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- Point in Time (19/02/2008)
- Original (As enacted)
Version Superseded: 21/07/2008
Point in time view as at 19/02/2008.
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Section 141
1(1)This Schedule provides for corporation tax relief for a company where a person—U.K.
(a)acquires shares by reason of his, or another person's, employment with that company (an “ ”: see Part 2 of this Schedule), or
(b)obtains by reason of his, or another person's, employment with that company an option to acquire shares and acquires shares [F1pursuant to] that option (the “grant of an option”: see Part 3 of this Schedule).
[F2(2)Part 4 of this Schedule makes further provision for cases where the shares acquired are restricted shares.
(2A)Part 4A of this Schedule makes further provision for cases where the shares acquired are convertible shares.]
(3)In this Schedule—
“the employing company” means the company mentioned in sub-paragraph (1);
“the recipient” means the person acquiring the shares or obtaining the option; and
“the employee” means the person by reason of whose employment the shares are acquired or the option is granted.
Textual Amendments
F1Words in Sch. 23 para. 1(1)(b) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 60(2)(4); S.I. 2003/1997, art. 2
F2Sch. 23 para. 1(2)(2A) substituted for Sch. 23 para. 1(2) (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 60(3)(5); S.I. 2003/1997, art. 2
2U.K.Relief under this Schedule is available only if the requirements of this Schedule are met as to—
(a)the business for the purposes of which the award or grant is made (paragraph 3);
(b)the kind of shares acquired (paragraph 4);
(c)the company whose shares are acquired (paragraph 6 or 12); and
(d)the income tax position of the employee (paragraph 7, 14 or 20).
3(1)The business for the purposes of which the award or grant is made must—U.K.
(a)be carried on by the employing company, and
(b)be within the charge to corporation tax.
(2)A business is within the charge to corporation tax if, or to the extent that, it is carried on by a company that is within the charge to corporation tax in respect of the profits of the business.
4(1)The shares acquired must meet the following requirements.U.K.
(2)They must be ordinary shares that are fully paid-up and not redeemable.
(3)They must be—
(a)shares of a class listed on a recognised stock exchange, or
(b)shares in a company that is not under the control of another company, or
(c)shares in a company that is under the control of a company (other than a close company or a company that if resident in the United Kingdom would be a close company) whose shares are listed on a recognised stock exchange.
5(1)The provisions of this Part of this Schedule apply in the case of an award of shares.U.K.
[F3(2)Where the shares acquired are restricted shares, the provisions of this Part have effect subject to the provisions of Part 4 of this Schedule.
(3)Where the shares acquired are convertible shares, the provisions of this Part have effect subject to the provisions of Part 4A of this Schedule.]
Textual Amendments
F3Sch. 23 para. 5(2)(3) substituted for Sch. 23 para. 5(2) (with effect in accordance with Sch. 22 paras. 68(2), 69(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 61; S.I. 2003/1997, art. 2
6(1)The shares acquired must be shares in—U.K.
(a)the employing company; or
(b)a company that, at the time of the award, is a parent company in relation to the employing company; or
(c)a company that, at the time of the award, is a member of a consortium that owns the employing company or a company within paragraph (b); or
(d)where at the time of the award the employing company or a company within paragraph (b) is a member of a consortium that owns another company (C), a company that at that time—
(i)is a member of the consortium or a parent company in relation to a member of the consortium, and
(ii)is also a member of the same commercial association of companies as C.
7(1)It must be the case that the employee—U.K.
(a)is subject to a charge to income tax under the Income Tax (Earnings and Pensions) Act 2003 (c. 1) in respect of the award, or
(b)would be subject to such a charge if the conditions specified in sub-paragraph (2) were met.
(2)The conditions mentioned in sub-paragraph (1)(b) are—
(a)that the employee was resident and ordinarily resident in the United Kingdom at all material times, and
(b)that the duties of the employment by reason of which the award was made were performed in the United Kingdom at all material times.
[F4(3)It must be the case that section 446UA of the Income Tax (Earnings and Pensions) Act 2003 does not operate in relation to the shares.]
Textual Amendments
F4Sch. 23 para. 7(3) inserted (with effect in accordance with Sch. 2 para. 20(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 20(2)
8(1)The amount of the relief is equal to the difference between—U.K.
(a)the market value of the shares at the time of the award, and
(b)the total amount or value of any consideration given, by the recipient or another, in respect of the shares.
(2)The consideration mentioned in sub-paragraph (1)(b) does not include the performance of any duties of, or in connection with, the employee’s employment with the employing company.
(3)A just and reasonable apportionment shall be made for the purposes of this paragraph of any consideration given partly in respect of the shares and partly in respect of other matters.
(4)If the award was made partly for the purposes of a business meeting the requirements of paragraph 3 (business must be within the charge to corporation tax) and partly for the purposes of a business in relation to which those requirements are not met, the amount of the relief shall be reduced to such extent as is just and reasonable.
9(1)The amount of the relief is allowed as a deduction in computing for the purposes of corporation tax the profits of the business for the purposes of which the award was made.U.K.
[F5(2)If the company carrying on that business is a company with investment business, the amount of the relief is treated as expenses of management for the purposes of section 75 of the Taxes Act 1988.]
[F6(3)If the company carrying on that business is an insurance company carrying on life assurance business, the amount of the relief shall be treated as expenses payable falling to be brought into account at Step 1 in section 76(7) of the Taxes Act 1988.]
(4)If the award was made for the purposes of more than one business within the charge to corporation tax, the amount of the deduction must be apportioned between them on a just and reasonable basis.
Textual Amendments
F5Sch. 23 para. 9(2) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 69(2)
F6Sch. 23 para. 9(3) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 69(3)
10(1)The relief is given for the accounting period in which the recipient acquires the shares.U.K.
(2)The time when the shares are acquired is when the recipient acquires a beneficial interest in the shares and not, if different, the time the shares are conveyed or transferred.
11(1)The provisions of this Part of this Schedule apply in the case of the grant of an option to acquire shares.U.K.
[F7(2)Where the shares acquired pursuant to the option are restricted shares, the provisions of this Part have effect subject to the provisions of Part 4 of this Schedule.
(3)Where the shares acquired pursuant to the option are convertible shares, the provisions of this Part have effect subject to the provisions of Part 4A of this Schedule.]
Textual Amendments
F7Sch. 23 para. 11(2)(3) substituted for Sch. 23 para. 11(2) (with effect in accordance with Sch. 22 paras. 68(2), 69(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 62; S.I. 2003/1997, art. 2
12U.K.The company whose shares are acquired [F8pursuant to] the option must be—
(a)the employing company; or
(b)a company that, at the time the option is granted, is a parent company in relation to the employing company; or
(c)a company that, at that time, is a member of a consortium that owns the employing company or a company within paragraph (b); or
(d)where, at that time, the employing company or a company within paragraph (b) is a member of a consortium that owns another company (C), a company that, at that time—
(i)is a member of the consortium or a parent company in relation to a member of the consortium, and
(ii)is also a member of the same commercial association of companies as C; or
(e)a qualifying successor company (see paragraph 13).
Textual Amendments
F8Words in Sch. 23 para. 12 substituted (with effect in accordance with Sch. 22 paras. 68(2), 69(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 63; S.I. 2003/1997, art. 2
13(1)This paragraph applies where—U.K.
(a)there is a takeover of a company whose shares are the subject of a qualifying option,
(b)the holder of the option, by agreement with the acquiring company, releases his rights under that option (“the old option”) in consideration of the grant to him of another option (“the new option”), and
(c)the new option relates to shares in a qualifying company.
(2)Where those conditions are met—
(a)the company whose shares are the subject of the new option is a qualifying successor company for the purposes of paragraph 12 (requirement as to company whose shares are acquired),
(b)shares acquired [F9pursuant to] the new option are treated for the purposes of this Schedule as if they had been acquired [F9pursuant to] the old option, and
[F10(c)in determining the amount of relief—
(i)any consideration given in respect of the grant of the new option is treated as if it had been given in respect of the grant of the old option, and
(ii)any consideration given in respect of the acquisition of shares pursuant to the new option is treated as if it had been given in respect of the acquisition of shares pursuant to the old option.]
(3)For the purposes of this paragraph—
(a)there is a takeover of a company where another company (“the acquiring company”) acquires control of it; and
(b)an option is a “qualifying option” if the requirements of paragraph 12 would be met in relation to [F11the shares acquired pursuant to it].
(4)The following are qualifying companies for the purposes of this paragraph—
(a)the acquiring company;
(b)a company that, at the time of the takeover, is a parent company in relation to the acquiring company;
(c)a company that, at that time, is a member of a consortium that owns the acquiring company or a company within paragraph (b);
(d)where, at that time, the acquiring company or a company within paragraph (b) is a member of a consortium that owns another company (C), a company that, at that time—
(i)is a member of the consortium or a parent company in relation to a member of the consortium, and
(ii)is also a member of the same commercial association of companies as C.
Textual Amendments
F9Words in Sch. 23 para. 13(2)(b) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 64(2)(5); S.I. 2003/1997, art. 2
F10Sch. 23 para. 13(2)(c) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 64(3)(5); S.I. 2003/1997, art. 2
F11Words in Sch. 23 para. 13(3)(b) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 64(4)(5); S.I. 2003/1997, art. 2
Textual Amendments
F12Sch. 23 para. 14 and crossheading substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 65; S.I. 2003/1997, art. 2
14(1)It must be the case that the acquisition of shares pursuant to the option—U.K.
(a)is a chargeable event in relation to the employee for the purposes of section 476 of the Income Tax (Earnings and Pensions) Act 2003 (whether or not an amount counts as employment income by virtue of that event), or
(b)would be such a chargeable event in relation to the employee if the conditions specified in sub-paragraph (2) were met.
(2)The conditions mentioned in sub-paragraph (1)(b) are—
(a)that the employee was resident and ordinarily resident in the United Kingdom at all material times, and
(b)that the duties of the employment by reason of which the option was granted were performed in the United Kingdom at all material times.]
15(1)The amount of the relief is equal to the difference between—U.K.
(a)the market value of the shares at the time [F13they are acquired pursuant to the option], and
(b)the total amount or value of any consideration given, by the recipient or another, in respect of the grant [F14of the option or the acquisition of the shares pursuant to] the option.
(2)The consideration mentioned in sub-paragraph (1)(b) does not include—
(a)the performance of any duties of, or in connection with, the employee’s employment with the employing company, or
(b)any amount paid or payable by the employee in pursuance of—
(i)an agreement within paragraph 3A(2) of Schedule 1 to the Contributions and Benefits Act (agreement for recovery from earner of secondary Class 1 contributions in respect of share option gain), or
(ii)an election under paragraph 3B of that Schedule (election transferring to earner liability for secondary Class 1 contributions in respect of share option gain).
(3)A just and reasonable apportionment shall be made for the purposes of this paragraph of any consideration given partly in respect of the grant [F15of the option or the acquisition of the shares pursuant to] the option and partly in respect of other matters.
(4)If the option was granted partly for the purposes of a business meeting the requirements of paragraph 3 (business must be within the charge to corporation tax) and partly for the purposes of a business in relation to which those requirements are not met, the amount of the relief shall be reduced to such extent as is just and reasonable.
Textual Amendments
F13Words in Sch. 23 para. 15(1) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 66(2)(a)(4); S.I. 2003/1997, art. 2
F14Words in Sch. 23 para. 15(1) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 66(2)(b)(4); S.I. 2003/1997, art. 2
F15Words in Sch. 23 para. 15(3) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 66(3)(4); S.I. 2003/1997, art. 2
16(1)The amount of the relief is allowed as a deduction in computing for the purposes of corporation tax the profits of the business for the purposes of which the option was granted.U.K.
[F16(2)If the company carrying on that business is a company with investment business the amount of the relief is treated as expenses of management for the purposes of section 75 of the Taxes Act 1988.]
[F17(3)If the company carrying on that business is an insurance company carrying on life assurance business, the amount of the relief shall be treated as expenses payable to be brought into account at Step 1 in section 76(7) of the Taxes Act 1988.]
(4)If the option was granted for the purposes of more than one business within the charge to corporation tax, the amount of the deduction must be apportioned between them on a just and reasonable basis.
Textual Amendments
F16Sch. 23 para. 16(2) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 70(2)
F17Sch. 23 para. 16(3) substituted (with effect in accordance with art. 1(2) of the amending S.I.) by The Finance Act 2004, Sections 38 to 40 and 45 and Schedule 6 (Consequential Amendment of Enactments) Order 2004 (S.I. 2004/2310), art. 1(2), Sch. para. 70(3)
17(1)The relief is given for the accounting period in which the shares are acquired [F18pursuant to] the option.U.K.
(2)The time when the shares are acquired is when the recipient acquires a beneficial interest in the shares and not, if different, the time the shares are conveyed or transferred.
Textual Amendments
F18Words in Sch. 23 para. 17(1) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 67; S.I. 2003/1997, art. 2
Textual Amendments
F19Sch. 23 Pt. 4 substituted (with effect in accordance with Sch. 22 para. 68(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 68(1); S.I. 2003/1997, art. 2
18In the case of—
(a)an award of restricted shares, or
(b)the acquisition pursuant to an option of restricted shares,
the provisions of Part 2 or 3 have effect subject to the provisions of this Part of this Schedule.
19Shares are “restricted shares” for the purposes of this Schedule if they are restricted securities, or a restricted interest in securities, for the purposes of Chapter 2 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (see sections 423 and 424 of that Act).
20(1)Where the recipient acquires restricted shares, this paragraph applies in place of paragraph 7 (income tax position of the employee).
(2)It must be the case that the employee —
(a)either—
(i)is subject to a charge to income tax under Chapter 1 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003 in respect of the award, or
(ii)is not subject to such a charge but will be subject to a charge to income tax under the Income Tax (Earnings and Pensions) Act 2003 by virtue of section 426 of that Act on the occurrence of an event in relation to the shares that is a chargeable event for the purposes of that section, or
(b)would be within paragraph (a) if the conditions specified in sub-paragraph (4) were met.
(3)Where but for the death of the employee sub-paragraph (2)(a)(ii) would apply in relation to restricted shares acquired under an award of shares, it is to be treated as applying in relation to the restricted shares.
(4)The conditions mentioned in sub-paragraph (2)(b) are—
(a)that the employee was resident and ordinarily resident in the United Kingdom at all material times, and
(b)that the duties of the employment by reason of which the award was made or the option was granted were performed in the United Kingdom at all material times.
21(1)Where the recipient acquires restricted shares, this paragraph applies in place of paragraph 8 or 15 (amount of relief).
(2)Relief is available—
(a)on the award of the shares or, where they are acquired pursuant to an option, on that acquisition,
(b)on any event that is a chargeable event in relation to the shares for the purposes of section 426 of the Income Tax (Earnings and Pensions) Act 2003,
(c)on the death of the employee.
(3)The amount of the relief on the award of the shares is equal to the amount that constitutes earnings from the employee’s employment under Chapter 1 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003 in respect of the award.
(4)The amount of the relief on the acquisition of the shares pursuant to the option is equal to the amount that counts as employment income of the employee under section 476 of the Income Tax (Earnings and Pensions) Act 2003 in respect of the acquisition, F20.... [F21No account shall be taken for this purpose of any relief under section 481 or 482 of that Act (relief for secondary Class 1 contributions or special contribution met by employee).]
[F22(4A)But if the option is a qualifying option, the amount mentioned in sub-paragraph (4) is increased by (or, if that amount is nil, is taken to be) the amount equal to any difference between—
(a)the amount that would have counted as employment income of the employee under section 476 of the Income Tax (Earnings and Pensions) Act 2003 in respect of the acquisition apart from the EMI code, and
(b)the amount (if any) that in fact counts as such income in accordance with the EMI code.]
(5)Where restricted shares acquired as mentioned in sub-paragraph (3) or (4) are also convertible shares, the total amount of the relief in respect of the acquisition is whichever is the greater of—
(a)in the case of an award of shares, the amounts mentioned in sub-paragraph (3) and paragraph 22C(3), and
(b)in the case of an acquisition of shares pursuant to an option, the amounts mentioned in sub-paragraph (4) and paragraph 22C(4).
(6)The amount of the relief on an event that is a chargeable event for the purposes of section 426 of the Income Tax (Earnings and Pensions) Act 2003 is equal to the amount that counts as employment income of the employee under that section in respect of that event. [F23No account shall be taken for this purpose of any relief under section 428A of that Act (relief for secondary Class 1 contributions met by employee).]
(7)The amount of the relief on the death of the employee is equal to the amount that (disregarding section 428(6) and (9) of the Income Tax (Earnings and Pensions) Act 2003) would count as employment income of the employee if there were a chargeable event within section 427(3)(c) of that Act immediately before the restricted shares ceased to be employment-related securities by virtue of the employee’s death.
(8)Section [F24446E(6)] of the Income Tax (Earnings and Pensions) Act 2003 is to be disregarded in determining the amounts of the reliefs given by sub-paragraphs (6) and (7).
(9)The amount of any non-commercial increase in the market value of the restricted shares since the time of the acquisition is to be disregarded for the purpose of determining the amounts of the reliefs given by sub-paragraphs (6) and (7).
“Non-commercial increase” has the same meaning as in Chapter 3B of Part 7 of the Income Tax (Earnings and Pensions) Act 2003.
(10)If the award or grant was made partly for the purposes of a business meeting the requirements of paragraph 3 (business must be within the charge to corporation tax) and partly for the purposes of a business in relation to which those requirements are not met, the amount of the relief shall be reduced to such extent as is just and reasonable.
(11)Where the employee—
(a)is not subject to a charge to income tax mentioned in sub-paragraph (3), (4) or (6), or would not be subject to the charge to income tax mentioned in sub-paragraph (7), but
(b)would be subject to such a charge if the conditions specified in paragraph 20(4) were met,
the amount of the relief is to be taken to be the amount that would be the amount of the relief if those conditions were met.
Textual Amendments
F20Words in Sch. 23 para. 21(4) repealed (1.9.2004) by Finance Act 2004 (c. 12), s. 85(2), Sch. 16 para. 5(2)(a), Sch. 42 Pt. 2(10) (with Sch. 16 para. 5(6)); S.I. 2004/1945, art. 2
F21Words in Sch. 23 para. 21(4) added (1.9.2004) by Finance Act 2004 (c. 12), s. 85(2), Sch. 16 para. 5(2)(b) (with Sch. 16 para. 5(6)); S.I. 2004/1945, art. 2
F22Sch. 23 para. 21(4A) inserted (with application in accordance with s. 93(6) of the amending Act) by Finance Act 2006 (c. 25), s. 93(2)
F23Words in Sch. 23 para. 21(6) added (1.9.2004) by Finance Act 2004 (c. 12), s. 85(2), Sch. 16 para. 5(3) (with Sch. 16 para. 5(6)); S.I. 2004/1945, art. 2
F24Word in Sch. 23 para. 21(8) substituted (retrospective to 7.5.2004) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 20(3)(7)
22(1)Where the recipient acquires restricted shares, this paragraph applies in place of paragraph 10 or 17 (timing of relief).
(2)The relief mentioned in paragraph 21(3) is given for the accounting period in which the recipient acquires the restricted shares pursuant to the award.
(3)The relief mentioned in paragraph 21(4) is given for the accounting period in which the recipient acquires the restricted shares pursuant to the option.
(4)The time when the shares are acquired is when the recipient acquires a beneficial interest in the shares and not, if different, the time the shares are conveyed or transferred.
(5)The relief mentioned in paragraph 21(6) is given for the accounting period in which the chargeable event takes place.
(6)The relief mentioned in paragraph 21(7) is given for the accounting period in which the employee dies.]
Textual Amendments
F25Sch. 23 Pt. 4A inserted (with effect in accordance with Sch. 22 para. 69(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 69(1); S.I. 2003/1997, art. 2
22AIn the case of—
(a)an award of convertible shares, or
(b)the acquisition pursuant to an option of convertible shares,
the provisions of Part 2 or 3 have effect subject to the provisions of this Part of this Schedule.
22B(1)Shares are “convertible shares” for the purposes of this Schedule if they are convertible securities, or an interest in convertible securities.
(2)But convertible securities which are not shares, or an interest in convertible securities which are not shares, are to be taken to be convertible shares for the purposes of this Schedule as it applies in relation to the reliefs given by paragraph 22C(6) and (7).
(3)In this paragraph “convertible securities” has the same meaning as in Chapter 3 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (see section 436 of that Act).
22C(1)Where the recipient acquires convertible shares, this paragraph applies in place of paragraph 8 or 15 (amount of relief).
(2)Relief is available—
(a)on the award of the shares or, where they are acquired pursuant to an option, on that acquisition,
(b)on any event that is a chargeable event in relation to the convertible shares,
(c)on the death of the employee.
(3)The amount of the relief on the award of the shares is equal to the amount that constitutes earnings from the employee’s employment under Chapter 1 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (as modified by section 437 of that Act) in respect of the award.
(4)The amount of the relief on the acquisition of the shares pursuant to an option is equal to the amount that counts as employment income of the employee under section 476 of the Income Tax (Earnings and Pensions) Act 2003 (as modified by section 437 of that Act) in respect of the acquisition, F26... [F27No account shall be taken for this purpose of any relief under section 481 or 482 of that Act (relief for secondary Class 1 contributions or special contribution met by employee).].
[F28(4ZA)But if the option is a qualifying option, the amount mentioned in sub-paragraph (4) is increased by (or, if that amount is nil, is taken to be) the amount equal to any difference between—
(a)the amount that would have counted as employment income of the employee under section 476 of the Income Tax (Earnings and Pensions) Act 2003 (as modified by section 437 of that Act) in respect of the acquisition apart from the EMI code, and
(b)the amount (if any) that in fact counts as such income in accordance with the EMI code.]
[F29(4A)Subsections (2) and (3) of section 437 of the Income Tax (Earnings and Pensions) Act 2003 are to be disregarded in determining the amounts mentioned in sub-paragraphs (3) and (4).]
(5)Where convertible shares acquired as mentioned in sub-paragraph (3) or (4) are also restricted shares, the total amount of the relief in respect of the acquisition is whichever is the greater of—
(a)in the case of an award of shares, the amounts mentioned in sub-paragraph (3) and paragraph 21(3), and
(b)in the case of an acquisition of shares pursuant to an option, the amounts mentioned in sub-paragraph (4) and paragraph 21(4).
(6)The amount of the relief on an event that is a chargeable event in relation to the convertible shares is equal to the amount that counts as employment income of the employee in respect of that event. [F30No account shall be taken for this purpose of any relief under section 442A of that Act (relief for secondary Class 1 contributions met by employee).]
(7)The amount of the relief on the death of the employee is equal to the amount that would have counted as employment income of the employee in relation to the first event following the employee’s death which would have been a chargeable event were the employee still alive.
(8)Sections 446G and 446H of the Income Tax (Earnings and Pensions) Act 2003 are to be disregarded in determining the amounts of the reliefs given by sub-paragraphs (6) and (7).
(9)If the award or grant was made partly for the purposes of a business meeting the requirements of paragraph 3 (business must be within the charge to corporation tax) and partly for the purposes of a business in relation to which those requirements are not met, the amount of the relief shall be reduced to such extent as is just and reasonable.
(10)Where the employee—
(a)is not subject to a charge to income tax mentioned in sub-paragraph (3), (4) or (6), or would not be subject to the charge to income tax mentioned in sub-paragraph (7), but
(b)would be subject to such a charge if the conditions specified in paragraph 7(2) or 14(2) were met,
the amount of the relief is to be taken to be the amount that would be the amount of the relief if those conditions were met.
(11)In this paragraph and paragraph 22D “chargeable event” means an event that is a chargeable event in relation to the convertible shares within section 439(3)(a) of the Income Tax (Employment and Pensions) Act 2003; but a conversion of the convertible shares into anything other than shares which—
(a)meet the requirements of paragraph 4, and
(b)would meet the requirements of paragraph 6 if they had been acquired by an award of shares,
is not a chargeable event for the purposes of this paragraph.
Textual Amendments
F26Words in Sch. 23 para. 22C(4) repealed (1.9.2004) by Finance Act 2004 (c. 12), s. 85(2), Sch. 16 para. 5(4)(a), Sch. 42 Pt. 2(10) (with Sch. 16 para. 5(6)); S.I. 2004/1945, art. 2
F27Words in Sch. 23 para. 22C(4) added (1.9.2004) by Finance Act 2004 (c. 12), s. 85(2), Sch. 16 para. 5(4)(b) (with Sch. 16 para. 5(6)); S.I. 2004/1945, art. 2
F28Sch. 23 para. 22C(4ZA) inserted (with application in accordance with s. 93(6) of the amending Act) by Finance Act 2006 (c. 25), s. 93(3)
F29Sch. 23 para. 22C(4A) inserted (with effect in accordance with Sch. 2 para. 20(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 20(4)
F30Words in Sch. 23 para. 22C(6) added (1.9.2004) by Finance Act 2004 (c. 12), s. 85(2), Sch. 16 para. 5(5) (with Sch. 16 para. 5(6)); S.I. 2004/1945, art. 2
22D(1)Where the recipient acquires convertible shares, this paragraph applies in place of paragraph 10 or 17 (timing of relief).
(2)The relief mentioned in paragraph 22C(3) is given for the accounting period in which the recipient acquires the convertible shares under the award.
(3)The relief mentioned in paragraph 22C(4) is given for the accounting period in which the recipient acquires the convertible shares pursuant to the option.
(4)The time when shares are acquired is when the recipient acquires a beneficial interest in the shares and not, if different, the time the shares are conveyed or transferred.
(5)The relief mentioned in paragraph 22C(6) is given for the accounting period in which the chargeable event takes place.
(6)The relief mentioned in paragraph 22C(7) is given for the accounting period in which the event takes place which would have been a chargeable event but for the death of the employee.]
23(1)This paragraph applies where—U.K.
(a)between the time when an award of shares, or the grant of an option to acquire shares, is made and the time of the relief-triggering event for those shares, there is a transfer of the whole, or substantially the whole, of the business for the purposes of which the award or grant was made (“the relevant business”),
(b)the transfer, or each of them if there is more than one, is a qualifying transfer, and
(c)as a result of the transfer or transfers, the whole or substantially the whole of the relevant business is carried on at the time of the relief-triggering event by a different company (“the successor company”) or by different companies (“the successor companies”) from the one by which it was carried on at the time of the award or grant.
(2)For the purposes of sub-paragraph (1)—
(a)the “relief-triggering event” for shares is the event that, in accordance with paragraph 10, 17[F31, 22 or 22D], determines the accounting period for which relief under this Schedule is given in respect of them;
(b)there is a “qualifying transfer” of a business (or a part of one) where the business (or part) is transferred from one company to another company that is, or to two or more companies that are, members of the same group.
(3)Where this paragraph applies—
(a)relief under this Schedule in respect of the shares is given to the successor company or, as the case may be, to whichever one of the successor companies is jointly nominated by them, and
(b)the reference in paragraph 1(1)(a) or (b) to “that company” shall be read as a reference to the company by which the relevant business was carried on at the time of the award or grant.
Textual Amendments
F31Words in Sch. 23 para. 23(2)(a) substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 70; S.I. 2003/1997, art. 2
24(1)Deductions available under any of the following provisions of Schedule 4AA to the Taxes Act 1988 (share incentive plans) are to be given in priority to relief under this Schedule—U.K.
(a)paragraph 2 (deduction for providing free or matching shares);
(b)paragraph 3 (deduction for expenses in providing partnership shares);
(c)paragraph 9 or 10(3) (deduction for contribution to plan trust).
(2)No relief is available under this Schedule in respect of shares in relation to which a deduction is allowable, or has been made, under any of those provisions.
25(1)Where relief under this Schedule is [F32(or, apart from paragraph 7(3), would be)] available for any accounting period, no other deduction is allowed for any corporation tax purposes (whether for that or any other period) in respect of the cost of providing the shares.U.K.
This applies to any deduction, whether by the employing company or any other company, in computing chargeable profits for the purposes of corporation tax.
(2)For this purpose the cost of providing the shares—
(a)means expenses directly related to the provision of the shares, and
(b)includes, in a case where the shares are acquired under an employee share scheme, any amount paid or payable by the employing company in respect of the participation of the employee in that scheme.
(3)The following are not regarded as part of the cost of providing the shares—
(a)expenses incurred in establishing the employee share scheme under which the recipient acquires the shares;
(b)expenses incurred in meeting, or contributing to, the costs of administering the scheme;
(c)the costs of borrowing for the purposes of the scheme;
(d)fees, commission, stamp duty and similar incidental expenses of acquiring the shares.
(4)In this paragraph “ ” means any scheme or arrangement for enabling shares to be acquired by reason of employees' employment.
Textual Amendments
F32Words in Sch. 23 para. 25(1) inserted (with effect in accordance with Sch. 2 para. 20(6) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 20(5)
26U.K.For the purposes of this Schedule—
[F33(za)“employment” includes a former or prospective employment,]
(a)references to employment by a company include holding an office with that company, and related expressions have a corresponding meaning, and
(b)members of a company whose affairs are managed by the members themselves are treated as holding an office with the company.
Textual Amendments
F33Sch. 23 para. 26(za) inserted (with effect on and after 16.4.2003) by Finance Act 2003 (c. 14), s. 140, Sch. 22 para. 71
Textual Amendments
F34Sch. 23 para. 27 and cross heading substituted (1.9.2003) by Finance Act 2003 (c. 14), Sch. 22 para. 72; S.I. 2003/1997, art. 2
27(1)Where after the employee’s death shares are acquired by the recipient pursuant to an option obtained by reason of the employee’s employment, the condition in paragraph 14 (income tax position of the employee) is treated as met if it would be met were the employee still alive.U.K.
(2)Where after the death of the recipient shares are acquired pursuant to an option obtained by reason of the employee’s employment, paragraph 1(1)(b) and Parts 3, 4 and 4A of this Schedule, and sub-paragraph (1) above, apply as if the recipient were still alive and the shares were acquired by him.]
28U.K.For the purposes of this Schedule—
(a)a company is a “group company”, in relation to another company, if they are members of the same group,
(b)two companies are members of the same group if, and only if, one is a 51% subsidiary of the other or both are 51% subsidiaries of a third company, and
(c)a company is a “parent company” in relation to another company if that other is its 51% subsidiary.
29(1)For the purposes of this Schedule a company is a member of a consortium owning another company if it is one of five or fewer companies—U.K.
(a)that 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 10% of that capital.
For this purpose the shareholdings of members of a group of companies shall be treated as held by a single company.
(2)In this Schedule a “commercial association of companies” means a company together with such of its associated companies as carry on businesses that are of such a nature that the businesses of the company and the associated companies, taken together, may be reasonably considered to make up a single composite undertaking.
“Associated company” here has the meaning given by section 416 of the Taxes Act 1988.
30U.K.In this Schedule—
“the Contributions and Benefits Act” means—
the Social Security Contributions and Benefits Act 1992 (c. 4), or
the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7);
“control” has the meaning given by section 840 of the Taxes Act 1988;
[F35“the EMI code” has the meaning given by section 527(3) of the Income Tax (Earnings and Pensions) Act 2003;]
F36...
“investment company” has the meaning given by section 130 of that Act;
“market value” has the same meaning as in the Taxation of Chargeable Gains Act 1992 (c. 12) (see sections 272 and 273 of that Act);
“option” includes any right to acquire shares;
“
”, in relation to a company, means shares forming part of the company’s ordinary share capital;[F35“qualifying option” has the same meaning as in the EMI code (see section 527(4) of the Income Tax (Earnings and Pensions) Act 2003);]
“
” includes—an interest in shares, and
stock or an interest in stock.
Textual Amendments
F35Words in Sch. 23 para. 30 inserted (with application in accordance with s. 93(6) of the amending Act) by Finance Act 2006 (c. 25), s. 93(4)
F36Words in Sch. 23 para. 30 repealed (with effect in accordance with Sch. 10 para. 17(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 10 para. 14(11)(a)
31U.K.In this Schedule the following expressions are defined or otherwise explained by the provisions indicated:
commercial association of companies | paragraph 29(2) |
consortium | paragraph 29(1) |
Contributions and Benefits Act | paragraph 30 |
control | paragraph 30 |
[F37convertible shares | paragraph 22B] |
[F38the EMI code | paragraph 30] |
employment and related expressions | paragraph 26 |
the employee | paragraph 1(3) |
employing company | paragraph 1(3) |
group | paragraph 28(b) |
group company | paragraph 28(a) |
F39. . . | F39. . . |
investment company | paragraph 30 |
F39. . . | F39. . . |
market value | paragraph 30 |
option | paragraph 30 |
ordinary shares | paragraph 30 |
parent company | paragraph 28(c) |
[F38qualifying option | paragraph 30] |
the recipient | paragraph 1(3) |
[F37restricted shares | paragraph 19] |
shares | paragraph 30 |
F40. . . | F40. . . |
within the charge to corporation tax (of a business) | paragraph 3(2) |
Textual Amendments
F37Words in Sch. 23 para. 31 inserted (with effect in accordance with Sch. 22 paras. 68(2), 69(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 73(3)(4); S.I. 2003/1997, art. 2
F38Words in Sch. 23 para. 31 inserted (with application in accordance with s. 93(6) of the amending Act) by Finance Act 2006 (c. 25), s. 93(5)
F39Sch. 23 para. 31 entries repealed (with effect in accordance with Sch. 10 para. 17(2) of the amending Act) by Finance Act 2007 (c. 11), Sch. 10 para. 14(11)(b)
F40Sch. 23 para. 31 entry repealed (with effect in accordance with Sch. 22 paras. 68(2), 69(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 73(2)(4), Sch. 43 Pt. 3(4) Note; S.I. 2003/1997, art. 2
32U.K.This Schedule applies to accounting periods of the employing company beginning on or after 1st January 2003.
33(1)Relief is not available under this Schedule in respect of shares to the extent that a deduction is available or has been made in respect of relevant expenses in computing the chargeable profits of the employing company or any other company for the purposes of corporation tax for an accounting period beginning before 1st January 2003.U.K.
(2)In sub-paragraph (1) “relevant expenses” means any expenses referable, directly or indirectly, to the provision of the shares in question.
(3)In relation to any time before the coming into force of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) (“ITEPA”), this Schedule has effect as if—
(a)the references to a charge to income tax under ITEPA were to a charge to income tax under section 19 of the Taxes Act 1988;
(b)the reference in paragraph 14(1)(a)(ii) to section 476 or 477 of ITEPA were to section 135 of the Taxes Act 1988;
(c)the reference in paragraph 14(2)(a) to section 519, 520, 524 or 525 of ITEPA were to section 185(3)(a) of the Taxes Act 1988;
(d)the reference in paragraph 14(2)(b) to section 530 of ITEPA were to paragraph 44 of Schedule 14 to the Finance Act 2000 (c. 17);
(e)the reference in paragraph 20(2)(a) to section 427 of ITEPA were to section 140A of the Taxes Act 1988;
(f)the references in paragraph 24(1) to paragraphs 2, 3, 9 and 10(3) of Schedule 4AA to the Taxes Act 1988 were to paragraphs 106, 107, 112A and 112B(3) respectively of Schedule 8 to the Finance Act 2000 (c. 17).
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