Income Tax (Earnings and Pensions) Act 2003

[F1 554N Exclusions: other cases involving employment-related securities etc U.K.

(1) Chapter 2 does not apply by reason of a relevant step the subject of which is employment-related securities if—

(a) by virtue of the step, the securities are acquired by a person, and

(b) section 425(2) appliesF2 ... to the acquisition.

(2) Chapter 2 does not apply by reason of a relevant step the subject of which is an employment-related securities option if—

(a) by virtue of the step, the option is acquired by a person, and

(b) section 475(1) appliesF3 ... to the acquisition.

(3) Terms used in subsection (1) or (2) have the same meaning as they have in Chapter 2 or 5 of Part 7 (as the case may be).

(4) Chapter 2 does not apply by reason of an event within subsection (5) if by virtue of the event an amount counts as employment income of A in respect of A's employment with B.

(5) The events within this subsection are—

(a) a chargeable event for the purposes of section 426, 438 or 476,

(b) an event which gives rise to the discharge of a notional loan for the purposes of section 446U, or

(c) a disposal to which Chapter 3D of Part 7 applies.

(6) Chapter 2 does not apply by reason of an event to which subsection (4) would apply apart from section 421B(6), F4 ... 429, [F5 430A(5)(b),] 443F6 ... or 477(2) or apart from an election under section 430 or 431.

(7) Subsection (11) applies if there is an acquisition of an asset within section 554C(4)(a) or (b) (“the relevant asset”) and—

(a) relevant consideration is given by A for the relevant asset of an amount equal to or greater than the market value of the relevant asset at the time of the acquisition, or

(b) ignoring any relevant consideration given for the relevant asset, the acquisition gives rise (or would give rise) to earnings of A within Chapter 1 of Part 3 [F7 , or an amount treated under section 226A as earnings of A,] from A's employment with B—

(i) the amount of which is equal to or greater than the market value of the relevant asset at the time of the acquisition, and

(ii) which are not exempt income.

(8) In subsection (7) “relevant consideration”—

(a) means consideration—

(i) which is given before, or at or about, the time of the acquisition, and

(ii) which is money or money's worth, but

(b) does not include—

(i) a promise to do anything, or

(ii) the performance of any duties of, or in connection with, an employment.

(9) If section 437(1) or 452(1) applies in relation to the acquisition, or would apply if Chapter 3 or 4A of Part 7 (as the case may be) applied in relation to the acquisition, in subsection (7) references to the market value of the relevant asset are to be read as references to that value determined on the basis mentioned in section 437(1) or 452(1) (as the case may be).

(10) Subsection (11) also applies if—

(a) there is an acquisition of an asset within section 554C(4)(a) or (b) (“the relevant asset”),

(b) the acquisition is pursuant to an employment-related securities option (within the meaning of Chapter 5 of Part 7F8 ...) acquired by reason of A's employment, or former or prospective employment, with B, and

(c) the acquisition is a chargeable event for the purposes of section 476 F9 ....

(11) Chapter 2 does not apply by reason of a relevant step taken after the acquisition if—

(a) the subject of the relevant step is the relevant asset, and

(b) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(12) In subsections (7) to (11) “acquisition” is to be read in accordance with section 421B(2)(a).

(13) Chapter 2 does not apply by reason of a relevant step within section 554C(1)(a) taken by a person if—

(a) the payment of the sum of money is by way of a loan (“the relevant loan”),

(b) the relevant loan is made and used solely for the purpose of enabling A to exercise an employment-related securities option (within the meaning of Chapter 5 of Part 7),

(c) the exercise of the option by A gives rise to employment income of A in respect of A's employment with B—

(i) which is chargeable to income tax or would be chargeable apart from [F10 Chapter 5B of Part 2], or

(ii) which is exempt income, and

(d) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.

(14) Subsection (15) applies if—

(a) apart from subsection (13), Chapter 2 would apply by reason of the relevant step mentioned in that subsection, and

(b) by the end of the relevant period, the relevant loan has not been fully repaid.

(15) This Part has effect as if a relevant step within section 554C(1)(a) were taken at the end of the relevant period—

(a) the subject of which is a sum of money of an amount equal to the outstanding amount of the relevant loan as at the end of the relevant period,

(b) in relation to which the relevant person (within the meaning of section 554C(1)) is the person to whom the relevant loan is made, and

(c) by reason of which Chapter 2 is to apply.

(16) In subsections (14) and (15) “the relevant period” means the period of 40 days starting with the day on which the relevant step mentioned in subsection (13) is taken.

[F11 (17) See paragraph 31 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is made for the purpose of enabling the exercise of an employment-related securities option and the relevant step is within paragraph 1 of that Schedule.]]

Textual Amendments

F1 Pt. 7A inserted (with effect in accordance with Sch. 2 paras. 52-59 of the amending Act) by Finance Act 2011 (c. 11), Sch. 2 para. 1

F2 Words in s. 554N(1)(b) omitted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 9 paras. 20(2), 47

F3 Words in s. 554N(2)(b) omitted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 9 paras. 20(3), 47

F4 Word in s. 554N(6) omitted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 9 paras. 20(4)(a), 47

F5 Word in s. 554N(6) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 9 para. 38

F6 Word in s. 554N(6) omitted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 9 paras. 20(4)(b), 47

F7 Words in s. 554N(7)(b) inserted (1.9.2013) by Finance Act 2013 (c. 29), Sch. 23 paras. 15, 38; S.I. 2013/1755, art. 2

F8 Words in s. 554N(10)(b) omitted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 9 paras. 20(5)(a), 47

F9 Words in s. 554N(10)(c) omitted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 9 paras. 20(5)(b), 47

F10 Words in s. 554N(13)(c)(i) substituted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by Finance Act 2014 (c. 26), Sch. 9 paras. 20(6), 47

F11 S. 554N(17) inserted (16.11.2017) by Finance (No. 2) Act 2017 (c. 32), Sch. 11 para. 32