Part 12Other relief for employee share acquisitions
Chapter 5Additional relief in cases involving convertible securities
1030Application of Chapter
(1)
This Chapter applies if relief under Chapter 2 or 3 is available in relation to an acquisition of convertible shares.
(2)
This Chapter also applies if—
(a)
there is an acquisition of convertible securities that are not shares, and
(b)
relief under Chapter 2 or 3 would have been available in relation to the acquisition but for the fact that the securities were not shares in relation to which all the conditions set out in section 1008 or 1016 were met.
(3)
For the purposes of subsections (1) and (2)(b) it does not matter if the amount of relief is calculated or would have been calculated as nil.
(4)
In this Chapter—
“the acquired securities” means the convertible shares mentioned in subsection (1) or the convertible securities mentioned in subsection (2),
“convertible securities” includes an interest in convertible securities, and
“the original relief” means the relief mentioned in subsection (1) or (2)(b).
(5)
If the original relief is or would have been available as a result of section 1015(3) (death of recipient), this Chapter applies as if the recipient were alive and the acquired securities were acquired by the recipient.
(6)
If the original relief is or would have been available as a result of section 1022 (takeover of company whose shares are subject to an option), this Chapter applies as if the acquired securities were acquired pursuant to the qualifying option mentioned in that section.
F11030AApplication of Chapter: employees of overseas companies who take up employment with, or work for, a UK company
(1)
This section applies if—
(a)
a person (“E”) has, or had, an employment (“the overseas employment”) with a non-UK resident company not within the charge to corporation tax (“the overseas company”),
(b)
E or another person acquired convertible securities because of the overseas employment (whether or not pursuant to an option),
(c)
the case is not within section 1030(1) or (2),
(d)
relief under Chapter 2 or 3 would have been available to the overseas company in relation to the acquisition if—
(i)
in a case in which the convertible securities were not shares, they had been shares in relation to which the conditions set out in section 1008 or (as the case may be) 1016 were met, and
(ii)
at all material times, the overseas company had carried on a business within subsection (2) (“a qualifying business”) and the overseas employment had related to that business,
(f)
the UK employment is in relation to a qualifying business carried on by the UK company,
(g)
(h)
because of the UK employment, an amount of employment income of E is charged to tax under ITEPA 2003 in relation to the chargeable event.
For the purposes of paragraph (d) it does not matter if the amount of the relief would have been calculated as nil.
(2)
A business is within this subsection so far as—
(a)
it is carried on by a company, and
(b)
the company is within the charge to corporation tax in relation to the profits of the business or would be but for section 18A.
(3)
A company is a “UK company” if it is a UK resident company or a non-UK resident company within the charge to corporation tax.
(4)
E has a “UK employment” with a UK company if—
(a)
E is employed by the UK company, or
(b)
E is not employed by the UK company but provides, and is obliged to provide, personal service to the UK company, in the course of performing the duties of the overseas employment (in which case, references to the UK employment are to the personal service E provides).
(5)
Relief under this Chapter is available to the UK company as a result of the chargeable event.
(6)
References in this Chapter to the original relief (other than in section 1030B) are to be treated as references to the relief that would have been available as mentioned in subsection (1)(d).
(7)
For the purposes of section 1032(2), references to the employing company in the conditions set out in section 1008 or (as the case may be) 1016 are to be read as references to the overseas company or the UK company.
(8)
In section 1033(3) (amount of relief available on occurrence of chargeable event), the reference to the employee is to be read as a reference to E.
(9)
For the purposes of section 1035(2) (giving relief), as that provision has effect by virtue of subsection (6), in section 1013(2) to (5) or (as the case may be) 1021(2) to (5)—
(a)
references to the employing company are to be treated as references to the UK company,
(b)
the reference to the relevant employment is to be treated as a reference to the UK employment, and
(c)
references to a business within section 1007(2) or (as the case may be) 1015(2) are to be treated as references to a business within subsection (2).
(10)
If, in relation to the chargeable event, the amount of relief available would otherwise be more than the total amount of employment income of E charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(11)
If relief is available to more than one company as a result of the same chargeable event, relief may only be given to one of them in respect of that event.
1030BApplication of Chapter where original relief a consequence of section 1007A, 1015A or 1015B
(1)
This section applies if the original relief is, or would have been, available under—
(a)
Chapter 2 as a consequence of section 1007A, or
(b)
Chapter 3 as a consequence of section 1015A or 1015B.
(2)
If the original relief is, or would have been, available as a consequence of section 1007A or 1015B, subsection (2) of the section concerned applies for the purposes of this Chapter.
(3)
Section 1007A(5), 1015A(4) or (as the case may be) 1015B(5) applies for the purposes of section 1032(2).
(4)
If, in relation to a chargeable event, the amount of relief available would otherwise be more than the total amount of employment income of the employee charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(5)
If relief is available to more than one company as a result of the same chargeable event, relief may only be given to one of them in respect of that event.
(6)
No relief is available as a result of the employee’s death.
1031Additional relief available if shares acquired are convertible shares etc
(1)
Relief under this Chapter is available to the employing company if, after the acquisition of the acquired securities, a chargeable event (see section 1032) occurs in relation to those securities.
(2)
Relief under this Chapter is also available to the employing company if the employee—
(a)
is dead when that acquisition occurs, or
(b)
dies after that acquisition.
(3)
But relief resulting from subsection (2) does not become available until the occurrence of the first event (referred to in this Chapter as “the relief event”) occurring after the employee's death that would have been a chargeable event in relation to the acquired securities had the employee been alive.
(4)
To find out what accounting period the relief is given for and how to calculate the amount of relief, see—
(a)
section 1033 for relief available as a result of the occurrence of a chargeable event, and
(b)
section 1034 for relief available as a result of the employee's death.
Those sections are supplemented by section 1035.
(5)
Section 1036 provides for the relief to be given to a successor company if the qualifying business is transferred by group transfers.
1032Meaning of “chargeable event”
(1)
In this Chapter “chargeable event” means an event that—
(a)
is a chargeable event for the purposes of section 438 of ITEPA 2003,
(b)
is within section 439(3)(a) of ITEPA 2003, and
(c)
is within subsection (2).
(2)
An event is within this subsection if it is the conversion of convertible securities into shares in relation to which—
(a)
if the original relief is or would have been available under Chapter 2, all the conditions set out in section 1008 are met, or
(b)
if the original relief is or would have been available under Chapter 3, all the conditions set out in section 1016 are met (ignoring paragraph (f) of condition 3).
F2(3)
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F2(4)
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F2(5)
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1033Relief available on occurrence of chargeable event
(1)
This section applies in relation to relief available as a result of the occurrence of a chargeable event.
(2)
The relief is given for the accounting period in which the chargeable event occurs.
(3)
The amount of relief is equal to the amount that counts as employment income of the employee under section 438 of ITEPA 2003 in relation to the chargeable event.
(4)
For the purposes of subsection (3) the following are to be ignored—
(a)
any relief under section 442A of ITEPA 2003, and
(b)
sections 446G and 446H of ITEPA 2003.
F3(5)
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1034Relief available following death of employee
(1)
This section applies in relation to relief available as a result of the employee's death.
(2)
The relief is given for the accounting period in which the relief event occurs.
(3)
The amount of relief is equal to the amount that would have counted as employment income of the employee under section 438 of ITEPA 2003 in relation to the relief event had the employee been alive.
(4)
For the purposes of subsection (3) sections 446G and 446H of ITEPA 2003 are to be ignored.
F4(5)
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1035Supplementary provision for purposes of sections 1033 and 1034
(1)
If section 1012 or 1020 (reduction in amount of relief) applies or would have applied in relation to the original relief, that section applies in relation to the relief under this Chapter as it applies or would have applied in relation to the original relief.
(2)
For the purposes of the giving of the relief under this Chapter—
(a)
if the original relief is or would have been available under Chapter 2, apply section 1013(2) to (5), and
(b)
if the original relief is or would have been available under Chapter 3, apply section 1021(2) to (5).
1036Transfer of qualifying business by group transfers
(1)
This section applies in relation to relief to be given under this Chapter if—
(a)
during the interim period (see subsections (5) to (7)), the whole, or substantially the whole, of the qualifying business is transferred, and
(b)
conditions A and B are met.
(2)
Condition A is that—
(a)
the transfer is a group transfer, or
(b)
if there is more than one transfer, all the transfers are group transfers.
(3)
Condition B is that, as a result of the transfer or transfers, at the end of the interim period—
(a)
the whole, or substantially the whole, of the qualifying business is carried on by one company (“the successor company”) only and that company is not the employing company, or
(b)
the whole, or substantially the whole, of the qualifying business is carried on by companies (“the successor companies”) none of which is the employing company.
(4)
The relief is to be given to—
(a)
the successor company, or
(b)
whichever one of the successor companies is nominated by them,
instead of the employing company (and references to the employing company in section 1013(3) and (4) or 1021(3) and (4) (as applied by section 1035(2)) are to be read as references to the company to which the relief is to be given).
(5)
“The interim period” is to be read in accordance with subsections (6) and (7).
(6)
The interim period begins—
(a)
if the original relief is or would have been available under Chapter 2, when the acquired securities are acquired, and
(b)
if the original relief is or would have been available under Chapter 3, when the option is obtained.
(7)
The interim period ends—
(a)
if the relief under this Chapter is available as a result of the occurrence of a chargeable event, when the chargeable event occurs, and
(b)
if the relief under this Chapter is available as a result of the employee's death, when the relief event occurs.