Textual Amendments
F1Sch. 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, F2.... [F3No 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).]
[F4(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. [F5No 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 [F6446E(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
F2Words 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
F3Words 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
F4Sch. 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)
F5Words 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
F6Word 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.]