinary trade of wholesale or retail distribution (see also paragraph 17);
c
banking, insurance, money-lending, debt-factoring, hire-purchase financing or other financial activities;
d
leasing, including letting ships on charter or other assets on hire (see also paragraph 18);
e
receiving royalties or licence fees (see also paragraph 19);
f
providing legal or accountancy services;
g
property development (see also paragraph 20);
h
farming or market gardening;
i
holding, managing or occupying woodlands, any other forestry activities or timber production;
F261ia
shipbuilding (see also paragraph 20A);
ib
producing coal (see also paragraph 20B);
ic
producing steel (see also paragraph 20C);
j
operating or managing hotels or comparable establishments, or managing property used as a hotel or comparable establishment (see also paragraph 21);
k
operating or managing nursing homes or residential care homes, or managing property used as a nursing home or residential care home (see also paragraph 22);
l
any activities which are excluded activities under paragraph 23.
Excluded activities: wholesale and retail distribution
17
1
This paragraph supplements paragraph 16(b).
2
A trade of wholesale distribution is one in which the goods are offered for sale and sold to persons—
a
for resale by them, or
b
for processing and resale by them,
to members of the general public for their use or consumption.
3
A trade of retail distribution is one in which the goods are offered for sale and sold to members of the general public for their use or consumption.
4
A trade is not an ordinary trade of wholesale or retail distribution if—
a
it consists, to a substantial extent—
i
in dealing in goods of a kind which are collected or held as an investment, or
ii
in that activity and any other excluded activity taken together, and
b
a substantial proportion of those goods are held by the company for a period which is significantly longer than the period for which a vendor would reasonably be expected to hold them while endeavouring to dispose of them at their market value.
5
In determining whether a trade carried on by any person (“P”) is an ordinary trade of wholesale or retail distribution, consideration must be given to the extent to which it has the following features—
a
the goods are bought by P in quantities larger than those in which P sells them;
b
the goods are bought and sold by P in different markets;
c
P employs staff and incurs expenses in the trade in addition—
i
to the cost of the goods, and
ii
in the case of a trade carried on by a company, to any remuneration paid to any person connected with it;
d
there are purchases or sales from or to persons who are connected with P;
e
purchases are matched with forward sales or vice versa;
f
the goods are held by P for longer than is normal for goods of the kind in question;
g
the trade is carried on otherwise than at a place or places commonly used for wholesale or retail trade;
h
P does not take physical possession of the goods.
6
The features in sub-paragraph (5)(a) to (c) are indications that the trade is such an ordinary trade.
7
Those in sub-paragraph (5)(d) to (h) are indications to the contrary.
Excluded activities: leasing of certain ships
18
1
This paragraph supplements paragraph 16(d) so far as it relates to the leasing of ships other than F54offshore installations or pleasure craft.
2
In the following provisions “ship” accordingly means a ship other than an F55offshore installation or a pleasure craft.
3
If the requirements of sub-paragraph (4) are met, a trade is not to be regarded as consisting in the carrying on of excluded activities within paragraph 16(d) as a result only of its consisting in the letting of ships on charter.
4
The requirements of this sub-paragraph are that—
a
every ship let on charter by the company carrying on the trade is beneficially owned by the company;
b
every ship beneficially owned by the company is registered in the United Kingdom;
c
the company is solely responsible for arranging the marketing of the services of its ships; and
d
the conditions mentioned in sub-paragraph (5) are satisfied in relation to every letting of a ship on charter by the company.
5
The conditions are that—
a
the letting is for a period not exceeding 12 months and no provision is made at any time (in the charterparty or otherwise) for extending it beyond that period otherwise than at the option of the charterer;
b
during the period of the letting there is no provision in force (as a result of being contained in the charterparty or otherwise) for the grant of a new letting to end, otherwise than at the option of the charterer, more than 12 months after that provision is made;
c
the letting is by way of a bargain made at arm’s length between the company and a person who is not connected with it;
d
under the terms of the charter the company is responsible as principal—
i
for taking, throughout the period of the charter, management decisions in relation to the ship, other than those of a kind generally regarded by persons engaged in trade of the kind in question as matters of husbandry, and
ii
for defraying all expenses in connection with the ship throughout that period, or substantially all such expenses, other than those directly incidental to a particular voyage or to the employment of the ship during that period; and
e
no arrangements exist as a result of which a person other than the company may be appointed to be responsible for the matters mentioned in paragraph (d) on behalf of the company.
6
If in the case of a letting by the company carrying on the trade (“the letting company”) the charterer is also a company and—
a
the charterer is a qualifying subsidiary of the letting company, or
b
the letting company is a qualifying subsidiary of the charterer, or
c
both companies are qualifying subsidiaries of a third company,
sub-paragraph (5) has effect with the omission of paragraph (c).
7
Where any of the requirements in sub-paragraph (4) is not met in relation to any lettings, the trade is not, as a result, to be treated as consisting in the carrying on of excluded activities if those lettings and any other excluded activities do not, taken together, amount to a substantial part of the trade.
8
In this paragraph—
F56. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
“pleasure craft” means any ship of a kind primarily used for sport or recreation.
Excluded activities: receipt of royalties or licence fees
19
1
This paragraph supplements paragraph 16(e) (receipt of royalties or licence fees).
2
If the requirement of sub-paragraph (3) is met, a trade is not to be regarded as consisting in the carrying of excluded activities within paragraph 16(e) as a result only of its consisting to a substantial extent in the receiving of royalties or licence fees.
3
The requirement of this sub-paragraph is that the royalties or licence fees (or all of them except for a part that is not substantial in terms of value) are attributable to the exploitation of relevant intangible assets.
4
For this purpose a “relevant intangible asset” is an intangible asset the whole or greater part of which (in terms of value) has been created—
F245a
by the relevant company, or
b
by a company which was a qualifying subsidiary of the relevant company throughout a period during which it created the whole or greater part (in terms of value) of the intangible asset.
5
In the case of an intangible asset which is intellectual property, any reference in sub-paragraph (4) to the creation of the asset by a company is to its creation in circumstances in which the right to exploit it vests in the company (either alone or jointly with others).
6
In sub-paragraph (5) “intellectual property” means—
a
any patent, trade mark, registered design, copyright, design right, performer’s right or plant breeder’s right; or
b
any rights under the law of a country or territory outside the United Kingdom which correspond or are similar to those falling within paragraph (a).
7
In this paragraph “intangible asset” means any asset which falls to be treated as an intangible asset in accordance with generally accepted accounting practice.
F2448
If—
a
the relevant company acquired all the shares (“old shares”) in another company (“the old company”) at a time when the only shares issued in the relevant company were subscriber shares, and
b
the consideration for the old shares consisted wholly of the issue of shares in the relevant company,
references in sub-paragraph (4) to the relevant company include the old company.
Excluded activities: property development
20
1
This paragraph supplements paragraph 16(g).
2
“Property development” means the development of land—
a
by a company which has, or at any time has had, an interest in the land, and
b
with the sole or main object of realising a gain from the disposal of an interest in the land when it is developed.
3
For this purpose “interest in land” means—
a
any estate, interest or right in or over land, including any right affecting the use or disposition of land, or
b
any right to obtain such an estate, interest or right from another which is conditional on the other’s ability to grant it.
4
References in this paragraph to an interest in land do not, however, include—
a
the interest of a creditor (other than a creditor in respect of a rentcharge) whose debt is secured by way of mortgage, an agreement for a mortgage or a charge of any kind over land, or
b
in the case of land in Scotland, the interest of a creditor in a charge or security of any kind over land.
F258Excluded activities: shipbuilding
Sch. 5 paras. 20A-20C and cross-heading inserted (with effect in accordance with s. 33(6) of the amending Act) by Finance Act 2008 (c. 9), s. 33(5)
20A
In paragraph 16(ia) “shipbuilding” has the same meaning as in the Framework on state aid to shipbuilding (2003/C 317/06), published in the Official Journal on 30 December 2003.
Excluded activities: producing coal
20B
1
This paragraph supplements paragraph 16(ib).
2
“Coal” has the meaning given by Article 2 of Council Regulation (EC) No. 1407/2002 (state aid to coal industry).
3
The production of coal includes the extraction of it.
Excluded activities: producing steel
20C
In paragraph 16(ic) “steel” means any of the steel products listed in Annex 1 to the Guidelines on national regional aid (2006/C 54/08), published in the Official Journal on 4 March 2006.
Excluded activities: hotels and comparable establishments
21
1
This paragraph supplements paragraph 16(j).
2
A “comparable establishment” means a guest house, hostel or other establishment offering overnight accommodation.
3
An establishment offers overnight accommodation if the main purpose of maintaining it is the provision of facilities for such accommodation (with or without catering services).
4
The activities of a person are not to be taken to fall within paragraph 16(j) unless that person has an estate or interest in, or is in occupation of, the hotel or comparable establishment in question.
Excluded activities: nursing homes and residential care homes
22
1
This paragraph supplements paragraph 16(k).
2
“Nursing home” means an establishment that exists wholly or mainly for the provision of nursing care—
a
for persons suffering from sickness, injury or infirmity, or
b
for women who are pregnant or have given birth to children.
3
“Residential care home” means an establishment that exists wholly or mainly for the provision of residential accommodation, together with board and personal care, for persons in need of personal care by reason of—
a
old age,
b
mental or physical disability,
c
past or present dependence on alcohol or drugs,
d
any past illness, or
e
past or present mental disorder.
4
The activities of a person are not to be taken to fall within paragraph 16(k) unless that person has an estate or interest in, or is in occupation of, the nursing home or residential care home in question.
Excluded activities: provision of facilities for another business
23
1
This paragraph applies where a company (“the service provider”) provides services or facilities for a business carried on by another person.
2
Providing those services or facilities is an excluded activity if—
a
the business consists to a substantial extent in carrying on excluded activities within any of sub-paragraphs (a) to (k) of paragraph 16, and
b
a controlling interest in the business is held by a person (other than a company of which the service provider is a subsidiary) who also has a controlling interest in the business carried on by the service provider.
3
Sub-paragraphs (4) to (6) explain what is meant by a controlling interest in a business for the purposes of sub-paragraph (2)(b).
4
In the case of a business carried on by a company, a person (“P”) has a controlling interest in the business if—
a
P controls the company,
b
the company is a close company and P, or an associate of P's, is a director of the company and either—
i
is the beneficial owner of more than 30% of the ordinary share capital of the company, or
ii
is able (directly or through the medium of other companies or by any other indirect means) to control more than 30% of that share capital, or
5
In any other case, a person has a controlling interest in a business if that person is entitled to not less than half—
a
of the assets used for the business, or
b
of the income arising from it.
6
For the purposes of sub-paragraph (4)(a) the question whether a person controls a company is to be determined in accordance with F316sections 450 and 451 of CTA 2010 (“control” in the context of close companies).
7
For the purposes of this paragraph any rights or powers of a person who is an associate of another person are to be attributed to that other person.
8
In this paragraph—
“associate” has the meaning given F317by section 448 of CTA 2010 (expressions relating to close companies), except that in F318that section as it applies for the purposes of this paragraph “relative” does not include a brother or sister;
“business” includes any trade, profession or vocation;
“director” is to be construed in accordance with F319section 452 of CTA 2010 (expressions relating to close companies).
Part 4Eligible employees
Eligible employees: introduction
24
An individual is an “eligible employee” in relation to the relevant company if the requirements of this Part of this Schedule as to the following are met at the appropriate time—
employment (see paragraph 25),
commitment of working time (see paragraphs 26 and 27), and
having no material interest (see paragraphs 28 to 33).
The employment requirement
25
To be an eligible employee in relation to the relevant company an individual must be an employee—
a
of that company, or
b
if that company is a parent company, of that company or a qualifying subsidiary of that company.
The requirement as to commitment of working time
C426
1
For an individual (“the employee”) to be an eligible employee in relation to the relevant company the average amount per week of the employee’s committed time must equal or exceed the statutory threshold, that is—
a
25 hours a week, or
b
if less, 75% of the employee’s working time (see paragraph 27).
2
The employee’s “committed time” means the time that the employee is required, as an employee in relevant employment, to spend—
a
on the business of the relevant company, or
b
if the relevant company is a parent company, on the business of the group.
3
It includes any time which the employee would have been required to spend as mentioned in sub-paragraph (2) but for—
a
injury, ill-health or disability,
b
c
reasonable holiday entitlement, or
d
not being required to work during a period of notice of termination of employment.
4
In this paragraph “relevant employment” means employment—
a
by the relevant company, or
b
where the relevant company is a parent company, by any member of the group.
Meaning of “working time”
C527
1
In paragraph 26 “working time” means—
a
time spent on remunerative work as an employee or self-employed person, or
b
time which would have been so spent but for any of the reasons set out in paragraph 26(3)(a) to (d).
2
In sub-paragraph (1)(a) “remunerative work”, in the context of work undertaken as an employee, means work the earnings from which—
a
are general earnings to which section 15 F252applies (earnings for year when employee UK resident), or
b
would be general earnings within paragraph (a) if the employee were F253UK resident (and none of sections 809B, 809D and 809E of ITA 2007 (remittance basis) applied to the employee).
3
In sub-paragraph (1)(a) “remunerative work”, in the context of work undertaken as a self-employed person, means work which is undertaken with a view to profit and the profits (if any) from which—
a
are (or would be) chargeable to tax F93as the profits of a trade, profession or vocation carried on wholly or partly in the United Kingdom, or
b
would be so chargeable if the employee were resident F459... in the United Kingdom.
The “no material interest” requirement
28
1
An individual is not an eligible employee in relation to the relevant company if the individual has a material interest—
a
in that company, or
b
if that company is a parent company, in any member of the group.
2
For the purposes of this paragraph an individual is to be regarded as having a material interest in a company if—
a
the individual,
b
the individual together with one or more of the individual’s associates, or
c
any such associate, with or without any other such associates,
has a material interest in the company.
3
This paragraph is supplemented—
a
as regards the meaning of “material interest”, by paragraphs 29 and 30; and
b
as regards the meaning of “associate” by paragraph 31 (read with paragraphs 32 and 33).
Meaning of “material interest”
29
1
In paragraph 28 (the “no material interest” requirement) references to a “material interest” in a company are to—
a
a material interest in the share capital of the company, or
b
where it is a close company, a material interest in its assets.
2
A material interest in the share capital of a company means—
a
beneficial ownership of, or
b
the ability to control (directly or through the medium of other companies or by any other indirect means),
more than 30% of the ordinary share capital of the company.
3
A material interest in the assets of a close company means—
a
possession of, or
b
an entitlement to acquire,
such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive more than 30% of the assets that would then be available for distribution among the participators.
4
In this paragraph—
“close company” includes a company that would be a close company but for—
“participator” has the meaning given by F360section 454 of CTA 2010 (expressions relating to close companies).
5
This paragraph is supplemented by paragraph 30 (options and interests in SIPs).
Material interest: options and interests in SIPs
30
1
This paragraph applies for the purposes of paragraph 29 (meaning of “material interest”).
2
A right to acquire shares (however arising) is to be treated as a right to control them.
3
However, shares that an individual may acquire under a qualifying option are to be left out of account until such time as they are actually acquired.
4
Sub-paragraph (5) applies in a case where—
a
the shares to be attributed to an individual consist of or include shares which the individual or another person has a right to acquire, and
b
the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company would be contractually bound to issue in the event of the exercise of the right.
5
In determining at any time prior to the exercise of the right whether the number of shares to be attributed to the individual exceeds 30% of the ordinary share capital of the company, that ordinary share capital is to be treated as increased by the number of unissued shares referred to in sub-paragraph (4)(b).
6
The references in sub-paragraphs (4) and (5) to the shares to be attributed to an individual are to the shares which—
a
for the purposes of paragraph 29(2) (material interest in share capital), and
b
in accordance with paragraph 28(2) (material interest can consist of or include that of individual’s associates),
fall to be brought into account in the individual’s case so that it can be determined whether their number exceeds 30% of the company’s ordinary share capital.
7
In applying paragraph 29 the following are to be disregarded—
a
the interest of the trustees of any F580Schedule 2 SIP (see Schedule 2) in any shares which are held by them in accordance with the plan but which have not been appropriated to, or acquired on behalf of, an individual, and
b
any rights exercisable by the trustees as a result of that interest.
Meaning of “associate”
31
1
In paragraph 28(2) (the “no material interest” requirement) “associate”, in relation to an individual, means—
a
any relative or partner of that individual,
b
the trustee or trustees of any settlement in relation to which that individual, or any of that individual’s relatives (living or dead), is or was a settlor, and
c
where that individual is interested in any shares or obligations of the company mentioned in paragraph 28(2) which are subject to any trust, or are part of the estate of a deceased person—
i
the trustee or trustees of the settlement concerned, or
ii
the personal representatives of the deceased,
as the case may be.
2
Sub-paragraph (1)(c) needs to be read with paragraphs 32 and 33 (which relate to employee benefit trusts and discretionary trusts).
3
In this paragraph—
Meaning of “associate”: trustees of employee benefit trust
32
1
This paragraph applies for the purposes of paragraph 31(1)(c) (meaning of “associate”: trustees of settlement) where the individual is interested as a beneficiary of an employee benefit trust in shares or obligations of the company mentioned in paragraph 28(2).
2
The trustees of the employee benefit trust are not to be regarded as associates of the beneficiary by reason only of the individual’s being so interested if neither—
a
the individual, nor
b
the individual together with one or more of the individual’s associates, nor
c
any such associate, with or without any other such associates,
has at any time after 13th March 1989 been the beneficial owner of, or able (directly or through the medium of other companies or by any other indirect means) to control, more than 30% of the ordinary share capital of the company.
3
In sub-paragraph (2)(b) and (c) “associate” has the meaning given by paragraph 31(1), but does not include the trustees of an employee benefit trust as a result only of the individual’s having an interest in shares or obligations of the trust.
4
Chapter 11 of Part 7 of this Act (which deals with the attribution of interests in companies to beneficiaries of employee benefit trusts) applies for the purposes of sub-paragraph (2).
5
In this paragraph “employee benefit trust” has the same meaning as in that Chapter (see sections 550 and 551).
Meaning of “associate”: trustees of discretionary trust
33
1
This paragraph applies for the purposes of paragraph 31(1)(c) (meaning of “associate”: trustees of settlement) where—
a
the individual (“the beneficiary”) is one of the objects of a discretionary trust,
b
the property subject to the trust has at any time consisted of or included shares or obligations of the company mentioned in paragraph 28(2),
c
the beneficiary has ceased to be eligible to benefit under the trust as a result of—
i
an irrevocable disclaimer or release executed by the beneficiary, or
ii
the irrevocable exercise by the trustees of a power to exclude the beneficiary from the objects of the trust,
d
immediately after the beneficiary ceased to be so eligible, no associate of the beneficiary was interested in the shares or obligations of the company which were subject to the trust, and
e
during the period of 12 months ending with the date on which the beneficiary ceased to be so eligible, neither the beneficiary nor any associate of the beneficiary received any benefit under the trust.
2
The beneficiary is not, as a result only of the matters mentioned in sub-paragraph (1)(a) and (b), to be regarded as having been interested in the shares or obligations of the company at any time during that period of 12 months.
3
In sub-paragraph (1) “associate” has the meaning given by paragraph 31, but with the omission of sub-paragraph (1)(c) of that paragraph (trusts and estates).
Part 5Requirements relating to options
Requirements relating to options: introduction
34
A share option is not a qualifying option unless the requirements of this Part of this Schedule as to the following are met at the appropriate time—
the type of shares that may be acquired (see paragraph 35),
when the option is capable of being exercised (see paragraph 36),
the terms being agreed in writing (see paragraph 37), and
the non-assignability of rights (see paragraph 38).
Option to be capable of exercise within 10 years
36
1
The option must be capable of being exercised within the period of 10 years beginning with the date on which it is granted.
2
Where the exercise of the option is dependent on the fulfilment of conditions, the option is to be taken to be capable of being exercised within the period mentioned in sub-paragraph (1) if the conditions may be fulfilled within that period.
Terms of option to be agreed in writing
37
1
The option must take the form of a written agreement between the person granting the option and the employee which meets the following requirements.
2
The agreement must state—
a
the date on which the option is granted;
b
that it is granted under the provisions of this Schedule;
c
the number, or maximum number, of shares that may be acquired;
d
the price (if any) payable by the employee to acquire them, or the method by which that price is to be determined; and
e
when and how the option may be exercised.
3
The agreement must set out any conditions, such as performance conditions, affecting the terms or extent of the employee’s entitlement.
F384
Where the shares that may be acquired by the employee are restricted shares, the agreement must contain details of the restrictions.
5
For the purposes of sub-paragraph (4)—
a
shares are “restricted shares” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and
b
“restrictions” means that provision.
F386
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-assignability of rights
38
The terms on which the option is granted—
a
must prohibit the person to whom it is granted from transferring any of that person’s rights under it, and
b
if they permit it to be exercised after that person’s death, must not permit it to be exercised more than one year after the date of the death.
Part 6Company reorganisations
Company reorganisations: introduction
39
1
This Part applies in connection with company reorganisations.
2
For the purposes of this Part there is a “company reorganisation” where a company (“the acquiring company”)—
a
obtains control of a company whose shares are subject to an outstanding qualifying option—
i
as a result of making a general offer to acquire the whole of the issued share capital of that company which is made on a condition such that, if it is met, the person making the offer will have control of the company, or
ii
as a result of making a general offer to acquire all the shares in the company which are of the same class as those to which the option relates;
F249b
obtains control of such a company as a result of a compromise or arrangement sanctioned by the court under section 899 F654or 901F of the Companies Act 2006 (court sanction for compromise or arrangement);
F247c
becomes bound or entitled to acquire shares in the scheme company under sections 979 to 982 F460or 983 to 985 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder).
d
obtains all the shares of a company whose shares are subject to an outstanding qualifying option as a result of a qualifying exchange of shares (see paragraph 40).
3
In sub-paragraph (2) “outstanding qualifying option” means a qualifying option that has yet to be exercised.
F4614
In sub-paragraph (2)(a)(i) the reference to the issued share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.
5
For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.
Grant of replacement option
41
1
This paragraph applies if both of the following conditions are met in connection with a company reorganisation.
2
The first condition is that the holder of a qualifying option, by agreement with the acquiring company, releases the holder’s rights under that option (“the old option”) in consideration of the granting to him of rights (“the new option”) which are equivalent but relate to shares in the acquiring company.
3
The second condition is that the requirements of the following paragraphs are met—
paragraph 42 (period within which replacement option must be granted), and
paragraph 43 (further requirements to be met as to replacement option).
4
If this paragraph applies, the new option is to be treated for the purposes of the EMI code as a “replacement option”.
5
Except where the contrary is indicated—
a
references in the EMI code to a qualifying option include a replacement option, and
b
a replacement option is to be treated for the purposes of the EMI code as if it had been granted on the date on which the old option was granted.
6
For the purposes of any of paragraphs 5 to 7 or section 536(1)(e), the total value of the shares in the acquiring company that are subject to the replacement option is to be taken to be equal to—
a
the total value (as calculated in accordance with paragraph 5(6) to (8)) of the shares that were subject to the old option immediately before the release of rights under that option, or
b
if the replacement option has been partially exercised, the proportion of that total value which corresponds to the proportion which the number of shares that remain subject to the option bears to the number of shares that were subject to it at the time when it was granted as a new option (see sub-paragraph (2) above).
7
In the EMI code references to “the old option” or “the new option” are to be construed in accordance with this paragraph.
Period within which replacement option must be granted
42
1
To qualify as a replacement option the new option must be granted within the required period (see sub-paragraphs (2) to (4)).
2
If the company reorganisation falls within paragraph 39(2)(a), the required period is the period of 6 months after the date on which—
a
the person making the offer has obtained control of the company, and
b
any condition subject to which the offer is made is met.
3
If the company reorganisation falls within paragraph 39(2)(b) or (d), the required period is the period of 6 months after the date on which the acquiring company obtains control of the company whose shares are subject to the old option.
4
If the company reorganisation falls within paragraph 39(2)(c), the required period is the period during which the acquiring company remains bound or entitled as mentioned in that provision.
Further requirements to be met as to replacement option
43
1
For the new option to qualify as a replacement option the following requirements must also be met.
2
The new option must be granted to the holder of the old option by reason of the holder’s employment—
a
with the acquiring company, or
b
if that company is a parent company, with that company or another member of the group.
3
The requirements of—
a
paragraph 4 (purpose of granting option),
b
paragraph 7 (maximum value of options in respect of relevant company) (as it has effect under sub-paragraph (4)), and
c
Part 5 (requirements as to options),
must be met in relation to the new option at the time of the release of rights under the old option (“the relevant time”).
4
For the purposes of paragraph 7 (as applied by sub-paragraph (3)(b)) the total value of the shares in the acquiring company that are subject to the new option is to be taken to be equal to the total value (as calculated in accordance with paragraph 5(6) to (8)) of the shares that were subject to the old option immediately before the relevant time.
5
In addition to the requirements mentioned in sub-paragraph (3)—
a
the independence requirement and the trading activities requirement must be met in relation to the acquiring company at the relevant time, and
b
the individual to whom the new option is granted must be an eligible employee in relation to the acquiring company at that time.
6
The total market value, immediately before the relevant time, of the shares which were subject to the old option must be equal to the total market value, immediately after the grant of the new option, of the shares in respect of which that option is granted.
7
The total amount payable by the employee for the acquisition of the shares under the new option must be equal to the total amount that would have been payable for the acquisition of shares under the old option.
Part 7Notification of option to inland revenue
Notice of option to be given to Inland Revenue
44
1
For a share option to be a qualifying option, notice of the option must be given to F124an officer of Revenue and Customs within 92 days after the date of the grant of the option.
2
The notice must—
a
be given by the employer company, F474...
F474b
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
The notice must contain, or be supported by, such information as F124an officer of Revenue and Customs may require for the purpose of determining whether the requirements of this Schedule are met.
4
The notice must also contain a declaration within F475sub-paragraph (5).
5
A declaration within this sub-paragraph is a declaration by a director, or the secretary, of the employer company—
a
that in the opinion of that person the requirements of this Schedule are met in relation to the option, F476...
b
that the information provided is, to the best of that person’s knowledge, correct and completeF477, and
c
that the individual to whom the option has been granted has made and signed a written declaration within sub-paragraph (6) and that the declaration is held by the employer company.
F4725A
The employer company must—
a
retain the declaration mentioned in sub-paragraph (5)(c) and, if requested to do so by an officer of Revenue and Customs, produce it to such an officer before the end of the period of 7 days after the day on which the request is made, and
b
give a copy of that declaration to the individual before the end of the period of 7 days after the day on which the declaration is signed by the individual.
6
A declaration within this sub-paragraph is a declaration by the individual to whom the option has been granted that the individual meets the requirement of paragraph 26 (commitment of working time) in relation to the option.
7
Any reference in this Part of this Schedule to the requirements (or any of the requirements) of this Schedule being met in relation to a share option is a reference to the requirements or requirement being met in relation to it at the appropriate time.
F4738
The notice, and any information supporting it, must be given electronically.
9
But, if an officer of Revenue and Customs considers it appropriate to do so, the officer may allow the employer company to give the notice or any supporting information in another way; and, if the officer does so, the notice or information must be given in that other way.
10
The Commissioners for Her Majesty's Revenue and Customs—
a
must prescribe how notices and supporting information are to be given electronically;
b
may make different provision for different cases or circumstances.
Correction of notice by Inland Revenue
45
1
F124An officer of Revenue and Customs may amend a notice given under paragraph 44 so as to correct obvious errors or omissions in the notice.
2
A correction under this paragraph must be made by a notice given to the employer company.
3
No correction may be made under this paragraph more than 9 months after the day on which the notice under paragraph 44 was given to F124an officer of Revenue and Customs.
4
A correction under this paragraph is of no effect if the employer company, within 3 months after the date of issue of the notice of correction, gives notice to F124an officer of Revenue and Customs rejecting the correction.
Notice of enquiry
46
1
This paragraph applies where notice of a share option is given under paragraph 44.
2
3
F124An officer of Revenue and Customs may enquire into whether the requirement of paragraph 26 (commitment of working time) is met in relation to the option by the individual to whom it has been granted if F112the officerF111gives that individual notice of F110the officer's intention to do so in accordance with this paragraph.
4
F124An officer of Revenue and Customs must give a copy of a notice under sub-paragraph (3) to the employer company.
5
Unless given by virtue of sub-paragraph (6), a notice of enquiry may not be given more than 12 months after the end of the period of 92 days mentioned in paragraph 44(1) (the period within which a notice under that paragraph must be given).
6
7
An option that has been the subject of one notice of enquiry under sub-paragraph (2) or (3) may not be the subject of another notice under that sub-paragraph, unless the notice is given by virtue of sub-paragraph (6).
8
In this paragraph a “notice of enquiry” means a notice given under sub-paragraph (2) or (3).
Completion of enquiry: closure notices
47
1
An enquiry under paragraph 46(2) is completed when F124an officer of Revenue and CustomsF115gives the employer company a notice—
b
stating F119the officer's decision as to whether the requirements of this Schedule are met in relation to the option.
2
3
An enquiry under paragraph 46(3) is completed when F124an officer of Revenue and CustomsF118gives the individual concerned and the employer company a notice—
b
stating F120the officer's decision as to whether the requirement of paragraph 26 (commitment of working time) is met by that individual in relation to the option.
4
References in the EMI code to a “closure notice” are to a notice under sub-paragraph (1) or (3).
5
A closure notice takes effect when it is issued.
Completion of enquiry: application for closure notice to be given
48
1
2
The application may be made—
a
by the employer company, or
b
in a case within paragraph 46(3), by the individual concerned.
F2743
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F2754
Any such application is to be subject to the relevant provisions of Part 5 of TMA 1970 (see, in particular, section 48(2)(b) of that Act).
5
Effect of enquiry
49
1
2
3
But this is subject—
a
if F123the officer's decision is that the requirements are not met, to the outcome of any appeal against that decision under paragraph 50;
b
if their decision is that the requirements are met, to the outcome of any subsequent enquiry under paragraph 46(6) (enquiry arising from discovery of false or misleading information).
4
This paragraph does not affect the provisions of sections 532 to 539 (which relate to disqualifying events).
Appeals
50
1
The employer company may appeal against a decision of F124an officer of Revenue and Customs —
a
that notice of the grant of the option was not given in accordance with paragraph 44, or
b
that the requirements of this Schedule are not met in relation to the option.
2
An individual may appeal against a decision of F124an officer of Revenue and Customs that the individual does not meet the requirement of paragraph 26 (commitment of working time).
3
Notice of the appeal must be given to F124an officer of Revenue and Customs within 30 days after the date when the closure notice is given to the appellant.
F2934
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part 8Supplementary provisions
Power to require information
51
1
F124An officer of Revenue and Customs may by notice require a person to provide F126the officer with information—
a
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 information to enable F124an officer of Revenue and Customs —
a
to decide whether a share option is a qualifying option, or
b
to determine the liability to tax, including capital gains tax, of any person who has been granted a qualifying option.
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.
Annual returns
F48452
1
This paragraph applies in relation to a company whose shares are (or have been) subject to qualifying options.
2
The company must give to Her Majesty's Revenue and Customs (“HMRC”) a return for each tax year falling (wholly or partly) in the company's qualifying option period.
3
The company's “qualifying option period” is the period—
a
beginning when the first qualifying option to which the company's shares are subject is granted, and
b
ending when the termination condition is met.
4
“The termination condition” is met when the company's shares—
a
are no longer subject to qualifying options, and
b
will no longer become subject to qualifying options.
5
The return for a tax year must—
a
contain, or be accompanied by, such information as HMRC may require, and
b
be given on or before 6 July in the following tax year.
6
The information which may be required under sub-paragraph (5)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of any person who has been granted a qualifying option to which the company's shares are subject.
7
If the company becomes aware that—
a
anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,
b
anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or
c
any other error or inaccuracy has occurred in relation to a return for a tax year,
the company must give an amended return correcting the position to HMRC without delay.
F48452A
1
A return under paragraph 52, and any information accompanying the return, must be given electronically.
2
But, if HMRC consider it appropriate to do so, HMRC may allow a company to give a return or any accompanying information in another way; and, if HMRC do so, the return or information must be given in that other way.
3
The Commissioners for Her Majesty's Revenue and Customs—
a
must prescribe how returns and accompanying information are to be given electronically;
b
may make different provision for different cases or circumstances.
Compliance with time limits
53
1
For the purposes of this Part and Part 7 a person F527(“P”) is not to be regarded as having failed to do anything required to be done within a particular period of time if—
a
F528P had a reasonable excuse for not doing it within that period, and
b
if the excuse ceased to exist, F528P did it without unreasonable delay after the excuse ceased to exist.
2
Where sub-paragraph (1)(b) applies, any further time limit running from the end of the period concerned is instead to run from the time when the thing in question was actually done.
F5263
For the purposes of sub-paragraph (1)—
a
an insufficiency of funds is not a reasonable excuse, unless attributable to events outside P's control, and
b
where P relies on any other person to do anything, that is not a reasonable excuse unless P took reasonable care to avoid the failure.
Power to amend by Treasury order
54
1
The Treasury may by order amend the EMI code—
a
to make such amendments of paragraphs 13 to 23 (the trading activities requirement and related provisions) as they consider expedient;
b
to substitute different sums of money for those for the time being specified in—
i
paragraphs 5(1) and 6(1) and (3) (maximum entitlement of employee);
ii
paragraph 12(1) and (2) (the gross assets requirement).
2
An order under sub-paragraph (1)(b) which amends paragraphs 5(1) and 6(1) and (3) may amend section 536(1)(e) (other disqualifying events) so as to substitute the same sum for the one that is for the time being specified there.
F501Penalties
Sch. 5 paras. 57A-57E and cross-heading inserted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 220, 222
57A
A company is liable for a penalty of £500 if the company fails—
a
to produce a declaration to an officer of Revenue and Customs as required by paragraph 44(5A)(a) before the end of the period mentioned in that provision, or
b
to provide a copy of a declaration to an individual as required by paragraph 44(5A)(b) before the end of the period mentioned in that provision,
and Her Majesty's Revenue and Customs (“HMRC”) decide that such a penalty should be payable.
57B
1
This paragraph applies if a company fails to give a return for a tax year (containing, or accompanied by, all required information) on or before the date mentioned in paragraph 52(5)(b) (“the date for delivery”).
2
The company is liable for a penalty of £100.
3
If the company's failure continues after the end of the period of 3 months beginning with the date for delivery, the company is liable for a further penalty of £300.
4
If the company's failure continues after the end of the period of 6 months beginning with the date for delivery, the company is liable for a further penalty of £300.
5
The company is liable for a further penalty under this sub-paragraph if—
a
the company's failure continues after the end of the period of 9 months beginning with the date for delivery,
b
HMRC decide that such a penalty should be payable, and
c
HMRC give notice to the company specifying the period in respect of which the penalty is payable.
(The company may be liable for more than one penalty under this sub-paragraph.)
6
The penalty under sub-paragraph (5) is £10 for each day that the failure continues during the period specified in the notice under sub-paragraph (5)(c).
7
The period specified in the notice under sub-paragraph (5)(c)—
a
may begin earlier than the date on which the notice is given, but
b
may not begin until after the end of the period mentioned in sub-paragraph (5)(a) or, if relevant, the end of any period specified in any previous notice under sub-paragraph (5)(c) given in relation to the failure.
57C
1
This paragraph applies if a return under paragraph 52, or any information accompanying such a return—
a
is given otherwise than in accordance with paragraph 52A, or
b
contains a material inaccuracy—
i
which is careless or deliberate, or
ii
which is not corrected as required by paragraph 52(7).
2
The company is liable for a penalty of an amount decided by HMRC.
3
The penalty must not exceed £5,000.
4
For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is careless if it is due to a failure by the company to take reasonable care.
57D
1
This paragraph applies if a company is liable for a penalty under this Part.
2
HMRC must assess the penalty and notify the company of the assessment.
3
Subject to sub-paragraph (4), the assessment must be made no later than 12 months after the date on which the company becomes liable for the penalty.
4
In the case of a penalty under paragraph 57C(1)(b), the assessment must be made no later than—
a
12 months after the date on which HMRC become aware of the inaccuracy, and
b
6 years after the date on which the company becomes liable for the penalty.
5
A penalty payable under this Part must be paid—
a
no later than 30 days after the date on which the notice under sub-paragraph (2) is given to the company, or
b
if notice of appeal is given against the penalty under paragraph 57E(1) or (2), no later than 30 days after the date on which the appeal is determined or withdrawn.
6
The penalty may be enforced as if it were corporation tax or, if the company is not within the charge to corporation tax, income tax charged in an assessment and due and payable.
7
Sections 100 to 103 of TMA 1970 do not apply to a penalty under this Part.
57E
1
A company may appeal against a decision of HMRC that the company is liable for a penalty under this Part.
2
A company may appeal against a decision of HMRC as to the amount of a penalty payable by the company under this Part.
3
Notice of appeal must be given to HMRC no later than 30 days after the date on which the notice under paragraph 57D(2) is given to the company.
4
On an appeal under sub-paragraph (1) which is notified to the tribunal, the tribunal may affirm or cancel the decision.
5
On an appeal under sub-paragraph (2) which is notified to the tribunal, the tribunal may—
a
affirm the amount of the penalty decided, or
b
substitute another amount for that amount.
6
Subject to this paragraph and paragraph 57D, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this paragraph as they have effect in relation to an appeal against an assessment to corporation tax or, if the company is not within the charge to corporation tax, income tax.
Minor definitions
58
In the EMI code—
“arrangements” includes any scheme, agreement or understanding, whether it is legally enforceable or not;
“company” means a body corporate;
“group of companies” means a parent company and its 51% subsidiaries;
“the group”, in relation to a parent company, means that company and its 51% subsidiaries;
“parent company” means a company that has one or more 51% subsidiaries and “single company” means a company that does not;
“research and development” has the meaning given by F231section 1006 of ITA 2007;
“shares” includes stock.
Index of defined expressions
59
In the EMI code the following expressions are defined or otherwise explained by the provisions indicated below:
the appropriate time | paragraph 1(4) |
arrangements | paragraph 58(1) |
child | F165section 721(6) |
close company | F166section 989 of ITA 2007, (and see paragraph 29(4)) |
closure notice | paragraph 47(4) |
company | paragraph 58 |
company reorganisation (in Part 6 of this Schedule) | paragraph 39(2) |
connected person | section 718 |
control | section 719 (and see paragraphs 10(2) and 23(6)) |
disqualifying event | see sections 532 to 539 |
distribution | F167section 989 of ITA 2007 |
earnings | section 62 and see section 721(7) |
the EMI code | section 527(3) |
employee and employment | section 4 |
eligible employee | paragraph 24 |
employer company | paragraph 2 |
excluded activities | paragraph 16 |
farming | F168section 996 of ITA 2007 |
F285. . . | F285. . . |
generally accepted accounting practice | F169section 997 of ITA 2007 |
group of companies | paragraph 58 |
the group | paragraph 58 |
F132. . . | F132... |
market value | paragraph 55 (and see paragraph 5(7)) |
met (in Part 7 of this Schedule) | paragraph 44(7) |
new option | paragraph 41(7) |
notice | F170section 989 of ITA 2007 |
F63offshore installation | F171sections 1001 and 1002 of ITA 2007 |
old option | paragraph 41(7) |
ordinary share capital | F172section 989 of ITA 2007 |
original option | section 529(3) |
parent company | paragraph 58 |
personal representative | F173section 989 of ITA 2007 |
qualifying company | paragraph 8 |
qualifying option | section 527(4) (and see paragraph 41(5)) |
qualifying subsidiary | paragraph 11 |
qualifying trade | paragraph 15 |
relevant company | paragraph 2 |
replacement option | section 527(4) |
the requirements of this Schedule | section 527(4) |
research and development | paragraph 58 |
share option | section 527(4) |
shares | paragraph 58 (and see paragraph 40(4)(a)) |
single company | paragraph 58 |
F286. . . | F286. . . |
51% subsidiary | F174section 989 of ITA 2007 |
tax | F345section 989 of ITA 2007 |
tax year | F175section 4(2) of ITA 2007 (as applied by section 989 of that Act) |
trade | F176section 989 of ITA 2007 |
F287tribunal | section 989 of ITA 2007 |
United Kingdom | F177section 1013 of ITA 2007 |
SCHEDULE 6Consequential Amendments
Part 1Income and Corporation Taxes Act 1988
1
The Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.
F2322
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
In section 4(1)
(construction of references in Income Tax Acts to deduction of tax) for “in pursuance of section 203” substitute “
under PAYE regulations
”
.
F2954
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F2965
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Omit section 19 (Schedule E).
7
In section 21A(2) (computation of amount chargeable)—
a
for “sections 588 and 589” substitute “
section 588
”
;
b
for “sections 589A and 589B” substitute “
section 589A
”
;
c
for “1989 (deductions in respect of certain emoluments)” substitute “
1989 (Schedule D: computation)
”
.
8
Omit section 58 (foreign pensions).
F959
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F9610
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F34611
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F29712
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F29813
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
14
Omit sections 131 to 134 (miscellaneous provisions relating to the Schedule E charge).
15
Omit sections 135 to 137 (provisions relating to gains by directors and employees from share options).
16
1
Amend section 138 (share acquisitions by directors and employees) as follows.
2
In subsection (1)(b) for “Schedule E” substitute “
the employment income Parts of ITEPA 2003
”
.
3
In subsection (4)(b) for “Case I of Schedule E” substitute “
section 15 or 21 of ITEPA 2003 (earnings of employee resident and ordinarily resident in the UK)
”
.
17
Omit section 140 (further interpretation of sections 135 to 139).
18
Omit sections 140A to 140H (further provisions relating to share acquisitions by directors and employees).
19
Omit sections 141 to 144 (vouchers and credit-tokens).
20
Omit section 144A (payments received free of tax).
21
Omit sections 145 to 147 (living accommodation).
22
Omit sections 148 to 151A (payments on retirement, sick pay and certain social security benefits).
F34723
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
24
Omit sections 153 to 159AC and sections 160 to 168G (employees earning £8,500 or more and directors: expenses and benefits in kind).
25
Omit section 185 (approved share option schemes).
26
1
Amend section 186 (approved profit sharing schemes) as follows.
2
In subsection (3)—
a
omit “the participant shall be chargeable to income tax under Schedule E for the year of assessment in which the entitlement arises on”, and
b
at the end add “
counts as employment income of the participant for the year of assessment in which the entitlement arises
”
.
3
In subsection (4)—
a
omit “the participant shall be chargeable to income tax under Schedule E for the year of assessment in which the disposal takes place on”, and
b
at the end add “
counts as employment income of the participant for the year of assessment in which the disposal takes place
”
.
4
In subsection (5)(a), for the words from “chargeable to income tax” to “those shares” substitute
entitled to a capital receipt (within the meaning of subsection (3) above) which is referable to those shares and—
i
an amount calculated by reference to that capital receipt counts as his employment income by virtue of subsection (3) above, or
ii
if the entitlement to the capital receipt arose before 6th April 2003, he was chargeable to income tax by virtue of that subsection (as it had effect before that date) in respect of that capital receipt,
27
In section 187 (interpretation of sections 185 and 186 and Schedules 9 and 10) omit subsections (1) to (4), (6) and (7), except so far as relating to profit sharing schemes.
28
Omit the following provisions (which give relief from income tax on various kinds of income)—
a
section 187A;
b
sections 189 to 198;
c
sections 199 to 202.
29
Omit sections 202A and 202B (assessment on receipts basis).
30
Omit sections 203 to 204 (pay as you earn).
31
Omit sections 205 and 206 (assessments).
32
Omit section 206A (PAYE settlement agreements).
33
Omit section 207 (disputes as to domicile or ordinary residence).
F9734
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F30935
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
36
After section 266 insert—
266ALife assurance premiums paid by employer
1
This section applies if—
a
pursuant to a non-approved retirement benefits scheme, the employer in any year of assessment pays a sum with a view to the provision of any relevant benefits for or in respect of any employee of that employer, and
b
the payment is made under such an insurance or contract as is mentioned in section 266.
This section applies whether or not the accrual of the relevant benefits is dependent on any contingency.
2
Relief, if not otherwise allowable, shall be given to that employee under section 266 in respect of the payment to the extent, if any, to which such relief would have been allowable to him if—
a
the payment had been made by him, and
b
the insurance or contract under which the payment is made had been made with him.
3
For the purposes of subsection (1)(a)—
a
a retirement benefits scheme is “non-approved” unless it is—
i
an approved scheme,
ii
a relevant statutory scheme, or
iii
a scheme set up by a government outside the United Kingdom for the benefit of its employees or primarily for their benefit, and
b
benefits are provided in respect of an employee if they are provided for the employee’s spouse, widow or widower, children, dependants or personal representatives.
4
Sections 611, 611A and 612 apply for the purposes of this section as they apply for the purposes of Chapter 1 of Part 14.
5
Section 388 of ITEPA 2003 (apportionment of payments in respect of more than one employee) applies in relation to a sum within subsection (1) as it applies in relation to a sum within section 386 of that Act (charge on payments to non-approved retirement benefits schemes).
6
This section does not apply in any case where either of the following provisions of ITEPA 2003 provides for section 386 of that Act not to apply—
a
section 389 (employments where earnings charged on remittance basis), and
b
section 390 (non-domiciled employees with foreign employers).
F23437
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F23338
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
39
Omit section 313 (taxation of consideration for certain restrictive undertakings).
F9840
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
41
Omit sections 315 to 318 (pensions etc. paid in respect of military or war service etc.).
42
Omit section 319 (crown servants: foreign service allowance).
43
Omit section 321 (consuls and other official agents).
F9944
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F23545
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
46
Omit section 330 (compensation for National-Socialist persecution).
47
1
Amend section 332 (expenditure and houses of ministers of religion) as follows.
2
Omit subsections (1) and (2).
F1003
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Omit subsections (3A), (3B) and (4).
F23648
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F10149
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F23750
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F23851
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
52
In section 376(2)
(qualifying borrowers and qualifying lenders) for the words from “an office or employment” to “Schedule E” substitute “
an office or employment which would, but for some special exemption or immunity from tax, be a taxable employment under Part 2 of ITEPA 2003 (as defined by section 66(3) of that Act)
”
.
F10253
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F10354
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F34855
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F10456
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F10557
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F5758
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F5859
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F5960
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F6061
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F27062
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F27063
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F27064
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F10665
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F10766
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F29967
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
68
Omit section 589 (qualifying courses of training etc.).
F30069
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F30170
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
71
In section 591D (provisions supplementary to section 591C) omit subsection (6).
F14572
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F14673
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74
Omit sections 595 and 596 (payments by employer to retirement benefits scheme).
75
Omit sections 596A to 596C (benefits under non-approved retirement benefits schemes).
76
Omit section 597 (charge to tax: pensions).
77
In section 599A (charge to tax: payments out of surplus funds) omit subsections (5), (6) and (8).
78
Omit section 600 (charge to tax: unauthorised payments to or for employees).
F14779
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80
F1431
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1432
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1433
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1434
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F1435
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6
Omit subsection (3)(b)(iv) and the word “and” preceding it.
81
In section 608 (charge to tax on annuities paid out of superannuation funds approved before 6th April 1980) omit subsection (4).
F14882
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83
In section 613 (Parliamentary pension funds) omit subsections (1) to (3).
84
In section 614(3)
(exemptions and reliefs in respect of income tax from investments etc. of certain pension schemes) for “paragraph (b), (c), (d) or (f) of subsection (2) of section 615” substitute “
section 648, 649, 650 or 651 of ITEPA 2003
”
.
85
In section 615 (exemption from tax in respect of certain pensions) omit subsections (1), (2), (4), (5) and (8).
86
Omit section 616 (other overseas pensions).
F30287
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
88
Omit section 617A (tax credits under Part 1 of Tax Credits Act 2002 (c. 21)).
F14989
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F15090
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
91
1
Section 643 (employer’s contributions and personal pension income etc.) is amended as follows.
2
Omit subsection (1).
3
In subsection (5) omit “shall be assessable to tax under Schedule E (and section 203 shall apply accordingly) and”.
F14492
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F14493
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F14494
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F14495
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
96
Omit sections 647 to 648A (personal pensions: unauthorised payments, contributions under unapproved arrangements and annuities).
F15197
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F15298
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F15399
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F239100
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F331101
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F331102
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F349103
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
104
In section 824(4A)
(repayment supplement: individuals and others) for “section 203” substitute “
PAYE regulations
”
.
F350105
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
106
In section 830 (territorial sea and designated areas) omit subsection (5).
107
In section 831(3) (interpretation of ICTA) before the entry relating to “the Management Act” insert—
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;
F240108
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F303109
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110
Omit Schedules 6 and 6A (taxation of directors and others: cars and vans).
111
Omit Schedules 7 and 7A (taxation of benefit of loans).
112
1
Amend Schedule 9 (approved share option schemes and profit sharing schemes) as follows.
2
Omit Parts 1, 2 and 6 except so far as relating to profit sharing schemes.
3
Omit Parts 3 and 4.
113
1
Amend Schedule 10 (further provisions relating to profit sharing schemes) as follows.
2
In paragraphs 3(1) and 6(4) for “charging an individual to income tax under Schedule E” substitute “
under which an amount counts as employment income of an individual
”
.
3
In paragraph 7—
a
in sub-paragraph (1), for “a participant in the scheme is chargeable to income tax under Schedule E” substitute “
an amount counts as employment income of the participant
”
,
b
in sub-paragraph (6), for the words from “section 203” to “Schedule E” substitute “
section 684 of ITEPA 2003 (PAYE regulations) and PAYE regulations as PAYE income payable to the recipient
”
, and
c
in sub-paragraph (7)(b)—
i
omit second “to”, and
ii
for “the participant is chargeable” substitute “
is charged on the participant
”
.
114
Omit Schedule 11 (payments and other benefits in connection with termination of employment etc.).
115
Omit Schedule 11A (removal benefits and expenses).
116
Omit Schedule 12 (foreign earnings).
117
Omit Schedule 12AA (mileage allowances).
118
Omit Schedule 12A (ordinary commuting and private travel).
119
In Schedule 14 (modification of section 266 in certain cases), in paragraph 5 for “section 595” substitute “
section 386 of ITEPA 2003 (payments to non-approved retirement benefits schemes)
”
.
F108120
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F351121
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Part 2Other enactments
Finance Act 1969 (c. 32)
122
1
Section 58 of the Finance Act 1969 (disclosure of information for statistical purposes by Board of Inland Revenue) is amended as follows.
2
In subsection (1)(a)—
a
for “section 203 of the Taxes Act 1988 (pay as you earn)” substitute “
PAYE regulations
”
;
b
for “emoluments to which that section applies” substitute “
earnings or amounts treated as earnings from an employment
”
.
3
In subsection (1)(b) for “emoluments” substitute “
earnings or amounts treated as earnings
”
.
4
After subsection (1) insert—
1A
In subsection (1) “earnings or amounts treated as earnings” means earnings or amounts treated as earnings which constitute employment income (see section 7(2)(a) or (b) of the Income Tax (Earnings and Pensions) Act 2003).
Taxes Management Act 1970 (c. 9)
123
The Taxes Management Act 1970 is amended as follows.
124
In section 7(4) and (5)
(notice of liability to income tax and capital gains tax) for “section 203 of the principal Act” substitute “
PAYE regulations
”
.
125
1
Amend section 9 (returns to include self-assessment) as follows.
2
In subsection (1) for “, 547(5) or 599A(5) of the principal Act” substitute “
or 547(5) of the principal Act or section 626 of ITEPA 2003
”
.
F1543
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
126
1
Amend section 15 (return of employee’s emoluments etc.) as follows.
2
For the sidenote to the section substitute “
Return of employees' earnings etc.
”
3
In subsection (3)(a) for “employment to which Chapter II of Part V of the principal Act applies” substitute “
employment which, for the purposes of the benefits code in ITEPA 2003, is a taxable employment under Part 2 of that Act (see section 66) but is not an excluded employment (see section 63 of that Act)
”
.
4
In subsection (8)(a) for “the relevant sections, that is to say, sections 141, 142, 143, 144A, 145, 146 and 154 to 165 of the principal Act” substitute “
the relevant provisions, that is to say, Chapters 4 to 10 of Part 3 and sections 222 and 223 of ITEPA 2003
”
.
5
In subsection (9)(a) for “the relevant sections” substitute “
the relevant provisions
”
.
6
In subsection (11)—
a
for “the relevant sections”, in each place, substitute “
the relevant provisions
”
; and
b
in paragraph (a)(ii) for “section 141(3), 142(2), 145(3) or 156(8) of the principal Act” substitute “
section 328(1), 362, 363, 364 or 365 of ITEPA 2003
”
.
7
In subsection (13)—
a
in the definition of “employee”, for “whose emoluments fall to be assessed under Schedule E” substitute “
whose earnings are within the charge to tax under ITEPA 2003
”
; and
b
for the definition of “the relevant sections” substitute—
“the relevant provisions” has the meaning given by section (8)(a) above.
127
For section 16A substitute—
16AAgency workers
1
This section applies where—
a
any services which an individual provides or is obliged to provide under an agency contract are treated under section 44(2) of ITEPA 2003 as the duties of an office or employment held by him with the agency, or
b
any remuneration receivable under or in consequence of arrangements falling within section 45 of that Act is treated as earnings from an office or employment held by an individual with the agency.
2
Where this section applies—
a
section 15 above shall apply as if the individual were employed by the agency, and
b
section 16 above shall not apply to any payments made to the individual under or in consequence of the agency contract or the arrangements.
3
In this section “agency contract” and “remuneration” have the same meaning as in Chapter 7 of Part 2 of ITEPA 2003.
128
In section 42(3)
(procedure for making claims etc.) for “section 203 of the principal Act” substitute “
PAYE regulations
”
.
F304129
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130
In section 59A (payments on account of income tax)—
a
in subsection (8)(b) for “section 203 of the principal Act” substitute “
PAYE regulations
”
; and
b
in subsection (10) for “Regulations under section 203 of the principal Act (PAYE)” substitute “
PAYE regulations
”
.
131
1
Amend section 59B (payment of income tax and capital gains tax) as follows.
2
In subsection (1) for “, 547(5) or 599A(5) of the principal Act” substitute “
or 547(5) of the principal Act or section 626 of ITEPA 2003
”
.
3
In subsection (2)(a) for “section 203 of the principal Act” substitute “
PAYE regulations
”
.
4
In subsection (8) for “Regulations under section 203 of the principal Act (PAYE)” substitute “
PAYE regulations
”
.
132
In section 62(1A)(a) (priority of claim for tax)—
a
for “emoluments” substitute “
taxable earnings (as defined by section 10 of ITEPA 2003)
”
;
b
for “section 203 of the principal Act (pay as you earn)” substitute “
PAYE regulations
”
.
133
In section 63(3)(a)
(recovery of tax in Scotland) for “section 203 of the principal Act (pay as you earn)” substitute “
PAYE regulations
”
.
134
In section 64(1A)(a) (priority of claim for tax in Scotland)—
a
for “emoluments” substitute “
taxable earnings (as defined by section 10 of ITEPA 2003)
”
;
b
for “section 203 of the principal Act (pay as you earn)” substitute “
PAYE regulations
”
.
135
1
Amend section 70 (evidence) as follows.
F2622
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3
In subsection (4) for “emoluments” in both places where it occurs substitute “
earnings or amounts treated as earnings
”
.
4
After subsection (4) insert—
5
In subsection (4) “earnings or amounts treated as earnings” means earnings or amounts treated as earnings which constitute employment income (see section 7(2)(a) or (b) of ITEPA 2003).
136
In section 91(3)(c)
(effect on interest of reliefs) for “section 203 of the principal Act” substitute “
PAYE regulations
”
.
137
1
Amend the Table in section 98 (special returns, etc.) as follows.
2
Omit from the first column of the Table the entries relating to—
a
regulations under section 202 of ICTA;
b
paragraph 117 of Schedule 8 to FA 2000;
c
paragraph 64 of Schedule 14 to FA 2000.
3
At the end of the first column of the Table insert the following entries—
Regulations under section 589 of ITEPA 2003.
Regulations under section 715 of ITEPA 2003.
Paragraph 93 of Schedule 2 to ITEPA 2003.
Paragraph 45 of Schedule 3 to ITEPA 2003.
Paragraph 33 of Schedule 4 to ITEPA 2003.
Paragraph 51 of Schedule 5 to ITEPA 2003.
4
Omit from the second column of the Table the entries relating to—
a
section 136(6) of ICTA;
b
section 140G of ICTA;
c
regulations under section 202 of ICTA;
d
regulations under section 203 of ICTA;
e
section 313(5) of ICTA;
f
section 85(1) and (2) of FA 1988;
g
paragraph 65 of Schedule 14 to FA 2000.
5
At the end of the second column of the Table insert the following entries—
Sections 432 and 433 of ITEPA 2003.
Section 445 of ITEPA 2003.
Sections 465 and 466 of ITEPA 2003.
Section 486 of ITEPA 2003.
Regulations under section 589 of ITEPA 2003.
Regulations under section 715 of ITEPA 2003.
PAYE regulations.
Paragraph 52 of Schedule 5 to ITEPA 2003.
138
In section 98A(1)
(special penalties in the case of certain returns) for “Regulations under section 203(2)
(PAYE) or” substitute “
PAYE regulations or regulations under section
”
.
139
In section 118 (interpretation) after the entry relating to “inspector” insert—
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003,
140
In section 119(4)
(construction of the Act) after “1992 Act” insert “
and ITEPA 2003
”
.
141
In paragraph 4(1A) of Schedule 1A (claims etc. not included in returns) for “section 203 of the principal Act” substitute “
PAYE regulations
”
.
F305142
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143
In Schedule 3A (electronic lodgement of tax returns etc.) in paragraph 2(4)
(returns to which the Schedule applies) after “the principal Act” insert “
or under ITEPA 2003
”
.
Finance Act 1973 (c. 51)
F325144
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F325145
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F325146
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Finance Act 1974 (c. 30)
F325147
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interpretation Act 1978 (c. 30)
148
In Schedule 1 to the Interpretation Act 1978 (words and expressions defined) after the definition of “Parliamentary election” insert—
“PAYE income” has the meaning given by section 683 of the Income Tax (Earnings and Pensions) Act 2003.
“PAYE regulations” means regulations under section 684 of that Act.
Education (Scotland) Act 1980 (c. 44)
149
In section 73B of the Education (Scotland) Act 1980 (grants and loans: Scotland)—
a
in subsection (3)(g) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
; and
b
in subsection (4) for “income assessable to income tax under Schedule E” substitute “
PAYE income
”
.
Inheritance Tax Act 1984 (c. 51)
150
The Inheritance Tax Act 1984 is amended as follows.
151
1
Amend the following provisions as provided in sub-paragraph (2)—
a
section 13(4)(c) (dispositions by close companies for benefit of employees),
b
section 72(4A) (property leaving employee trusts and newspaper trusts), and
c
section 86(3)(c) (trusts for benefit of employees).
2
In each of those provisions, for “an employee share ownership plan approved under Schedule 8 to the Finance Act 2000” substitute “
a share incentive plan approved under Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003
”
.
152
In section 14(1)
(waiver of remuneration), for “would be assessable to income tax under Schedule E” substitute “
would be earnings, or would be treated as earnings, and would constitute employment income (see section 7(2)(a) or (b) of the Income Tax (Earnings and Pensions) Act 2003)
”
.
Bankruptcy (Scotland) Act 1985 (c. 66)
F631153
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Insolvency Act 1986 (c. 45)
154
In paragraph 1 of Schedule 6 to the Insolvency Act 1986 (the categories of preferential debts)—
a
for “emoluments” substitute “
taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003)
”
; and
b
for “section 203 of the Income and Corporation Taxes Act 1988 (pay as you earn)” substitute “
PAYE regulations
”
.
Finance Act 1988 (c. 39)
155
1
Section 73 of the Finance Act 1988 (consideration for certain restrictive undertakings) is amended as follows.
2
In subsection (2) for “any sum to which section 313 of that Act applies” substitute “
any payment which is treated as earnings of an employee by virtue of section 225 of the Income Tax (Earnings and Pensions) Act 2003 (payments for restrictive undertakings)
”
.
3
In subsection (3) for “Any sum to which section 313 of the Taxes Act 1988 applies” substitute “
Any payment which is treated as earnings of an employee by virtue of section 225 of the Income Tax (Earnings and Pensions) Act 2003
”
.
Finance Act 1989 (c. 26)
156
The Finance Act 1989 is amended as follows.
157
For section 43 substitute—
43Schedule D: computation
1
In calculating profits or gains of a trade to be charged under Schedule D for a period of account, no deduction is allowed for an amount charged in the accounts in respect of employees' remuneration, unless the remuneration is paid before the end of the period of 9 months immediately following the end of the period of account.
2
For the purposes of subsection (1) above an amount charged in the accounts in respect of employees' remuneration includes an amount—
a
for which provision is made in the accounts, or
b
which is held by an intermediary,
with a view to its becoming employees' remuneration.
3
Subsection (1) above applies whether the amount is in respect of particular employments or in respect of employments generally.
4
If the remuneration is paid after the end of the period of 9 months mentioned in subsection (1) above, any deduction allowed in respect of it is allowed for the period of account in which it is paid and not for any other period of account.
5
If the profits of the trade are calculated before the end of the period of 9 months mentioned in subsection (1) above—
a
it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but
b
if the remuneration is subsequently paid before the end of that period, the calculation is adjusted if a claim to adjust it is made to an officer of the Board within 2 years beginning with the end of the period of account.
6
For the purposes of this section, remuneration is paid when it—
a
is treated as received by an employee for the purposes of the Income Tax (Earnings and Pensions) Act 2003 by section 18, 19, 31 or 32 of that Act (receipt of money and non-money earnings), or
b
would be so treated if it were not exempt income.
7
In this section—
“employee” includes an office-holder and “employment” correspondingly includes an office, and
“remuneration” means an amount which is or is treated as earnings for the purposes of the Income Tax (Earnings and Pensions) Act 2003.
158
For section 44 substitute—
44Investment and insurance companies: computation
1
In calculating the profits of an investment company for a period of account, no deduction is allowed for an amount charged in the accounts in respect of employees' remuneration, unless the remuneration is paid before the end of the period of 9 months immediately following the end of the period of account.
2
For the purposes of subsection (1) above an amount charged in the accounts in respect of employees' remuneration includes an amount—
a
for which provision is made in the accounts, or
b
which is held by an intermediary,
with a view to its becoming employees' remuneration.
3
Subsection (1) above applies whether the amount is in respect of particular employments or in respect of employments generally.
4
If the remuneration is paid after the end of the period of 9 months mentioned in subsection (1) above, any deduction allowed in respect of it is allowed for the period of account in which it is paid and not for any other period of account.
5
If the profits of the trade are calculated before the end of the period of 9 months mentioned in subsection (1) above—
a
it must be assumed, in making the calculation, that any remuneration which is unpaid when the calculation is made will not be paid before the end of that period, but
b
if the remuneration is subsequently paid before the end of that period, the calculation is adjusted if a claim to adjust it is made to an officer of the Board by or on behalf of the company within 2 years beginning with the end of the period of account.
6
For the purposes of this section, remuneration is paid when it—
a
is treated as received by an employee for the purposes of the Income Tax (Earnings and Pensions) Act 2003 by section 18, 19, 31 or 32 of that Act (receipt of money and non-money earnings), or
b
would be so treated if it were not exempt income.
7
Where the profits of a company carrying on life assurance business are not charged under Case I of Schedule D, this section shall apply in calculating the profits as it applies in calculating the profits of an investment company; and in any such case—
a
subsection (4) above shall have effect subject to section 86 below, and
b
in construing section 86 below the remuneration shall be treated as expenses for the accounting period.
8
In this section—
“employee” includes an office-holder and “employment” correspondingly includes an office,
“investment company” has the same meaning as in Part 4 of the Taxes Act 1988, and
“remuneration” means an amount which is or is treated as earnings for the purposes of Parts 2 to 7 of the Income Tax (Earnings and Pensions) Act 2003.
159
In section 53(2)(f)
(amendments consequential on the substitution of a new section 167 of ICTA) for “sections 332(2)(c) and 418(3)(a)” substitute “
section 418(3)(a)
”
.
160
1
Amend section 69 (chargeable events in relation to employee share ownership trusts) as follows.
2
In subsection (3AA)—
a
in paragraph (a) for “an employee share ownership” substitute “
a share incentive
”
, and
b
in paragraph (b) for “Schedule 8 to the Finance Act 2000” substitute “
Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003
”
.
3
In the definition of “market value” in subsection (3AC), for “in Schedule 8 to the Finance Act 2000” substitute “
it has for the purposes of the SIP code (see paragraph 92 of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003)
”
.
4
In subsection (4ZA)(b)—
a
for “a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988” substitute “
an SAYE option scheme within the meaning of the SAYE code (see section 516(4) of the Income Tax (Earnings and Pensions) Act 2003)
”
, and
b
in sub-paragraph (ii) for “that Schedule” substitute “
Schedule 3 to that Act
”
.
F155161
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162
In section 178(2) (setting of rates of interest)—
a
in paragraph (m) omit the words “160,”,
b
at the end of the first paragraph (p) omit the word “and”,
c
renumber the second paragraph (p) as paragraph (q), and
d
at the end of paragraph (r) insert
, and
s
Chapter 7 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003.
163
1
Amend Schedule 5 (employee share ownership trusts) as follows.
2
In paragraph 4(2A) (beneficiaries)—
a
for “a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988” substitute “
an SAYE option scheme
”
, and
b
in paragraph (b), for “that Schedule” substitute “
Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003
”
.
3
In paragraph 9(2ZA)(b) (transfers of securities on qualifying terms)—
a
for “a savings-related share option scheme within the meaning of Schedule 9 to the Taxes Act 1988” substitute “
an SAYE option scheme
”
, and
b
in sub-paragraph (ii), for “that Schedule” substitute “
Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003
”
.
4
In paragraph 10 (other features)—
a
for “savings-related share option schemes approved under Schedule 9 to the Taxes Act 1988” substitute “
SAYE option schemes approved under Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003
”
; and
b
for “that Schedule” substitute “
Schedule 9 to the Taxes Act 1988
”
.
5
After paragraph 17 insert—
18
For the purposes of this Schedule “SAYE option scheme” has the same meaning as in the SAYE code (see section 516 of the Income Tax (Earnings and Pensions) Act 2003 (approved SAYE option schemes)).
Insolvency (Northern Ireland) Order 1989 (S.I. 1989/2405 (N.I. 19))
164
In paragraph 1 of Schedule 4 to the Insolvency (Northern Ireland) Order 1989 (the categories of preferential debts)—
a
in sub-paragraph (1), for “emoluments” substitute “
taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003)
”
; and
b
in sub-paragraph (2), for “section 203 of the Income and Corporation Taxes Act 1988 (pay as you earn)” substitute “
regulations made under section 684 of that Act (PAYE regulations)
”
.
Finance Act 1990 (c. 29)
165
The Finance Act 1990 is amended as follows.
F241166
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167
1
Amend paragraph 4 of Schedule 14 (amendments of sections 322 and 323 of ICTA) as follows.
2
In sub-paragraph (1) for “sections 322(1)(a) and (2) and 323(1)” substitute “
section 322(1)(a)
”
.
3
Omit sub-paragraph (2).
Finance Act 1991 (c. 31)
168
1
Amend section 38 of the Finance Act 1991 (employee share schemes: non-discrimination) as follows.
2
Omit subsection (2).
3
In subsection (6) for “Subsections (2) and” substitute “
Subsection
”
.
Social Security Contributions and Benefits Act 1992 (c. 4)
169
The Social Security Contributions and Benefits Act 1992 is amended as follows.
170
In section 1 (outline of contributory system), in subsection (2)(bb) for “emoluments” substitute “
general earnings
”
.
171
In section 2 (categories of earners), in subsection (1)(a) for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings
”
.
172
1
Amend section 4 (payments treated as remuneration and earnings) as follows.
2
For subsection (4)(a) substitute—
a
the amount of any gain calculated under section 479 or 480 of ITEPA 2003 in respect of which an amount counts as employment income of the earner under section 476 or 477 of that Act (charge on exercise, assignment or release of share option);
3
In subsection (4)(b) for “section 313 of the 1988 Act” substitute “
section 225 or 226 of ITEPA 2003
”
.
4
In subsection (6)(a) for “Schedule E” substitute “
the employment income Parts of ITEPA 2003
”
.
173
In section 7(1)(b)
(meaning of “secondary contributor”) for “emoluments” in both places where it occurs substitute “
general earnings
”
.
174
1
Amend section 10 (Class 1A National Insurance contributions: benefits in kind etc.) as follows.
2
For subsection (1)(a) substitute—
a
for any tax year an earner is chargeable to income tax under ITEPA 2003 on an amount of general earnings received by him from any employment (“the relevant employment”),
3
For subsection (1)(b) substitute—
b
the relevant employment is both—
i
employed earner’s employment, and
ii
an employment, other than an excluded employment, within the meaning of the benefits code (see Chapter 2 of Part 3 of ITEPA 2003),
4
In subsection (1)(c) for “emolument” substitute “
general earnings
”
.
5
In subsection (1) in the words after paragraph (c) for “emolument” substitute “
general earnings
”
.
6
In subsection (2)(b) for “emolument” substitute “
general earnings
”
.
7
In subsection (4)—
a
for “emolument” substitute “
general earnings
”
;
b
for “it” substitute “
them
”
.
8
In subsection (6) for “emolument as is taken” substitute “
general earnings as are taken
”
.
9
For subsection (7) substitute—
7
In calculating for the purposes of this section the amount of general earnings received by an earner from an employment, a deduction under any of the excluded provisions is to be disregarded.
This subsection does not apply in relation to a deduction if subsection (7A) applies in relation to it.
7A
Where—
a
a deduction in respect of a matter is allowed under an excluded provision, and
b
the amount deductible is at least equal to the whole of any corresponding amount which would (but for this section) fall by reference to that matter to be included in the general earnings mentioned in subsection (7),
the whole of the corresponding amount shall be treated as not included.
7B
For the purposes of subsections (7) and (7A) “excluded provision” means—
a
any provision of Chapter 2 of Part 5 of ITEPA 2003 (deductions for employee’s expenses), other than section 352 (limited deduction for agency fees paid by entertainers), and
b
any provision of Chapter 5 of Part 5 of ITEPA 2003 (deductions for earnings representing benefits or reimbursed expenses).
10
For subsection (8)(a) substitute—
a
modify the effect of subsections (7) and (7A) above by amending subsection (7B) so as to include any enactment contained in the Income Tax Acts within the meaning of “excluded provision”; or
11
In subsection (8)(b)—
a
for “subsection (7)” substitute “
subsections (7) to (7B)
”
;
b
for “under Schedule E” substitute “
on employment income
”
.
12
In subsection (9)(a) for “emoluments” substitute “
general earnings
”
.
13
Omit subsection (10).
175
1
Amend section 10ZA (liability of third party provider of benefits in kind) as follows.
2
In subsection (1)(a) for “an emolument” substitute “
general earnings
”
.
3
Amend subsection (1)(b) as follows—
a
for “the emolument, in so far as it is one in respect of which” substitute “
the general earnings, in so far as they are ones in respect of which
”
;
b
for “consists” substitute “
consist
”
.
4
In subsection (2), in the words after paragraph (b) for “an emolument” substitute “
general earnings
”
.
5
In subsection (6) for “section 168(4) of the Income and Corporation Taxes Act 1988” substitute “
section 721(5) of ITEPA 2003
”
.
176
1
Amend section 10ZB (non-cash vouchers provided by third parties) as follows.
2
In subsection (2)(a) for the words from “employment” to the end of the paragraph substitute “
employment which is an excluded employment for the purposes of the benefits code, and
”
.
3
In subsection (2)(b) for “if that Chapter did apply to that employment” substitute “
if that employment were not an excluded employment
”
.
4
In subsection (2), in the words following paragraph (b) for “as if that employment were employment to which that Chapter applied” substitute “
as if that employment were not an excluded employment
”
.
5
In subsection (3) for “section 141 of the Income and Corporation Taxes Act 1988” substitute “
section 84 of ITEPA 2003
”
.
177
1
Amend section 10A (Class 1B National Insurance contributions) as follows.
2
In subsection (1) for “emoluments” substitute “
general earnings
”
.
3
In subsection (2)(a) for “the emoluments included” substitute “
the general earnings included
”
.
4
In subsection (4) for “Emoluments are chargeable emoluments” substitute “
General earnings are chargeable emoluments
”
.
5
In subsection (5) for “emoluments” in both places where it occurs substitute “
general earnings
”
.
178
1
Amend section 122(1) (interpretation of Parts 1 to 6 and supplementary provisions) as follows.
2
Insert the following definitions in the appropriate places—
“the benefits code” has the meaning given by section 63(1) of ITEPA 2003;
“the employment income Parts of ITEPA 2003” means Parts 2 to 7 of that Act;
“excluded employment” has the meaning given by section 63(4) of ITEPA 2003;
“general earnings” has the meaning given by section 7 of ITEPA 2003 and accordingly sections 3 and 112 of this Act do not apply in relation to the word “earnings” when used in the expression “general earnings”;
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;
3
In the definition of “PAYE settlement agreement” for “section 206A of the Income and Corporation Taxes Act 1988” substitute “
Chapter 5 of Part 11 of ITEPA 2003
”
.
179
In section 126(5)(a)(ii)
(trade disputes) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) under PAYE regulations
”
.
180
1
Amend section 150(2) (interpretation of Part 10) as follows.
2
In paragraph (b) of the definition of “unemployability supplement or allowance”—
a
in sub-paragraph (ii) for “section 315(1) of the Income and Corporation Taxes Act 1988” substitute “
section 641 of the Income Tax (Earnings and Pensions) Act 2003
”
;
b
omit sub-paragraph (v).
3
In paragraph (b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988” substitute “
any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003
”
.
4
In the definition of “war widow’s pension” for “subsection (2)(e) of the said section 315” substitute “
section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003
”
.
181
In section 163(1)
(interpretation of Part 11), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)
”
.
182
In section 171(1)
(interpretation of Part 12), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)
”
.
183
In section 171ZJ(2)(a)
(Part 12ZA: supplementary) for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)
”
.
184
In section 171ZS(2)(a)
(Part 12ZB: supplementary) for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)
”
.
185
In Schedule 1 (supplementary provisions relating to contributions of Classes 1, 1A, 1B, 2 and 3)—
a
in paragraph 6(1)(a) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
;
b
in paragraph 6(1)(b) for “regulations under that section” substitute “
PAYE regulations
”
;
c
in paragraph 6(7) for “regulations made under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
;
d
in paragraph 7(1)(a) for “regulations made by F124an officer of Revenue and Customs under section 203(2) or” substitute “
PAYE regulations or regulations made under section
”
; and
e
in paragraph 7B(1) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
.
Social Security Administration Act 1992 (c. 5)
186
The Social Security Administration Act 1992 is amended as follows.
187
1
Amend section 139(11) (definitions used in provisions relating to arrangements for council tax benefit) as follows.
2
In paragraph (b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988” substitute “
any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003
”
.
3
In the definition of “war widow’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “
section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003
”
.
188
1
Amend section 159B(6) (effect of alterations affecting state pension credit) as follows.
2
In paragraph (b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “
any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003
”
.
3
In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “
section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003
”
.
189
1
Amend section 162(5) (destination of national insurance contributions) as follows.
2
In paragraph (c) for “emoluments” substitute “
general earnings
”
.
3
In paragraph (ca) for “emoluments” substitute “
general earnings
”
.
Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7)
190
The Social Security Contributions and Benefits (Northern Ireland) Act 1992 is amended as follows.
191
In section 1 (outline of contributory system), in subsection (2)(bb) for “emoluments” substitute “
general earnings
”
.
192
In section 2 (categories of earners), in subsection (1)(a) for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings
”
.
193
1
Amend section 4 (payments treated as remuneration and earnings) as follows.
2
For subsection (4)(a) substitute—
a
the amount of any gain calculated under section 479 or 480 of ITEPA 2003 in respect of which an amount counts as employment income of the earner under section 476 or 477 of that Act (charge on exercise, assignment or release of share option);
3
In subsection (4)(b) for “section 313 of the 1988 Act” substitute “
section 225 or 226 of ITEPA 2003
”
.
4
In subsection (6)(a) for “Schedule E” substitute “
the employment income Parts of ITEPA 2003
”
.
194
In section 7(1)(b)
(meaning of “secondary contributor”) for “emoluments” in both places where it occurs substitute “
general earnings
”
.
195
1
Amend section 10 (Class 1A National Insurance contributions: benefits in kind etc.) as follows.
2
For subsection (1)(a) substitute—
a
for any tax year an earner is chargeable to income tax under ITEPA 2003 on an amount of general earnings received by him from any employment (“the relevant employment”),
3
For subsection (1)(b) substitute—
b
the relevant employment is both—
i
employed earner’s employment, and
ii
an employment, other than an excluded employment, for the purposes of the benefits code (see Chapter 2 of Part 3 of ITEPA 2003),
4
In subsection (1)(c) for “emolument” substitute “
general earnings
”
.
5
In subsection (1), in the words after paragraph (c) for “emolument” substitute “
general earnings
”
.
6
In subsection (2)(b) for “emolument” substitute “
general earnings
”
.
7
In subsection (4)—
a
for “emolument” substitute “
general earnings
”
;
b
for “it” substitute “
them
”
.
8
In subsection (6) for “emolument” substitute “
general earnings
”
.
9
For subsection (7) substitute—
7
In calculating for the purposes of this section the amount of general earnings received by an earner from an employment, a deduction under any of the excluded provisions is to be disregarded.
This subsection does not apply in relation to a deduction if subsection (7A) applies in relation to it.
7A
Where—
a
a deduction in respect of a matter is allowed under an excluded provision, and
b
the amount deductible is at least equal to the whole of any corresponding amount which would (but for this section) fall by reference to that matter to be included in the general earnings mentioned in subsection (7),
the whole of the corresponding amount shall be treated as not included.
7B
For the purposes of subsections (7) and (7A) “excluded provision” means—
a
any provision of Chapter 2 of Part 5 of ITEPA 2003 (deductions for employee’s expenses) other than section 352 (limited deduction for agency fees paid by entertainers), and
b
any provision of Chapter 5 of Part 5 of ITEPA 2003 (deductions for earnings representing benefits or reimbursed expenses).
10
For subsection (8)(a) substitute—
a
modify the effect of subsections (7) and (7A) above by amending subsection (7B) so as to include any enactment contained in the Income Tax Acts within the meaning of “excluded provision”; or
11
In subsection (8)(b)—
a
for “subsection (7)” substitute “
subsections (7) to (7B)
”
;
b
for “under Schedule E” substitute “
on employment income
”
.
12
In subsection (9)(a) for “emoluments” substitute “
general earnings
”
.
13
Omit subsection (10).
196
1
Amend section 10ZA (liability of third party provider of benefits in kind) as follows.
2
In subsection (1)(a) for “an emolument” substitute “
general earnings
”
.
3
Amend subsection (1)(b) as follows—
a
for “the emolument, in so far as it is one in respect of which” substitute “
the general earnings, in so far as they are ones in respect of which
”
;
b
for “consists” substitute “
consist
”
.
4
In subsection (2), in the words after paragraph (b) for “an emolument” substitute “
general earnings
”
.
5
In subsection (6) for “section 168(4) of the Income and Corporation Taxes Act 1988” substitute “
section 721(5) of ITEPA 2003
”
.
197
1
Amend section 10ZB (non-cash vouchers provided by third parties) as follows.
2
In subsection (2)(a) for the words from “employment” to the end of the paragraph substitute “
employment which is an excluded employment for the purposes of the benefits code, and
”
.
3
In subsection (2)(b) for “if that Chapter did apply to that employment” substitute “
if that employment were not an excluded employment
”
.
4
In subsection (2), in the words following paragraph (b) for “as if that employment were employment to which that Chapter applied” substitute “
as if that employment were not an excluded employment
”
.
5
In subsection (3) for “section 141 of the Income and Corporation Taxes Act 1988” substitute “
section 84 of ITEPA 2003
”
.
198
1
Amend section 10A (Class 1B National Insurance contributions) as follows.
2
In subsection (1) for “emoluments” substitute “
general earnings
”
.
3
In subsection (2)(a) for “the emoluments included” substitute “
the general earnings included
”
.
4
In subsection (4) for “Emoluments are chargeable emoluments” substitute “
General earnings are chargeable emoluments
”
.
5
In subsection (5) for “emoluments” in both places where it occurs substitute “
general earnings
”
.
199
1
Amend section 121(1) (interpretation of Parts 1 to 6 and supplementary provisions) as follows.
2
Insert the following definitions in the appropriate places—
“the benefits code” has the meaning given by section 63(1) of ITEPA 2003;
“the employment income Parts of ITEPA 2003” means Parts 2 to 7 of that Act;
“excluded employment” has the meaning given by section 63(4) of ITEPA 2003;
“general earnings” has the meaning given by section 7 of ITEPA 2003 and accordingly sections 3 and 112 of this Act do not apply in relation to the word “earnings” when used in the expression “general earnings”;
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;
3
In the definition of “PAYE settlement agreement” for “section 206A of the Income and Corporation Taxes Act 1988” substitute “
Chapter 5 of Part 11 of ITEPA 2003
”
.
200
In section 125(5)(a)(ii)
(trade disputes) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) under PAYE regulations
”
.
201
1
Amend section 146(2) (interpretation of Part 10) as follows.
2
In paragraph (b) of the definition of “unemployability supplement or allowance”—
a
in sub-paragraph (ii) for “section 315(1) of the Income and Corporation Taxes Act 1988” substitute “
section 641 of the Income Tax (Earnings and Pensions) Act 2003
”
;
b
omit sub-paragraph (v).
3
In paragraph (b) of the definition of “war disablement pension”, for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988” substitute “
any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003
”
.
4
In the definition of “war widow’s pension” for “subsection (2)(e) of the said section 315” substitute “
section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003
”
.
202
In section 159(1)
(interpretation of Part 11), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)
”
.
203
In section 167(1)
(interpretation of Part 12), in paragraph (a) of the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)
”
.
204
In Schedule 1 (supplementary provisions relating to contributions of Classes 1, 1A, 1B, 2 and 3)—
a
in paragraph 6(1)(a) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
;
b
in paragraph 6(1)(b) for “regulations under that section” substitute “
PAYE regulations
”
;
c
in paragraph 6(7) for “regulations made under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
;
d
in paragraph 7(1)(a) for “regulations made by F124an officer of Revenue and Customs under section 203(2) or” substitute “
PAYE regulations or regulations made under section
”
; and
e
in paragraph 7B(1) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
.
Social Security Administration (Northern Ireland) Act 1992 (c. 8)
205
1
Section 139B(6) of the Social Security Administration (Northern Ireland) Act 1992 (effect of alterations affecting state pension credit) is amended as follows.
2
b) of the definition of “war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “
any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003
”
.
3
In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “
section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003
”
.
206
In section 142(5) of that Act (destination of national insurance contributions)—
a
in paragraph (c) for “emoluments” substitute “
general earnings
”
;
b
in paragraph (ca) for “emoluments” substitute “
general earnings
”
Taxation of Chargeable Gains Act 1992 (c. 12)
207
The Taxation of Chargeable Gains Act 1992 is amended as follows.
F263208
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
209
In section 11(1) (visiting forces, agents-general etc.)—
a
for “section 323(1) of the Taxes Act” substitute “
section 303(1) of ITEPA 2003
”
; and
b
for “subsection (2) of section 323 and subsections (4) to (8) of that section shall apply accordingly” substitute “
section 303(2) to (6) of that Act and section 323(2) of the Taxes Act
”
.
210
1
Amend section 120 (increased expenditure by reference to tax charged in relation to shares etc.) as follows.
2
For subsection (1) substitute—
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.
3
In subsection (3)—
a
for “is chargeable to tax by virtue of section 162(5) of the Taxes Act” substitute “
is treated as earnings under section 195(2) of ITEPA 2003
”
, and
b
for “so chargeable” substitute “
so treated as earnings
”
.
4
In subsection (4)—
a
for “chargeable to tax under section 135(1) or (6) of the Taxes Act” substitute “
counting as employment income under section 476 or 477 of ITEPA 2003
”
, and
b
for “so chargeable to tax” substitute “
so counting as employment income
”
.
5
In subsection (5A)—
a
for “is chargeable to tax under section 140A of the Taxes Act” substitute “
counts as employment income under Chapter 2 of Part 7 of ITEPA 2003
”
, and
b
for “so chargeable” substitute “
so counting as employment income
”
.
6
In subsection (5B)—
a
for “is chargeable to tax under section 140D of the Taxes Act” substitute “
counts as employment income under Chapter 3 of Part 7 of ITEPA 2003
”
, and
b
for “so chargeable” substitute “
so counting as employment income
”
.
7
Omit subsection (6).
8
For subsection (7) substitute—
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.
9
After subsection (7) insert—
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.
10
In subsection (8) for “section 140A of the Taxes Act” substitute “
Chapter 2 of Part 7 of ITEPA 2003
”
.
211
1
Amend section 149B (employee incentive schemes: conditional interests in shares) as follows.
2
In subsection (1) for “section 140A of the Taxes Act” substitute “
Chapter 2 of Part 7 of ITEPA 2003 (conditional interests in shares)
”
.
3
In subsection (2) for “section 140B of the Taxes Act” substitute “
section 429 of ITEPA 2003
”
.
4
In subsection (4)—
a
for “section 140A of the Taxes Act” substitute “
Chapter 2 of Part 7 of ITEPA 2003
”
, and
b
for “that section” substitute “
that Chapter
”
.
212
After section 149B insert—
149CPriority share allocations
Section 17(1) shall not apply to an acquisition of shares if section 542 or 544 of ITEPA 2003 applies in relation to it.
213
In section 222(8D)(b)
(relief on disposal of private residence), for “the same meanings as they have for the purposes of Chapter II of Part V of the Taxes Act” substitute “
the meanings given by Chapter 2 of Part 3 of ITEPA 2003
”
.
214
In section 236A (employee share ownership plans), and in the sidenote and in the italic heading immediately before the section, for “employee share ownership” wherever it occurs substitute “
share incentive
”
.
215
In section 238(2)(a)
(approved profit sharing and share option schemes), for “is chargeable to income tax” substitute “
counts as employment income (or was chargeable to income tax for the year 2002-03 or an earlier year of assessment
”
.
216
After section 238 insert—
238AApproved share schemes and share incentives
1
Schedule 7D (approved share schemes and share incentives) shall have effect.
2
Schedule 7D relates—
a
in Part 1, to approved share incentive plans (SIPs) (see section 488 of ITEPA 2003),
b
in Part 2, to approved SAYE option schemes (see section 516 of that Act),
c
in Part 3, to approved CSOP schemes (CSOPs) (see section 521 of that Act), and
d
in Part 4, to enterprise management incentives (see section 527 of that Act).
217
After section 263 insert—
263ZAFormer employees: employment-related liabilities
1
This section applies if—
a
a deduction of the amount of one or more deductible payments may be made under section 555 of ITEPA 2003 (former employee entitled to deduction from total income in respect of liabilities related to the former employment) when computing a former employee’s total income for a tax year, and
b
the total amount which may be deducted exceeds the total income for that year.
2
In this section “excess relief” means the amount of the difference between—
a
the total amount which may be deducted, and
b
the total income.
3
The amount of the excess relief may be treated as an allowable loss accruing to the former employee for that tax year.
This subsection applies only if the former employee makes a claim for the purpose.
4
But no relief is available under subsection (3) in respect of any amount of the excess relief that exceeds the maximum amount.
5
For the purposes of this section the “maximum amount”, in relation to the excess relief for a tax year, means the amount on which the former employee would be chargeable to capital gains tax for that year if the following were disregarded—
a
any relief available under this section,
b
any allowable losses falling to be carried forward to that year from a previous year for the purposes of section 2(2),
c
section 3(1) (the annual exempt amount),
d
any relief against capital gains tax under section 72 of the Finance Act 1991 (deduction of trading losses), and
e
any relief against capital gains tax under section 90(4) of the Finance Act 1995 (relief for post-cessation expenditure).
6
A former employee may make a claim under subsection (3) and a claim under section 555(3) of ITEPA 2003 in the same notice.
218
In section 271 (other miscellaneous exemptions), for subsection (1)(c) substitute—
c
any gain accruing to a person from his acquisition and disposal of assets held by him as part of a fund—
i
mentioned in section 614(2) of the Taxes Act,
ii
to which section 615(3) of the Taxes Act applies, or
iii
mentioned in section 648, 649, 650, 651 or 653 of ITEPA 2003;
219
1
Amend section 288(1) (interpretation) as follows.
2
In the entry relating to “allowable loss” for “and 16” substitute “
, 16 and 263ZA
”
.
3
After the entry relating to “investment trust” insert—
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003;
220
1
Amend Schedule 7C (relief for transfers to approved share plans) as follows.
2
In paragraph 1(1)
(introductory) for “an employee share ownership” substitute “
a share incentive
”
.
3
In paragraph 2 (conditions relating to the disposal)—
a
in sub-paragraph (1) for “Schedule 8 to the Finance Act 2000” substitute “
Schedule 2 to ITEPA 2003
”
,
b
in sub-paragraph (2)—
i
for “Part VIII” substitute “
Part 4
”
,
ii
for “used in plan” substitute “
awarded
”
, and
iii
for “61(a) and (c)” substitute “
27(1)(a) and (c) and (2)
”
,
c
in sub-paragraph (4) for “of Schedule 8 to the Finance Act 2000” substitute “
given by paragraph 97 of Schedule 2 to ITEPA 2003
”
.
221
After Schedule 7C insert—
SCHEDULE 7DApproved share schemes and share incentives
Part 1Approved share incentive plans
Introductory
1
1
The provisions of this Part of this Schedule apply for capital gains tax purposes in relation to an approved share incentive plan (“the plan”).
2
This Part of this Schedule forms part of the SIP code (see section 488 of ITEPA 2003 (approved share incentive plans)).
3
Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by the index.
4
In particular, for the purposes of paragraphs 5 and 7 of this Schedule “market value” has the meaning given by paragraph 92 of Schedule 2 to that Act (determination of market value); and Part 8 of this Act has effect subject to this paragraph.
Gains accruing to trustees
2
1
Any gain accruing to the trustees is not a chargeable gain if the shares—
a
are shares in relation to which the requirements of Part 4 of Schedule 2 to ITEPA 2003 (approved share incentive plans: types of shares that may be awarded) are met, and
b
are awarded to employees, or acquired on their behalf as dividend shares, in accordance with the plan within the relevant period.
2
If any of the shares in the company in question are readily convertible assets at the time the shares are acquired by the trustees, the relevant period is the period of two years beginning with the date on which the shares were acquired by the trustees.
This is subject to sub-paragraph (4).
3
If at the time of the acquisition of the shares by the trustees none of the shares in the company in question are readily convertible assets, the relevant period is—
a
the period of five years beginning with the date on which the shares were acquired by the trustees, or
b
if within that period any of the shares in that company become readily convertible assets, the period of two years beginning with the date on which they did so,
whichever ends first.
This is subject to sub-paragraph (4).
4
If the shares are acquired by the trustees by virtue of a payment in respect of which a deduction is allowed under paragraph 9 of Schedule 4AA to the Taxes Act (deduction for contribution to plan trust), the relevant period is the period of ten years beginning with the date of acquisition.
5
For the purposes of determining whether shares are awarded to a participant within the relevant period, shares acquired by the trustees at an earlier time are taken to be awarded to a participant before shares of the same class acquired by the trustees at a later time.
6
Sub-paragraph (5) is subject to paragraph 78(1) of Schedule 2 to ITEPA 2003 (acquisition by trustees of shares from employee share ownership trust).
7
For the purposes of this paragraph “readily convertible assets” has the meaning given by sections 701 and 702 of that Act (readily convertible assets).
This is subject to sub-paragraph (8).
8
In determining for the purposes of this paragraph whether shares are readily convertible assets any market for the shares that—
a
is created by virtue of the trustees acquiring shares for the purposes of the plan, and
b
exists solely for the purposes of the plan,
shall be disregarded.
9
In relation to shares acquired by the trustees before 11th May 2001 this paragraph has effect with the substitution—
a
in sub-paragraph (2), of “If the shares are readily convertible assets at the time they” for the words before “are acquired”, and
b
in sub-paragraph (3)—
i
of “If at the time of their acquisition by the trustees the shares are not readily convertible assets” for the words before “the relevant period”, and
ii
in paragraph (b), of “the shares in question” for “any of the shares in that company”.
Participant absolutely entitled as against trustees
3
1
Sub-paragraph (2) applies to any shares awarded to a participant under the plan.
2
The participant is treated for capital gains tax purposes as absolutely entitled to those shares as against the trustees.
3
Sub-paragraph (2) applies notwithstanding anything in the plan or the trust instrument.
Different classes of shares
4
1
For the purposes of Chapter 1 of Part 4 of this Act (shares, securities, options etc: general) a participant’s plan shares are treated, so long as they are subject to the plan, as of a different class from any shares (which would otherwise be treated as of the same class) that are not plan shares.
2
For the purposes of that Chapter, any shares to which sub-paragraph (3) applies shall be treated as of a different class from any shares to which sub-paragraph (4) applies, even if they would otherwise fall to be treated as of the same class.
3
This sub-paragraph applies to any shares transferred to the trustees of the plan trust by a qualifying transfer that have not been awarded to participants under the plan.
4
This sub-paragraph applies to any shares held by the trustees that were not transferred to them by a qualifying transfer.
5
In this paragraph “qualifying transfer” has the meaning given in paragraph 78(2) of Schedule 2 to ITEPA 2003 (acquisition by trustees of shares from employee share ownership trust).
6
For the purposes of Chapter 1 of Part 4 of this Act any shares which—
a
were acquired by the trustees by virtue of a payment in respect of which a deduction is allowed under paragraph 9 of Schedule 4AA to the Taxes Act (deduction for contribution to plan trust), and
b
have not been awarded under the plan,
shall be treated as of a different class from any shares held by the trustees that were not so acquired by them, even if they would otherwise fall to be treated as of the same class.
No chargeable gain on shares ceasing to be subject to the plan
5
1
Shares which cease to be subject to the plan are treated as having been disposed of and immediately reacquired by the participant at market value.
2
Any gain accruing on that disposal is not a chargeable gain.
Deemed disposal by trustees on disposal of beneficial interest
6
1
If at any time the participant’s beneficial interest in any of his shares is disposed of, the shares in question shall be treated for the purposes of the SIP code as having been disposed of at that time by the trustees for the like consideration as was obtained for the disposal of the beneficial interest.
2
For this purpose there is no disposal of the participant’s beneficial interest if and at the time when—
a
in England and Wales or Northern Ireland, that interest becomes vested in any person on the insolvency of the participant or otherwise by operation of law, or
b
in Scotland, that interest becomes vested in a judicial factor, in a trustee of the participant’s sequestrated estate or in a trustee for the benefit of the participant’s creditors.
3
If a disposal of shares falling within this paragraph is not at arm’s length, the proceeds of the disposal shall be taken for the purposes of the SIP code to be equal to the market value of the shares at the time of the disposal.
Treatment of forfeited shares
7
1
If any of the participant’s plan shares are forfeited, they are treated as having been disposed of by the participant and acquired by the trustees at market value at the date of forfeiture.
2
Any gain accruing on that disposal is not a chargeable gain.
Disposal of rights under rights issue
8
1
Any gain accruing on the disposal of rights under paragraph 77 of Schedule 2 to ITEPA 2003 (power of trustees to raise funds to subscribe for rights issue) is not a chargeable gain.
2
Sub-paragraph (1) does not apply to a disposal of rights unless similar rights are conferred in respect of all ordinary shares in the company.
Part 2Approved SAYE option schemes
Introductory
9
1
This Part of this Schedule forms part of the SAYE code (see section 516 of ITEPA 2003 (approved SAYE option schemes)).
2
Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 3 to that Act (approved SAYE option schemes) have the meaning indicated by the index.
Market value rule not to apply
10
1
This paragraph applies where—
a
a share option (“the option”) has been granted to an individual—
i
in accordance with the provisions of an approved SAYE option scheme, and
ii
by reason of the individual’s office or employment as a director or employee of a company,
b
the individual exercises the option in accordance with the provisions of the SAYE option scheme at a time when the scheme is approved, and
c
condition A or condition B in section 519(2) or (3) of ITEPA 2003 (no charge in respect of exercise of option) is met.
2
The company mentioned in sub-paragraph (1)(a)(ii) may be—
a
the company whose shares are the subject of the option, or
b
some other company.
3
If the option—
a
was granted under the SAYE option scheme before the withdrawal of approval under paragraph 42 of Schedule 3 to ITEPA 2003, but
b
is exercised after the withdrawal of approval,
then, for the purposes of sub-paragraph (1)(b) above in its application to the option, the scheme is to be treated as if it were still approved at the time of the exercise.
4
Section 17(1) (disposals and acquisitions treated as made at market value) shall not apply in calculating the consideration for—
a
the individual’s acquisition of shares by the exercise of the option, or
b
any corresponding disposal of those shares to the individual.
5
References in sub-paragraphs (1)(b) and (4) above to the individual include references to a person exercising the option in accordance with provision included in the scheme by virtue of paragraph 32 of Schedule 3 to ITEPA 2003 (exercise of options: death); and sub-paragraph (1)(c) above does not apply in relation to a person so exercising the option.
Part 3Approved CSOP schemes
Introductory
11
1
This Part of this Schedule forms part of the CSOP code (see section 521 of ITEPA 2003 (approved CSOP schemes)).
2
Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 4 to that Act (approved CSOP schemes) have the meaning indicated by the index.
3
This Part of this Schedule applies where—
a
a share option (“the option”) has been granted to an individual—
i
in accordance with the provisions of an approved CSOP scheme, and
ii
by reason of the individual’s office or employment as a director or employee of a company, and
b
shares (“the relevant shares”) are acquired by the exercise of the option.
4
The company mentioned in sub-paragraph (3)(a)(ii) may be—
a
the company whose shares are the subject of the option, or
b
some other company.
Relief where income tax charged in respect of grant of option
12
1
This paragraph applies where an amount (the “employment income amount”) counted as employment income of the individual under section 526 of ITEPA 2003 (charge where option granted at a discount) in respect of the option.
2
For the purposes of section 38(1)(a) (acquisition and disposal costs etc.), that part of the employment income amount which is attributable to the relevant shares shall be treated as consideration given for the acquisition of the relevant shares.
3
This paragraph also applies where the individual was chargeable to income tax on an amount in respect of the option under—
a
subsection (6) of section 185 of ICTA (as it had effect before 1st January 1992),
b
subsection (6A) of that section (as it had effect in relation to options obtained on or after 1st January 1992 but before 29th April 1996), or
c
subsection (6) of that section (as it had effect in relation to options obtained on or after 29th April 1996);
and in such a case the “employment income amount” means the amount on which the individual was so chargeable.
4
This paragraph applies whether or not—
a
the exercise of the option is in accordance with the provisions of the CSOP scheme, or
b
the CSOP scheme is approved at the time of the exercise.
Market value rule not to apply
13
1
This paragraph applies where—
a
the individual exercises the option in accordance with the provisions of the CSOP scheme at a time when the scheme is approved, and
b
the condition in section 524(2) of ITEPA 2003 (no charge in respect of exercise of option) is met.
2
Section 17(1) (disposals and acquisitions treated as made at market value) shall not apply in calculating the consideration for—
a
the individual’s acquisition of the relevant shares by the exercise of the option, or
b
any corresponding disposal of the relevant shares to the individual.
3
Sub-paragraph (2) also applies where the option is exercised at a time when the scheme is approved in accordance with provision included in the scheme by virtue of paragraph 25 of Schedule 4 to ITEPA 2003 (exercise of options: death); and references in that sub-paragraph to the individual are to be read accordingly.
Part 4Enterprise management incentives
Introductory
14
1
This Part of this Schedule forms part of the EMI code (see section 527 of ITEPA 2003 (enterprise management incentives: qualifying options)).
2
Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 5 to that Act (enterprise management incentives) have the meaning indicated by the index.
3
In this Part of this Schedule, “qualifying shares”—
a
means shares acquired by the exercise of a qualifying option, subject to sub-paragraphs (4) and (5), and
b
includes shares (“replacement shares”) which—
i
are treated under section 127 (equation of original shares and new holding) as the same asset as a holding of qualifying shares, and
ii
meet the requirements of paragraph 35 of Schedule 5 to ITEPA 2003 (type of shares that may be acquired).
4
If a disqualifying event occurs in relation to a qualifying option (whether the original option or a replacement option), shares acquired by the exercise of that option are qualifying shares only if the option is exercised within 40 days of that event.
5
References in this Part of this Schedule to “the original option”, where there has been one or more replacement options, are to the option that the replacement option (or, if there has been more than one, the first of them) replaced.
Taper relief on disposal of qualifying shares
15
For the purposes of computing taper relief on a disposal of qualifying shares, the shares are treated as if they had been acquired when the original option was granted.
Rights issues in respect of qualifying shares
16
Where—
a
an individual holds qualifying shares, and
b
there is, by virtue of any such allotment for payment as is mentioned in section 126(2)(a) (allotment in proportion to shareholdings), a reorganisation affecting that holding,
sections 127 to 130 (which relate to reorganisation or reduction of share capital) shall not apply in relation to that holding.
Pension Schemes Act 1993 (c. 48)
222
In section 181(1) of the Pension Schemes Act 1993 (general interpretation), in the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)
”
.
Pension Schemes (Northern Ireland) Act 1993 (c. 49)
223
In section 176(1) of the Pension Schemes (Northern Ireland) Act 1993 (general interpretation), in the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “
general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)
”
.
Finance Act 1994 (c. 9)
224
1
In the Finance Act 1994, paragraph 27 of Schedule 24 (provisions relating to the Railways Act 1993 — employee benefits: transport vouchers) is amended as follows.
2
In sub-paragraph (3) for “Subsection (6) of section 141 of the Taxes Act 1988” substitute “
Section 86 of ITEPA 2003 (exception for certain transport vouchers)
”
.
3
In sub-paragraph (3)(c) for “paragraphs (a) to (d) of that subsection” substitute “
section 86(2)(a) to (d) of ITEPA 2003
”
.
4
In sub-paragraph (12) after the definition of “the former transport voucher benefits for comparable employees” insert—
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003.
5
For sub-paragraph (13) substitute—
13
Subject to paragraph 1(1) and sub-paragraph (12) above, expressions used in this paragraph and in section 86 of ITEPA 2003 have the same meaning in this paragraph as in that section.
This does not apply in relation to the reference to a transport voucher in sub-paragraph (1) above.
Finance Act 1995 (c. 4)
225
The Finance Act 1995 is amended as follows.
F242226
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227
In section 137(7)
(part-time workers: miscellaneous provisions) for “Subsections (2) to” substitute “
Subsection
”
.
Jobseekers Act 1995 (c. 18)
228
F635The Jobseekers Act 1995 is amended as follows.
229
F635In section 15(2)(c)(i)
(effect on other claimants) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) under PAYE regulations
”.
230
F635In section 26(3)
(the back to work bonus) for the words from “Subject to section 617” to “not to be taxable)” substitute “
Subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable)
”.
Child Support Act 1995 (c. 34)
231
For section 10(4) of the Child Support Act 1995 (child maintenance bonus) substitute—
4
Subsection (3) is subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable).
Child Support (Northern Ireland) Order 1995 (S.I. 1995/2702 (N.I. 13))
232
For Article 4(4) of the Child Support (Northern Ireland) Order 1995 (child maintenance bonus) substitute—
4
Paragraph (3) is subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable).
Jobseekers (Northern Ireland) Order 1995 (S.I. 1995/2705 (N.I. 15))
233
F636The Jobseekers (Northern Ireland) Order 1995 is amended as follows.
234
F636In Article 17(2)(c)(i)
(effect on other claimants) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003 under regulations made under section 684 of that Act (PAYE regulations)
”.
235
F636In Article 28(3)
(the back to work bonus) for the words from “Subject to section 617” to “not to be taxable)” substitute “
Subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable)
”.
Teaching and Higher Education Act 1998 (c. 30)
236
In section 22 of the Teaching and Higher Education Act 1998 (new arrangements for giving financial support to students)—
a
in subsection (5)(g) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
; and
b
in subsection (6)(a) for “income assessable to income tax under Schedule E” substitute “
PAYE income
”
.
Scotland Act 1998 (c. 46)
237
In section 79(3) of the Scotland Act 1998 (supplemental powers to modify enactments) for “section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
.
Education (Student Support) (Northern Ireland) Order 1998 (S.I. 1998/1760 (N.I. 14))
238
In Article 3 of the Education (Student Support) (Northern Ireland) Order 1998 (new arrangements for giving financial support to students)—
a
in paragraph (5)(g) for “section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
section 684 of the Income Tax (Earnings and Pensions) Act 2003 (PAYE regulations)
”
; and
b
in paragraph (6)(a) for “income assessable to income tax under Schedule E” substitute “
PAYE income (as defined in section 683 of the Income Tax (Earnings and Pensions) Act 2003
”
.
Tax Credits Act 1999 (c. 10)
239
The Tax Credits Act 1999 is amended as follows.
240
In section 6(1)
(payment of tax credit by employers etc.) for “income assessable to income tax under Schedule E” substitute “
PAYE income
”
.
241
In paragraph 10(1) of Schedule 2 (transfer of functions), in paragraph (b) of the subsection which, in any case where the overpayment was made in respect of tax credit, is treated as substituted for—
a
subsection (8) of section 71 of the Social Security Administration Act 1992 (c. 5), and
b
subsection (8) of section 69 of the Social Security Administration (Northern Ireland) Act 1992 (c. 8),
for “section 203(2)(a) of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “
PAYE regulations
”
.
Finance Act 2000 (c. 17)
242
The Finance Act 2000 is amended as follows.
F362243
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F306244
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F61245
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Capital Allowances Act 2001 (c. 2)
246
The Capital Allowances Act 2001 is amended as follows.
247
1
Amend section 4 (capital expenditure) as follows.
2
For subsection (2)(b) substitute—
b
any expenditure or sum that may be allowed as a deduction under a relevant provision from the taxable earnings from an employment or office held by the person.
3
After subsection (2) insert—
2A
In subsection (2)—
“relevant provision” means any of the following—
a
section 262;
b
section 232 of ITEPA 2003 (giving effect to mileage allowance relief);
c
Chapters 2 to 6 of Part 5 of that Act (general deductions allowed from earnings); and
d
sections 613(1), 619 and 639 of ICTA (contributions to pensions funds etc.), and
“taxable earnings” has the meaning given by section 10 of ITEPA 2003.
4
In subsection (3) for “emoluments” substitute “
earnings
”
.
248
1
Amend section 20 (employments and offices) as follows.
2
In subsection (2)—
a
for “emoluments” substitute “
earnings
”
; and
b
for “do not fall within Case I or II of Schedule E” substitute “
fall within section 22 or 26 of ITEPA 2003
”
.
3
In subsection (3)—
a
for “those emoluments” substitute “
those earnings
”
; and
b
for “other emoluments” substitute “
other taxable earnings (as defined by section 10 of ITEPA 2003)
”
.
249
In section 61(2)
(disposal events and disposal values), in entry 2(b) of the Table, for “Schedule E” substitute “
ITEPA 2003
”
.
250
In section 63(1)
(cases in which disposal value is nil) for “Schedule E” substitute “
ITEPA 2003
”
.
251
In section 72(3)
(disposal values), in entry 2(b) of the Table, for “Schedule E” substitute “
ITEPA 2003
”
.
252
In section 88(c)
(sales at under-value) for “Schedule E” substitute “
ITEPA 2003
”
.
253
In section 262 (employments and offices)—
a
in paragraph (a) for “an amount to be deducted from the emoluments of” substitute “
a deduction from the taxable earnings from
”
; and
b
in paragraph (b) for “an emolument” substitute “
earnings
”
.
254
In section 423(1)
(disposal value for sections 421 and 422), in entry 2(b) of the Table, for “Schedule E” substitute “
ITEPA 2003
”
.
255
At the end of Part 1 of Schedule 1 (abbreviations) insert—
ITEPA 2003
The Income Tax (Earnings and Pensions) Act 2003
F243256
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Finance Act 2001 (c. 9)
257
For section 95 of the Finance Act 2001 (exemptions in relation to employee share ownership plans) substitute—
95Exemptions in relation to approved share incentive plans
1
This section forms part of the SIP code (see section 488 of the Income Tax (Earnings and Pensions) Act 2003 (approved share incentive plans)).
2
Accordingly, expressions used in this section and contained in the index at the end of Schedule 2 to that Act (approved share incentive plans) have the meaning indicated by that index.
3
Where, under an approved share incentive plan, partnership shares or dividend shares are transferred by the trustees to an employee—
a
no ad valorem stamp duty is chargeable on any instrument by which the transfer is made, and
b
no stamp duty reserve tax is chargeable on any agreement by the trustees to make the transfer.
4
But subsection (3) does not apply to—
a
any instrument executed (within the meaning of the Stamp Act 1891) before 6th April 2003, or
b
any agreement to transfer shares made before that date.
F307258
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State Pension Credit Act 2002 (c. 16)
263
1
Section 17(1) of the State Pension Credit Act 2002 (other interpretation provisions) is amended as follows.
2
In paragraph (b) of the definition of “foreign war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “
section 641 of the Income Tax (Earnings and Pensions) Act 2003
”
.
3
In paragraph (b) of the definition of “foreign war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “
section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003
”
.
4
In paragraph (b) of the definition of “war disablement pension”, for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “
any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003
”
.
5
In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “
section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003
”
.
Tax Credits Act 2002 (c. 21)
264
The Tax Credits Act 2002 is amended as follows.
265
1
Amend section 25 (payments of working tax credit by employers) as follows.
2
In subsection (1) for “Schedule E payments” substitute “
payments of, or on account of, PAYE income
”
.
3
In subsection (5) for “Schedule E payment” substitute “
payment of, or on account of, PAYE income
”
.
4
Omit subsection (6).
266
In section 29(5)
(recovery of overpayments) for “regulations under section 203(2)(a) of the Income and Corporation Taxes Act 1988 (c. 1)
(PAYE)” substitute “
PAYE regulations
”
.
State Pension Credit Act (Northern Ireland) 2002 (c. 14 (N.I.))
267
1
Section 17(1) of the State Pension Credit Act (Northern Ireland) 2002 (other interpretation provisions) is amended as follows.
2
In paragraph (b) of the definition of “foreign war disablement pension” for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “
section 641 of the Income Tax (Earnings and Pensions) Act 2003
”
.
3
In paragraph (b) of the definition of “foreign war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “
section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003
”
.
4
In paragraph (b) of the definition of “war disablement pension”, for “subsection (1) of section 315 of the Income and Corporation Taxes Act 1988 (c. 1)” substitute “
any of paragraphs (a) to (f) of section 641(1) of the Income Tax (Earnings and Pensions) Act 2003
”
.
5
In paragraph (b) of the definition of “war widow’s or widower’s pension” for “section 315(2)(e) of the Income and Corporation Taxes Act 1988” substitute “
section 641(1)(e) or (f) of the Income Tax (Earnings and Pensions) Act 2003
”
.
Certain corresponding Northern Ireland provision
268
1
This paragraph applies if provision is made for Northern Ireland which corresponds to section 171ZJ of the Social Security Contributions and Benefits Act 1992 (c. 4) (Part 12ZA — statutory paternity pay: supplementary) (which was inserted by section 2 of the Employment Act 2002 (c. 22)).
2
In the Northern Ireland provision any reference to emoluments chargeable to income tax under Schedule E is to be construed as a reference to general earnings (as defined by section 7 of this Act).
269
1
This paragraph applies if provision is made for Northern Ireland which corresponds to section 171ZS of the Social Security Contributions and Benefits Act 1992 (Part 12ZA — statutory adoption pay: supplementary) (which was inserted by section 4 of the Employment Act 2002).
2
In the Northern Ireland provision any reference to emoluments chargeable to income tax under Schedule E is to be construed as a reference to general earnings (as defined by section 7 of this Act).
SCHEDULE 7Transitionals and savings
Part 1Continuity of the law
1
The repeal of provisions and their enactment in a rewritten form in this Act does not affect the continuity of the law.
2
Paragraph 1 does not apply to any change in the law made by this Act.
3
Any subordinate legislation or other thing which—
a
has been made or done, or has effect as if made or done, under or for the purposes of a repealed provision, and
b
is in force or effective immediately before the commencement of the corresponding rewritten provision,
has effect after that commencement as if made or done under or for the purposes of the rewritten provision.
4
Any reference (express or implied) in any enactment, instrument or document to—
a
a rewritten provision, or
b
things done or falling to be done under or for the purposes of a rewritten provision,
is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding repealed provision had effect, a reference to the repealed provision or (as the case may be) things done or falling to be done under or for the purposes of the repealed provision.
5
Any reference (express or implied) in any enactment, instrument or document to—
a
a repealed provision, or
b
things done or falling to be done under or for the purposes of a repealed provision,
is to be read as including, in relation to times, circumstances or purposes in relation to which any corresponding rewritten provision has effect, a reference to the rewritten provision or (as the case may be) things done or falling to be done under or for the purposes of the rewritten provision.
6
Paragraphs 1 to 5 have effect instead of section 17(2) of the Interpretation Act 1978 (c. 30) (but are without prejudice to any other provision of that Act).
7
Paragraphs 4 and 5 apply only in so far as the context permits.
Part 2Employment income: charge to tax
Taxable earnings
8
1
The charging provisions of Chapters 4 and 5 of Part 2—
a
apply for the purpose of determining taxable earnings from an employment in the tax year 2003-04 or any later tax year, and
b
accordingly apply where (for the purposes of those Chapters) general earnings are received, or remitted to the United Kingdom, in that or any later tax year.
2
But they apply to general earnings for a tax year before the tax year 2003-04, as well as to those for that or any later year.
This is subject to sub-paragraph (3).
3
If—
a
any general earnings within subsection (1) of section 22 (chargeable overseas earnings) or 26 (foreign earnings of resident employee) are for a tax year before 1989-90,
b
the earnings are remitted to the United Kingdom in the tax year 2003-04 or any later tax year (“the remittance year”), and
c
either—
i
the employee is not resident in the United Kingdom in the remittance year, or
ii
the employment is not held in the remittance year,
subsection (2) of section 22 or 26 does not apply to the earnings.
4
Section 30 (treatment of earnings for year in which employment not held) does not apply where any of the tax years mentioned in subsection (2) or (3) of that section is a tax year before the tax year 1989-90.
Relief for delayed remittances
F2549
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F25410
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F25411
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disputes as to domicile or ordinary residence
F25412
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Application of provisions to agency workers
13
In relation to times before 6th April 2003, Chapter 7 of Part 2 applies with the following modifications—
a
references to “employment income of the worker” are to be read as references to “income of the worker chargeable to tax under Schedule E”,
b
references to “earnings” are to be read as references to “emoluments”, and
c
references to “this Chapter” are to be read as references to “section 134 of ICTA”.
14
Section 44(2) does not apply in relation to—
a
payments made before 6th April 1998 other than payments made in respect of services provided on or after that date, or
b
payments made on or after that date in respect of services provided before that date,
if in providing the services the worker is or would be a sub-contractor within the meaning of section 560 of ICTA (sub-contractors in the construction industry).
Part 3Employment income: earnings and benefits etc. treated as earning
F601...
Sch. 7 para. 15 and cross-heading omitted (with effect in accordance with s. 12(5) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 12(4)(b)
F60115
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F60716
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxable benefits: the benefits code
17
1
In relation to times before 6th April 2003, references in the benefits code to “employment”, “employed”, “employee” and “employer” are to be read in accordance with this paragraph.
2
In relation to F603Chapters 3, 6, 7 and 10 of the benefits code (provisions not applicable before the tax year 2016-17 to lower-paid employments), the references mentioned in sub-paragraph (1) are to be read in accordance with section 66 (meaning of employment and related expressions) but as if in subsection (1)(a) there were substituted “an employment to which Chapter 2 of Part 5 of ICTA applies” for “a taxable employment under Part 2”.
3
In relation to any other Chapters of the benefits code, the references mentioned in sub-paragraph (1) are to be read in accordance with section 66 but as if in subsection (1)(a) there were substituted “an employment the emoluments of which fall to be assessed under Schedule E” for “a taxable employment under Part 2”.
F6044
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5
This paragraph is subject to paragraphs 18(2), 24, 27(3), 29(4) and 31(2) of this Schedule.
F602...
Sch. 7 para. 19 and cross-heading omitted (with effect in accordance with s. 12(5) of the amending Act) by virtue of Finance Act 2015 (c. 11), s. 12(4)(b)
F36918
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F60219
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F60820
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Taxable benefits: living accommodation
21
1
Section 107 (special rule for calculating cost of providing accommodation) does not apply if the employee first occupied the living accommodation before 31st March 1983.
2
Nothing in this paragraph affects the operation of section 107 as applied by section 398(2)(b) or 415(2)(b).
Taxable benefits: loans
25
1
Chapter 7 of Part 3 applies to a loan made at any time, including one made before 29th July 1976 (the date on which FA 1976 was passed).
2
But section 188 (loan released or written off: amount treated as earnings) does not apply to benefits received in pursuance of arrangements made at any time with a view to protecting the holder of shares acquired before 6th April 1976 from a fall in their market value.
26
1
This paragraph relates to the operation of section 183 (alternative method of calculation) in relation to section 177(2) (exceptions for loans at fixed rate of interest) in the case of a loan made before 6th April 2003.
2
Where section 183 applies, then for the purpose of calculating under section 177(2) the amount of interest that would have been payable on the loan at the official rate of interest for the year in which the loan was made, in step 3 in section 183(3) for “the number of days in the tax year” substitute “
365
”
.
27
1
Subject to paragraph 25(2), where a loan is made before 6th April 2003, section 188 (loan released or written off: amount treated as earnings) applies with the following modifications.
2
References to the employment in relation to which a loan is an employment-related loan are to be read, in relation to times before 6th April 2003, as references to the employment referred to in section 174 (employment-related loans) as modified by paragraph 17.
3
In relation to times before 6th April 2003—
a
in subsection (2)(c), substitute “an employment to which Chapter 2 of Part 5 of ICTA applies” for F605“not lower-paid employment as a minister of religion”, and
b
in subsection (3)(a), substitute “
an employment to which Chapter 2 of Part 5 of ICTA does not apply
”
for F606“lower-paid employment as a minister of religion”.
Taxable benefits: residual liability to charge
32
1
This paragraph applies in relation to Chapter 10 of Part 3.
2
In section 206, the references in subsection (4) and step 2 in subsection (5) to the cost of a benefit determined under section 205 are to be read as including a reference to the cost of a benefit determined under section 156(5) of ICTA.
3
Sections 212, 213 and 215 do not have effect in relation to any payment if—
a
it is made in respect of a scholarship awarded before 15th March 1983,
b
the first payment in respect of the scholarship was made before 6th April 1984, and
c
in relation to payments made after 5th April 1989, the person holding the scholarship (“the scholar”) is receiving full-time instruction at the university, college, school or other educational establishment at which the scholar was receiving such instruction on—
i
15th March 1983, in a case where the first payment in respect of the scholarship was made before that date, or
ii
the date on which the first such payment was made, in any other case.
4
For the purposes of sub-paragraph (3)(c), a payment made before 6th April 1989 in respect of any period beginning on or after that date is treated as made at the beginning of that period.
Part 4Employment income: exemptions
Incidental overnight expenses and benefits
33
In determining whether section 240(1) or (2) or 268 applies—
a
in the case of a period of absence which began before 6th April 2003 and ends on or after that date, or
b
in the case of a period of absence which begins on or after that date and incidentally to which goods, services or money are obtained using a non-cash voucher in relation to which section 141(6C) of ICTA applies,
the question whether for the purposes of section 241 the exemption provisions total exceeds the permitted amount is to be determined as if this Act had applied at any relevant time before that date.
34
In determining—
a
whether section 141(6C) and (6D), 142(3C) and (3D), 155(1B) and (1C) or section 200A of ICTA applies in the case of a period of absence which began before 6th April 2003 and ends on or after that date, or
b
whether section 141(6C) and (6D) applies in the case of a period of absence which begins on or after that date,
the question whether the authorised maximum (as defined in section 200A(4) of ICTA) is exceeded in relation to the absence is to be determined as if in section 200A(5) after the words “exceeded by” there were inserted the words “the aggregate of the exemption provisions total in respect of the period (as defined in section 241 of ITEPA 2003) and”.
Removal benefits and expenses
35
1
Section 287 (limit on exemption for removal benefits and expenses) applies with the modification in sub-paragraph (2) where—
a
a benefit is provided on or after 6th April 2003 in connection with a change of an employee’s residence, or
b
expenses are incurred on or after that day in connection with such a change,
and any such benefits have been provided or expenses incurred before that date in connection with that change.
2
In subsection (2) before paragraph (a) insert—
aa
the total value to the employee immediately before 6th April 2003, as defined in paragraph 24(2) of Schedule 11A to ICTA,
36
A direction under paragraph 6(2) of Schedule 11A to ICTA (directions as to meaning of “the relevant day”) by virtue of which a day on or after 6th April 2003 was directed to be the relevant day in relation to a change of residence—
a
is not affected by any repeals made by this Act, but
b
continues in force as respects any benefit provided or expenses incurred on or after that date as if it were a direction given under section 274(2) (directions as to the limitation day), directing that day to be the limitation day.
Retraining courses
37
1
The repeal of sections 588(5)(a) and 589(3) and (4) of ICTA does not affect—
a
the operation of section 588(5) of ICTA by virtue of paragraph (a) of that provision where liability for a tax year before 2003-04 is determined,
b
the operation of section 588(5) of ICTA by virtue of paragraph (b) of that provision where liability is determined on the assumption that the person undertaking the course fell within section 588(1) of ICTA in such a tax year, or
c
the operation of section 588(6) F312... of ICTA as they apply by virtue of sub-paragraph (2).
2
In any case where there has been such a determination as is mentioned in sub-paragraph (1)(a) or (b), section 588(6) F313applies as if it referred to a failure to comply with any provision of section 589(3) or (4) of ICTA instead of a failure to meet such a condition as is mentioned in section 312(1)(b)(i) or (ii) of this Act.
Suggestion awards
38
1
This paragraph applies for the purpose of determining the extent, if any, to which section 321(2) (exemption of suggestion awards) applies in respect of a financial benefit award for a suggestion (“the later award”) in a case where such an award (“the earlier award”) has been made for the same suggestion on a previous occasion or occasions before the tax year 2003-04.
2
For the purposes of the application of section 322(3) in relation to the later award, “the residue of the suggestion maximum” means the suggestion maximum, as defined in section 322(4), less the aggregate of—
a
the total of the amounts exempted from income tax under section 321 in respect of financial benefit awards for the same suggestion made on previous occasions, and
b
the total of the earlier awards.
Part 5Employment income: deductions
Earnings charged on remittance
39
In relation to expenses incurred before the tax year 2003-04, section 353 (deductions from earnings charged on remittance) applies as if the condition in subsection (3) of that section were that the expenses would have been deductible under section 193, 194, 195 or 198(1) of ICTA from emoluments of the office or employment if those emoluments had been chargeable under Case I of Schedule E for the tax year in which the expenses were incurred.
Non-domiciled employee’s travel costs and expenses: “qualifying arrival date”
40
In relation to any time before 6th April 2003, section 375 (meaning of “qualifying arrival date”) has effect as if the references in subsections (1)(a) and (4) to the person receiving earnings for duties performed in the United Kingdom included a reference to the person receiving emoluments for such duties.
Part 6Employment income: income which is not earnings or F13related to securities
Words in Sch. 7 Pt. 6 heading substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(3)
Benefits from non-approved pension schemes
F15641
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments and benefits on termination of employment etc.
42
Section 403 (charge on payment or other benefit) does not apply in relation to payments or other benefits received on or after 6th April 2003 that were brought into charge to tax before 6th April 1998.
43
1
This paragraph applies for the purpose of determining how the £30,000 threshold referred to in sections 403 and 404 operates where—
a
payments or other benefits to which Chapter 3 of Part 6 apply are received, and
b
payments or benefits to which section 148 of ICTA applied were received in respect of the same person—
i
in respect of the same employment, or
ii
in respect of different employments with the same employer or associated employers.
2
For the purposes of section 403(4) and (5), section 415 (valuation of benefits) does not apply to the payments and benefits referred to in sub-paragraph (1)(b), and their aggregate amount is to be taken to be their aggregate amount immediately before 6th April 2003.
3
The references in sections 403(4) and (5) and 404(3)(b) to payments or benefits to which Chapter 3 of Part 6 applies include references to the payments and benefits referred to in sub-paragraph (1)(b).
4
Section 404(2) (when employers are associated) applies for the purposes of this paragraph.
Part 7Employment income: F14income related to securities
Words in Sch. 7 Pt. 7 heading substituted (10.7.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(4)
F3Pre-6th April 2003 acquisitions
Sch. 7 para. 43A and cross-heading inserted (16.4.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 46(5)(26)(b)
43A
1
This paragraph relates to the operation of section 421E (exclusions from Chapters 2 to 4 of Part 7: residence) in relation to an acquisition made before 6th April 2003.
2
Section 421E(1) has effect with the substitution of “
the employee was not chargeable under Case I of Schedule E in respect of the employment
”
for the words from “the earnings”.
3
Section 421E(2) has effect with the substitution of “
the emoluments of the employment did not fall to be charged to income tax under Schedule E
”
for the words from “the earnings”.
F12Securities disposed of for more than market value
Sch. 7 para. 61A and cross-heading inserted (with effect in accordance with Sch. 22 para. 46(26)(a) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 46(19)
61A
Chapter 3D of Part 7 does not apply in relation to securities, or an interest in securities, acquired on or before 6th April 1976.
Approved SAYE option schemes
71
1
This paragraph applies where, immediately before 6th April 2003, a savings-related share option scheme was approved under Schedule 9 to ICTA (approved share option schemes and profit-sharing schemes).
2
On and after that date the scheme is to be treated as an SAYE option scheme approved by F124an officer of Revenue and Customs under Schedule 3 to this Act.
3
Sub-paragraph (2) has effect even if the provisions of the scheme do not wholly conform with the provisions of Schedule 3 to this Act, but it has effect without prejudice to—
a
paragraphs 42 and 43 of that Schedule (withdrawal or loss of approval), and
b
any approved alteration of the scheme.
4
For the purposes of paragraph 42 of Schedule 3, as it applies to the scheme, nothing is to be regarded as a disqualifying event if it would not have resulted in any of the former approval requirements ceasing to be met.
The “former approval requirements” means the requirements of Schedule 9 to ICTA by reference to which the scheme was approved.
5
Nothing in this Act affects the validity of—
a
any provision of the scheme which was included in it at any time before 6th April 2003 in accordance with the provisions of Schedule 9 to ICTA as then in force, or
b
any rights obtained under the scheme which were obtained at any such time in accordance with the provisions of that Schedule as then in force.
6
In this paragraph “savings-related share option scheme” has the meaning given by paragraph 1(1) of Schedule 9 to ICTA.
72
1
Any reference in the SAYE code to a share option granted in accordance with the provisions of an approved SAYE option scheme is to be read as including, in relation to times before 6th April 2003, a reference to a right to acquire shares obtained in accordance with the provisions of a savings-related share option scheme approved under Schedule 9 to ICTA.
2
Any reference in a scheme within paragraph 71(1) to a person chargeable to tax under Case I of Schedule E is to be read as including, in relation to times after 5th April 2003, a reference to a person whose earnings fall within paragraph 6(2)(c) of Schedule 3 to this Act.
3
This paragraph—
a
is without prejudice to Part 1 of this Schedule, and
b
applies only in so far as the context permits.
4
In this paragraph “savings-related share option scheme” has the same meaning as in paragraph 71.
Approved CSOP schemes
73
1
This paragraph applies where, immediately before 6th April 2003, a discretionary share option scheme was approved under Schedule 9 to ICTA (approved share option schemes and profit-sharing schemes).
2
On and after that date the scheme is to be treated as a CSOP scheme approved by F124an officer of Revenue and Customs under Schedule 4 to this Act.
3
Sub-paragraph (2) has effect even if the provisions of the scheme do not wholly conform with the provisions of Schedule 4 to this Act, but they are without prejudice to—
a
paragraphs 30 and 31 of that Schedule (withdrawal or loss of approval), and
b
any approved alteration of the scheme.
4
For the purposes of paragraph 30 of Schedule 4, as it applies to the scheme, nothing is to be regarded as a disqualifying event if it would not have resulted in any of the former approval requirements ceasing to be met.
The “former approval requirements” means the requirements of Schedule 9 to ICTA by reference to which the scheme was approved.
5
Nothing in this Act affects the validity of—
a
any provision of the scheme which was included in it at any time before 6th April 2003 in accordance with the provisions of Schedule 9 to ICTA as then in force, or
b
any rights obtained under the scheme which were obtained at any such time in accordance with the provisions of that Schedule as then in force.
6
In this paragraph “discretionary share option scheme” means a share option scheme other than a savings-related share option scheme (as defined by paragraph 1(1) of Schedule 9 to ICTA).
74
1
Any reference in the CSOP code to a share option granted in accordance with the provisions of an approved CSOP scheme is to be read as including, in relation to times before 6th April 2003, a reference to a right to acquire shares obtained in accordance with the provisions of a discretionary share option scheme approved under Schedule 9 to ICTA.
2
This paragraph—
a
is without prejudice to Part 1 of this Schedule,
b
applies only in so far as the context permits, and
c
has effect subject to paragraph 75.
3
In this paragraph “discretionary share option scheme” has the same meaning as in paragraph 73.
75
1
This paragraph has effect where, immediately before 6th April 2003, a discretionary share option scheme which was approved before 29th April 1996—
a
is approved under Schedule 9 to ICTA, and
b
has effect subject to the modifications made by paragraphs 2 and 3 of Schedule 16 to FA 1996 (scheme to have effect, despite anything included in it to the contrary, as if it contained provisions required by paragraphs 28 and 29 of Schedule 9 to ICTA: limit of £30,000 on value of shares subject to outstanding options and requirements as to price for acquisition of shares).
2
On and after 6th April 2003 the scheme is to continue to have effect as if it provided—
a
that an individual may not be granted share options under it which would at the time when they are granted cause the aggregate market value of the shares which the individual may acquire by exercising share options granted under—
i
the scheme, or
ii
any other approved CSOP scheme established by the scheme organiser or an associated company of the scheme organiser,
to exceed or further exceed £30,000 (leaving out of account share options that have already been exercised), and
b
that the price at which shares may be acquired by the exercise of a share option granted under the scheme must not be manifestly less than the market value of shares of the same class at that time (or, if F125the Commissioners for Her Majesty’s Revenue and Customs and the scheme organiser agree in writing, at an earlier time or times stated in the agreement).
3
For the purposes of sub-paragraph (2)(a), the market value of shares is to be calculated as at—
a
the time when the options relating to them were granted, or
b
if an agreement relating to them has been made under paragraph 22 of Schedule 4 (requirements as to price for acquisition of shares) the earlier time or times stated in the agreement.
4
Sub-paragraph (2) is subject to any amendment to the scheme made after 28th April 1996 (whether before or after 6th April 2003).
5
In this paragraph “discretionary share option scheme” has the same meaning as in paragraph 73.
6
Other expressions used in this paragraph and contained in the index at the end of Schedule 4 (index of expressions defined in the CSOP code) have the meaning indicated by that index.
76
1
This paragraph applies to any right obtained by an individual—
a
under a discretionary share option scheme approved under Schedule 9 to ICTA, and
b
during the period beginning with 17th July 1995 and ending with 28th April 1996,
if, by virtue of section 115 of FA 1996 (transitional provisions which gave retrospective effect to certain amendments relating to discretionary share option schemes), the right was, immediately before 6th April 2003, treated for the purposes of sections 185 to 187 of and Schedule 9 to ICTA as having been obtained otherwise than in accordance with the provisions of a discretionary share option scheme approved under that Schedule.
2
For the purposes of the CSOP code, the right is to be treated as having been granted otherwise than in accordance with the provisions of an approved CSOP scheme.
3
In this paragraph “discretionary share option scheme” has the same meaning as in paragraph 73.
Enterprise management incentives
77
1
This paragraph applies where, immediately before 6th April 2003, a share option was a qualifying option for the purposes of Schedule 14 to FA 2000 (enterprise management incentives).
2
On and after that date the share option is to be treated as a qualifying option for the purposes of the EMI code.
3
Sub-paragraph (2) has effect even if the requirements that had to be met in order for the share option, or any share option replaced by it, to be a qualifying option for the purposes of Schedule 14 to FA 2000 differed to any extent from those set out in Schedule 5.
4
In this paragraph “share option” means a right to acquire shares.
78
1
In section 535 (disqualifying events relating to employee), subsections (2) to (6) apply to the tax year 2003-04 and later tax years (in accordance with section 723(1)).
2
In Schedule 14 to FA 2000 (enterprise management incentives), paragraph 52 (disqualifying events: actual relevant working time) continues to apply in relation to April 2003 for the purpose of calculating, in accordance with sub-paragraphs (3) to (5) of that paragraph, whether a disqualifying event is to be taken to have occurred at the end of the tax year 2002-03.
3
If a disqualifying event is to be taken to have so occurred, it (like anything else which under that Schedule is a disqualifying event immediately before 6th April 2003) is a disqualifying event for the purposes of Schedule 5 to this Act.
79
1
Section 536 (other disqualifying events) has effect in relation to any alteration made to the share capital of a company before 11th May 2001 with the following modification.
2
In subsection (1), for paragraphs (b) and (c) substitute—
b
any alteration to the share capital of the relevant company to which section 537 applies and is made without the prior approval of F124an officer of Revenue and Customs ;
80
1
Section 537 (alteration of share capital for purposes of section 536) has effect in relation to any alteration made to the share capital of a company before 11th May 2001 with the following modifications.
2
In subsection (1), omit “and (c)”.
3
In subsection (2), substitute “
This section
”
for “This subsection”.
4
Omit subsection (3).
81
In a case where the qualifying option was granted before 6th April 2003, section 540(2) (no charge on acquisition of shares as taxable benefit) applies in relation to the time when the option was granted with the substitution of “the employee was chargeable to tax under Case I of Schedule E” for the words from “the earnings” onwards.
82
1
This paragraph relates to the operation of section 541(2) (effects on tax charges where shares cease to be conditional only or are converted) in relation to an FA 2000 option which was exercised before 6th April 2003.
2
The references to a qualifying option include an FA 2000 option which was so exercised; but in relation to such an option sub-paragraph (3) applies instead of section 541(3).
3
For the purposes of section 541(2) “the amount of relief on the exercise of the option” means the difference between—
a
the amount on which tax would have been chargeable under section 135 of ICTA (charge on exercise etc. of option) in respect of the exercise of the option apart from Schedule 14 to FA 2000 (enterprise management incentives), and
b
the amount (if any) in fact so chargeable in accordance with that Schedule.
4
In this paragraph an “FA 2000 option” means a qualifying option for the purposes of Schedule 14 to FA 2000.
83
In Schedule 5 (enterprise management incentives), paragraph 41(6) (like other provisions of that paragraph) applies to replacement options whenever granted.
Employee benefit trusts
84
In relation to times before 6th April 2003, section 549(5) (definition of “employee” for purposes of Chapter 11 of Part 7) is to be read as referring to a person holding an office or employment whose emoluments were chargeable under Schedule E.
Part 8Approved profit sharing schemes
Trustees' duty to provide information
85
Any obligation imposed in accordance with paragraph 34(b) of Schedule 9 to ICTA (trustees' duties to provide information) on the trustees of a profit sharing scheme approved under that Schedule is to be construed as an obligation, where an amount counts as employment income of a participant by reason of the occurrence of any event, to inform the participant of any facts relevant to determining the participant’s resulting liability to tax.
Part 9Social security income
Disabled person’s and working families' tax credits
88
1
This paragraph applies if, on 6th April 2003, the repeals made by TCA 2002 of the provisions listed in sub-paragraph (3) have not come fully into force.
2
Until the repeal of those provisions has come fully into force, Table B in section 677(1) of this Act is to be read as if it included references to disabled person’s tax credit and working families' tax credit.
3
The provisions referred to in this paragraph are—
a
in SSCBA 1992, section 128 (working families' tax credit) and section 129 (disabled person’s tax credit), and
b
in SSCB(NI)A 1992, section 127 (working families' tax credit) and section 128 (disabled person’s tax credit).
Part 10PAYE
PAYE regulations
89
1
In relation to any time before the commencement of the repeals in Part 7 of Schedule 20 to FA 1999, section 684(2) (PAYE regulations) has effect with the following modification.
2
At the end of item 5 insert “
including the proving of the contents or transmission of anything that the regulations allow to be transmitted to any person in electronic form or by electronic means
”
.
Part 11Consequences for corporation tax
90
1
This paragraph applies where—
a
a company is charged to corporation tax by reference to an accounting period which begins before and ends on or after 6th April 2003, and
b
because of a change in the law made by this Act, the income tax law relating to the accounting period is different from what it would have been if that change had not been made.
2
If the company so elects, this Act applies with such modifications as may be necessary to secure that the income tax law relating to the accounting period is the same as it would have been if the change in the law had not been made.
3
An election under this paragraph must be made by notice given to F124an officer of Revenue and Customs no later than the end of the period of two years beginning with the day following the last day of the accounting period.
4
In this paragraph “income tax law” has the same meaning as in section 9 of ICTA.
91
1
This paragraph applies in relation to corporation tax charged by reference to an accounting period which begins before and ends on or after 6th April 2003.
2
In its application for the purposes of corporation tax, any provision of this Schedule is to be read as if—
a
any reference to the tax year 2003-04 were a reference to that accounting period, and
b
any reference to 6th April 2003 were a reference to the first day of that accounting period.
92
1
The provisions of this Act mentioned in sub-paragraph (2) do not have effect for corporation tax purposes for so much of any accounting period as falls before 6th April 2003.
2
The provisions are—
a
in Schedule 6 (consequential amendments)—
i
paragraph 11 (which replaces references in section 84A of ICTA to share option schemes approved under Schedule 9 to that Act with references to SAYE option schemes and CSOP schemes approved under this Act), and
ii
paragraphs 12 and 109 (which insert Schedule 4AA to ICTA (share incentive plans: corporation tax deductions)), and
b
the repeal by Schedule 8 (repeals) of—
i
Part 12 of Schedule 8 to FA 2000 (corporation tax deductions in relation to employee share option plans), and
ii
so much of any other provision of Schedule 8 to that Act as is necessary for the operation of Part 12.
3
This paragraph has effect as an exception to the provision made by section 723(1)(b) (commencement of this Act for purposes of corporation tax).
SCHEDULE 8Repeals and revocations
Part 1Acts of Parliament
Short title and chapter | Extent of repeal |
|---|---|
Taxes Management Act 1970 (c. 9) | In section 98, the entries in the first column of the Table relating to—
|
| In section 98, the entries in the second column of the Table relating to—
|
Income and Corporation Taxes Act 1988 (c. 1) | Section 19. |
| Section 58. |
| In section 65(2), the words “Subject to section 330,”. |
| Sections 131 to 137. |
| Sections 140 to 151A. |
| Sections 153 to 159AC. |
| Sections 160 to 168G. |
| Section 185. |
| In section 186—
|
| In section 187, subsections (1) to (4), (6) and (7), except so far as relating to profit sharing schemes. |
| Section 187A. |
| Sections 189 to 198. |
| Sections 199 to 207. |
| Section 313. |
| Sections 315 to 319. |
| Section 321. |
| Section 322(2). |
| In section 323—
|
| Section 330. |
| Section 332(1), (2), (3A), (3B) and (4). |
| In section 577—
|
| Section 579(1). |
| Section 580(3). |
| In section 585—
|
| In section 588, in subsection (5), paragraph (a) and the word “or” preceding paragraph (b). |
| Section 589. |
| Section 589A(2) to (6), (10). |
| In section 589B—
|
| Section 591D(6). |
| Section 595. |
| Section 596. |
| Sections 596A to 596C. |
| Section 597. |
| Section 599A(5), (6) and (8). |
| Section 600. |
| In section 607(3)(b), sub-paragraph (iv) and the word “and” preceding it. |
| Section 608(4). |
| Section 613(1) to (3). |
| Section 615(1), (2), (4), (5) and (8). |
| Section 616. |
| Section 617(1) and (2). |
| Section 617A. |
| In section 638(13), the definition of “employee share ownership plan”. |
| In section 643—
|
| Sections 647 to 648A. |
| Section 830(5). |
| Schedules 6, 6A, 7 and 7A. |
| In Schedule 9—
|
| In Schedule 10, in paragraph 7(7)(b), the second “to”. |
| Schedules 11, 11A, 12, 12AA and 12A. |
| In Schedule 29, paragraph 6. |
Social Security Act 1988 (c. 7) | In Schedule 4, paragraph 1. |
Finance Act 1988 (c. 39) | Section 46. |
| Section 47(1). |
| Section 48(1). |
| Section 49(1). |
| Section 57. |
| Section 68. |
| Section 69. |
| Section 73(1). |
| Sections 77 to 88. |
| In section 89—
|
| Section 128. |
| In Schedule 3, paragraph 4. |
| In Schedule 13, paragraph 3. |
Finance Act 1989 (c. 26) | Sections 36 to 42. |
| Section 45. |
| Sections 50 to 52. |
| Section 53, except subsection (2)(f) so far as relating to section 418(3) of ICTA. |
| Section 62. |
| Sections 64 and 66. |
| In section 178(2)—
|
| Section 179(1)(g) and (5). |
| In Schedule 6—
|
| In Schedule 12, paragraph 8. |
Companies Act 1989 (c. 40) | In Schedule 18, paragraph 46. |
Finance Act 1990 (c. 29) | Section 21. |
| Section 77. |
| Section 79. |
| In Schedule 14, paragraph 4(2). |
Oversea Superannuation Act 1991 (c. 16) | Section 2. |
Disability Living Allowance and Disability Working Allowance Act 1991 (c. 21) | In Schedule 2, paragraph 18. |
Finance Act 1991 (c. 31) | Section 38(2). |
| Sections 39 to 40. |
| Section 44. |
| Section 69. |
| In Schedule 6, paragraphs 1 and 3. |
Social Security Contributions and Benefits Act 1992 (c. 4) | Section 10(10). |
| In section 150(2), in paragraph (b) of the definition of “unemployability supplement or allowance”, sub-paragraph (v). |
Social Security (Consequential Provisions) Act 1992 (c. 6) | In Schedule 2, paragraph 93. |
Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) | Section 10(10). |
| In section 146(2), in paragraph (b) of the definition of “unemployability supplement or allowance”, sub-paragraph (v). |
Social Security (Consequential Provisions) (Northern Ireland) Act 1992 (c. 9) | In Schedule 2, paragraph 33. |
Taxation of Chargeable Gains Act 1992 (c. 12) | Section 120(6). |
| In Schedule 10, paragraphs 14(9) to (12) and 16(3) to (5). |
Finance (No. 2) Act 1992 (c. 48) | Section 37. |
| Section 54. |
Finance Act 1993 (c. 34) | Section 68. |
| Sections 73 to 76. |
| Section 105(1) and (2). |
| Section 124. |
| Schedules 3, 4 and 5. |
Finance Act 1994 (c. 9) | Sections 88 and 89. |
| Section 108(1) to (6) and (7)(b). |
| Sections 109 and 110. |
| Sections 125 to 132. |
| Section 139. |
Vehicle Excise and Registration Act 1994 (c. 22) | In Schedule 3, paragraph 22. |
Finance Act 1995 (c. 4) | Sections 43 to 45. |
| Sections 91 to 93. |
| Section 108. |
| Section 111. |
| Section 137(2), (3) and (8). |
| Section 141. |
Jobseekers Act 1995 (c. 18) | In Schedule 2, paragraphs 12, 14 and 16. |
Child Support Act 1995 (c. 34) | In Schedule 3, paragraph 1. |
Finance Act 1996 (c. 8) | Sections 106 to 110. |
| Sections 113 to 115. |
| Section 120(11)(b). |
| Section 152. |
| In Schedule 7, paragraph 5. |
| Schedule 16. |
| In Schedule 20, paragraphs 6 to 10, 41 and 42. |
Finance Act 1997 (c. 16) | Sections 62 and 63. |
| In Schedule 18, in Part 6(3), Note 3(b). |
Finance Act 1998 (c. 36) | Sections 49 to 53. |
| Section 55(1). |
| Section 58. |
| Sections 60 and 61. |
| Sections 63 to 69. |
| Section 93. |
| Schedules 9 and 10. |
Tax Credits Act 1999 (c. 10) | In Schedule 1, paragraph 6(c). |
Finance Act 1999 (c. 16) | Sections 42 to 45. |
| Sections 48 to 51. |
| In Schedule 5, paragraphs 1 to 3. |
| In Schedule 10, paragraphs 4, 5, 6 and 8. |
Welfare Reform and Pensions Act 1999 (c. 30) | In Schedule 8, paragraph 1(2). |
| In Schedule 12, paragraph 75. |
Care Standards Act 2000 (c. 14) | In Schedule 4, paragraph 13. |
Finance Act 2000 (c. 17) | Section 38(5) and (7). |
| Section 47. |
| Sections 56 to 60. |
| Section 62. |
| Schedules 8, 10 and 11. |
| Schedule 12, except paragraphs 17 and 18. |
| Schedule 14. |
Capital Allowances Act 2001 (c. 2) | In Schedule 2, paragraphs 24, 25, 51(1) and 107. |
Finance Act 2001 (c. 9) | Section 57(1) and (2). |
| Section 58. |
| Sections 60 to 62. |
| In Schedule 12—
|
| Schedules 13 and 14. |
| In Schedule 22, in paragraph 16(5), the definition of “PAYE regulations”. |
Social Security Contributions (Share Options) Act 2001 (c. 20) | Section 4. |
International Development Act 2002 (c. 1) | In Schedule 3, paragraph 10. |
State Pension Credit Act 2002 (c. 16) | In Schedule 2, paragraph 28. |
Tax Credits Act 2002 (c. 21) | Section 25(6). |
| In Schedule 3, paragraph 14. |
Finance Act 2002 (c. 23) | Sections 33 to 37. |
| Section 38(2) and (3). |
| Section 39. |
| Section 41. |
| In section 103(4)(f), the words “in Schedule 14, paragraph 22(4),”. |
| Schedule 6. |
| In Schedule 13, in paragraph 27(1), the definition of “PAYE regulations”. |
Employee Share Schemes Act 2002 (c. 34) | The whole Act. |
Part 2Subordinate legislation
Reference and title | Extent of revocation |
|---|---|
Disability Living Allowance and Disability Working Allowance (Northern Ireland Consequential Amendments) Order 1991 (S.I. 1991/2874) | Article 5. |
Income Tax (Car Benefits) (Replacement Accessories) Regulations 1994 (S.I. 1994/777) | The whole Regulations. |
Income Tax (Replacement Cars) Regulations 1994 (S.I. 1994/778) | The whole Regulations. |
Income Tax (Employments) (Notional Payments) Regulations 1994 (S.I. 1994/1212) | In regulation 2—
|
| Regulations 3 to 8A. |
Income Tax (Employments) (Notional Payments) (Amendment) Regulations 1996 (S.I. 1996/2969) | The whole Regulations. |
Income Tax (Employments) (Notional Payments) (Amendment) Regulations 1998 (S.I. 1998/1891) | Regulations 4 to 6. |
Income Tax (Car Benefits) (Reduction of Value of Appropriate Percentage) Regulations 2001 (S.I. 2001/1123) | Regulation 8. |
Financial Services and Markets Act 2000 (Consequential Amendments) (Taxes) Order 2001 (S.I. 2001/3629) | Article 107. |
Enterprise Management Incentives (Gross Asset Requirement) Order 2001 (S.I. 2001/3799) | The whole Order. |
Words in Sch. 1 Pt. 1 inserted (21.7.2009) by Finance Act 2009 (c. 10), s. 126(3)