(5) Terms used in subsections (2) to (4) have the same meaning as they
have in Chapter 6, 7 or 8 of Part 7 (as the case may be).

(6) Chapter 2 does not apply by reason of a relevant step taken by a
person (“P”) if—

(a) 5the relevant step is taken for the sole purpose of—

(i) granting qualifying options under an EMI
arrangement,

(ii) acquiring or holding shares to be provided pursuant
to qualifying options granted under an EMI
10arrangement, or

(iii) providing shares pursuant to qualifying options
granted under an EMI arrangement, and

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

(7) 15But subsection (6) does not apply to the relevant step if, immediately
before or after the step is taken—

(a) the total number of shares of any type held, in relation to the
EMI arrangement, by P and any other persons for purposes
within subsection (6)(a)(i) to (iii), exceeds

(b) 20the maximum number of shares of that type which might
reasonably be expected to be required, in relation to the EMI
arrangement, for those purposes over the period of ten years
starting with the day on which the relevant step is taken.

(8) In subsections (6) and (7) “EMI arrangement” means an arrangement
25under which qualifying options are granted.

(9) Terms used in subsections (6) to (8) have the same meaning as in
Chapter 9 of Part 7.

(10) Subsection (11) applies if—

(a) a person (“P”) takes a relevant step within section 554B by
30reason of which Chapter 2 would apply apart from
subsection (3) or (6), and

(b) at any time (“the relevant time”) the sum of money or asset
(or any part of it) which is the subject of the relevant step—

(i) ceases to be held by or on behalf of P solely for
35purposes within subsection (3)(a) and (b) or (6)(a)(i)
to (iii), but

(ii) continues to be held by or on behalf of P on the basis
mentioned in section 554B(1)(a) or (b).

(11) This Part has effect as if a relevant step within section 554B were
40taken at the relevant time—

(a) the subject of which is the sum of money or asset (or the part
of it) mentioned in subsection (10)(b), and

(b) by reason of which Chapter 2 is to apply (subject only to
section 554A(4)).

(12) 45Chapter 2 does not apply by reason of a relevant step taken by the
Independent Parliamentary Standards Authority in relation to a
member of the House of Commons.

554F Exclusions: commercial transactions

(1) Chapter 2 does not apply by reason of a relevant step which is the
payment of a sum of money by way of a loan if—

(a) the loan is a loan on ordinary commercial terms within the
5meaning of section 176, ignoring conditions B and C in that
section, and

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

(2) Chapter 2 does not apply by reason of a relevant step taken by a
10person (“P”), which is not the payment of a sum of money by way of
a loan, if—

(a) the step is taken for the sole purpose of a transaction which P
has with A and which P entered into in the ordinary course
of P’s business,

(b) 15a substantial proportion of P’s business involves similar
transactions with members of the public,

(c) the terms on which P entered into the transaction with A are
substantially the same as the terms on which P normally
enters into similar transactions with members of the public,
20and

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

(3) For the purposes of subsection (2)(b) and (c) a transaction is “similar”
if it is of the same or a similar type to the transaction which P has with
25A.

(4) In subsection (2)(b) and (c) “members of the public” means members
of the public at large with whom P deals at arm’s length.

(5) In this section references to A include references to any person linked
with A.

554G 30 Exclusions: transactions under employee benefit packages

(1) Chapter 2 does not apply by reason of a relevant step taken by a
person (“P”) if—

(a) the step is not taken under a pension scheme,

(b) the step is taken for the sole purpose of a transaction which P
35has with A and which P entered into in the ordinary course
of P’s business,

(c) if the step is the payment of a sum of money by way of a
loan—

(i) a substantial proportion of P’s business involves
40making similar loans to members of the public,

(ii) the transaction with A is part of a package of benefits
which is available to a substantial proportion of B’s
employees, and

(iii) subsection (3) does not apply,

(d) 45if the step is not the payment of a sum of money by way of a
loan, the transaction with A is part of a package of benefits
which is available—

(i) to a substantial proportion of B’s employees, or

(ii) to a substantial proportion of those employees of B
whose status as employees of B is comparable with
A’s status as an employee of B (taking into account
(for example) levels of seniority, types of duties and
5levels of remuneration),

(e) the terms on which similar transactions are offered by P
under the package of benefits mentioned in paragraph (c)(ii)
or (d) (as the case may be) are generous enough to enable
substantially all of the employees of B to whom the package
10is available to take advantage of what is offered (if they want
to),

(f) the terms on which P entered into the transaction with A are
substantially the same as the terms on which P normally
enters into similar transactions with employees of B under
15the package of benefits,

(g) if B is a company, a majority of B’s employees to whom the
package of benefits is available do not have a material interest
(as defined in section 68) in B, and

(h) there is no connection (direct or indirect) between the
20relevant step and a tax avoidance arrangement.

(2) For the purposes of subsection (1)(c)(i)—

(a) a loan is “similar” if it is made for the same or similar
purposes as the loan which is the subject of the relevant step,
and

(b) 25“members of the public” means members of the public at
large with whom P deals at arm’s length.

(3) This subsection applies if any feature of the package of benefits
mentioned in subsection (1)(c)(ii) has or is likely to have the effect
that, of the employees of B to whom the package is available, it is
30employees within subsection (4) on whom benefits under the
package will be wholly or mainly conferred.

(4) The employees within this subsection are—

(a) directors,

(b) senior employees,

(c) 35employees who receive, or as a result of the package of
benefits are likely to receive, the higher or highest levels of
remuneration, and

(d) if B is a company and is a member of a group of companies,
any employees not within paragraph (b) or (c) who—

(i) 40are senior employees in the group, or

(ii) receive, or as a result of the package of benefits are
likely to receive, the higher or highest levels of
remuneration in the group.

(5) For the purposes of subsection (1)(e) and (f) a transaction is “similar”
45if it is of the same or a similar type to the transaction which P has with
A.

(6) If the relevant step is not the payment of a sum of money by way of
a loan, in this section references to employees of B are references to
those employees of B whose duties of employment are performed in
50the United Kingdom; and for this purpose duties performed outside

the United Kingdom the performance of which is merely incidental
to the performance of duties in the United Kingdom are to be treated
as performed in the United Kingdom.

(7) In this section (apart from subsection (1)(d)(ii)) references to A
5include references to any person linked with A.

554H Exclusions: earmarking of deferred remuneration

(1) This section applies if—

(a) on a date (“the award date”) A is awarded remuneration
(“the deferred remuneration”) in respect of A’s employment
10with B,

(b) the main purpose of the award is not the provision of relevant
benefits (within the meaning of Chapter 2 of Part 6, but
ignoring section 393B(2)(a)),

(c) the deferred remuneration is awarded on terms (“the
15deferred remuneration terms”) the main purpose of which is
to defer the provision to A of the deferred remuneration to a
specified date (“the vesting date”) which is after the award
date, while providing that the award of the deferred
remuneration is revoked if specified conditions are not met
20on or before the vesting date,

(d) the vesting date is not more than five years after the award
date,

(e) as at the award date, there is a reasonable chance that the
award of the deferred remuneration will be revoked because
25not all the specified conditions will be met on or before the
vesting date,

(f) if the deferred remuneration were to be provided to A by any
person on the award date, that action would, for the purposes
of Part 11, be a payment of PAYE employment income of A
30in respect of A’s employment with B,

(g) before the end of the vesting date, a person (“P”) takes a
relevant step within section 554B by reason of which Chapter
2 would apply apart from this section,

(h) on the taking of the relevant step, the sum of money or asset
35which is the subject of the step represents the deferred
remuneration or any part of it (and nothing else), and

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

(2) In addition to the provision relating to revocation required by
40subsection (1)(c) (which must be included), the deferred
remuneration terms may also provide that the award of the deferred
remuneration is partly revoked if specified conditions are not met on
or before the vesting date.

(3) Chapter 2 does not apply by reason of the relevant step mentioned in
45subsection (1)(g).

(4) In the following subsections “the earmarked deferred remuneration”
means the deferred remuneration so far as, on the taking of the
relevant step mentioned in subsection (1)(g), it is represented by the
sum of money or asset which is the subject of the step as mentioned
50in subsection (1)(h).

(5) Subsection (6) applies if, at any time (“the relevant time”)—

(a) any sum of money or asset held by or on behalf of P on the
basis mentioned in section 554B(1)(a) or (b) which represents
any of the earmarked deferred remuneration ceases to
5represent that earmarked deferred remuneration or a part of
it (because the remuneration is to be provided to A in another
way or its award has been revoked or for any other reason),
but

(b) the sum of money or asset continues to be held by or on
10behalf of P on the basis mentioned in section 554B(1)(a) or (b).

(6) This Part has effect as if a relevant step within section 554B were
taken at the relevant time—

(a) the subject of which is—

(i) the sum of money or asset mentioned in subsection
15(5), and

(ii) a just and reasonable proportion of any relevant
income (see subsection (12)), and

(b) by reason of which Chapter 2 is to apply (subject only to
section 554A(4)).

(7) 20Subsection (8) applies if neither subsection (10) nor subsection (11)
applies to the earmarked deferred remuneration or to a part of it.

(8) This Part has effect as if a relevant step within section 554B were
taken at the end of the vesting date—

(a) the subject of which is—

(i) 25a sum of money of the notional PAYE amount, and

(ii) a just and reasonable proportion of any relevant
income (see subsection (12)), and

(b) by reason of which Chapter 2 is to apply (subject only to
section 554A(4)).

(9) 30In subsection (8)(a) “the notional PAYE amount” means the amount
which the payment of PAYE employment income would have been
had, as the case may be—

(a) the earmarked deferred remuneration, or

(b) the part of it to which neither subsection (10) nor subsection
35(11) applies,

been provided to A at the end of the vesting date in a way which is,
for the purposes of Part 11, a payment of PAYE employment income
of A in respect of A’s employment with B.

(10) This subsection applies to the earmarked deferred remuneration so
40far as it is provided to A before the end of the vesting date in a way
which is, for the purposes of Part 11, a payment of PAYE
employment income of A in respect of A’s employment with B.

(11) This subsection applies to the earmarked deferred remuneration so
far as, before the end of the vesting date, the award of the earmarked
45deferred remuneration is revoked in accordance with the deferred
remuneration terms.

(12) In subsections (6)(a)(ii) and (8)(a)(ii) “relevant income” means any
income—

(a) which, before the relevant time or the end of the vesting date
(as the case may be)—

(i) arises (directly or indirectly) from a sum of money or
asset held by or on behalf of P representing any of the
5earmarked deferred remuneration, and

(ii) is the subject of a relevant step within section 554B
taken by P by reason of which Chapter 2 would apply
apart from section 554Q, and

(b) which, at the relevant time or the end of the vesting date (as
10the case may be), continues to be held by or on behalf of P on
the basis mentioned in section 554B(1)(a) or (b).

554I Exclusions: introduction to sections 554J to 554M

(1) Sections 554J and 554K are about steps within section 554B taken in
relation to awards of certain shares or securities or of sums of money
15determined by reference to the market value of certain shares or
securities.

(2) Sections 554L and 554M are about steps within section 554B taken in
relation to grants of rights to acquire certain shares or securities or to
receive sums of money determined by reference to the market value
20of certain shares or securities.

(3) Sections 554J to 554M apply only if B is a company.

(4) In those sections—

• “relevant benefits” has the same meaning as in Chapter 2 of Part
  6, but ignoring section 393B(2)(a),

• 25“relevant shares” means—

  (a)

  shares (including stock) in B,

  (b)

  instruments issued by B which are securities for the
  purposes of Chapters 1 to 5 of Part 7 within section
  420(1)(b), or

  (c)

  30units in a collective investment scheme (as defined in
  section 420(2)) managed by B which are securities for
  the purposes of Chapters 1 to 5 of Part 7 within
  section 420(1)(e), and

• “trading company” means a company the business of which
  35consists wholly or mainly in the carrying on of a trade.

(5) If B is a member of a group of companies, in the definition of
“relevant shares” in subsection (4) references to B are to be read as
including references to any other company which is a member of that
group.

(6) 40For the purposes of sections 554K and 554M an exit event occurs if—

(a) shares in the relevant company are admitted to trading on a
stock exchange,

(b) all the shares in the relevant company, or a substantial
proportion of them, are disposed of to persons none of whom
45is connected with any of the persons making any disposal,

(c) if the relevant company is a trading company (as defined in
subsection (4)), the company’s trade, or a substantial

proportion of it, is transferred to a person who is not a
relevant connected person,

(d) the relevant company’s assets, or a substantial proportion of
them, are disposed of to a person who is not a relevant
5connected person,

(e) the winding up of the relevant company starts, or

(f) a person (“P”) who controls the relevant company ceases to
control it, so long as no person connected with P starts to
control it.

(7) 10For the purposes of subsection (6)—

(a) “the relevant company” means—

(i) if the relevant shares mentioned in section
554K(1)(a)(i) or (ii) or 554M(1)(a)(i) or (ii) are shares
(including stock), the company in which they are
15shares, or

(ii) if the relevant shares so mentioned are instruments
within paragraph (b) of the definition of “relevant
shares” in subsection (4), the company by which those
instruments are issued,

(b) 20“relevant connected person” means a person who—

(i) is connected with the relevant company, or

(ii) is a shareholder in the relevant company or is
connected with a shareholder in the relevant
company,

(c) 25the relevant company’s trade, or a substantial proportion of
it, is transferred to another person if—

(i) the relevant company ceases to carry on the trade or
the proportion of it, and

(ii) on that occurring, the other person starts to carry on
30the trade or the proportion of it, and

(d) section 12(7) of CTA 2009 applies for the purpose of
determining when the winding up of the relevant company
starts.

554J Exclusions: earmarking for employee share schemes (1)

(1) 35This section applies if—

(a) there is an arrangement (“B’s employee share scheme”)
under which, in respect of A’s employment with B, an award
may be made to A of—

(i) relevant shares, or

(ii) 40a sum of money the amount of which is to be
determined by reference to the market value of any
relevant shares at the time the sum is to be paid,

(b) the main purpose of the award of the relevant shares or sum
of money would not be the provision of relevant benefits,

(c) 45the award of the relevant shares or sum of money would be
on terms (“the deferred award terms”) the main purpose of
which is to defer the receipt of the shares by A, or the
payment of the sum of money to A, to a specified date (“the
vesting date”) which is after the date (“the award date”) on
50which the award is made, while providing that the award is

revoked if specified conditions are not met on or before the
vesting date,

(d) the vesting date would not be more than ten years after the
award date, and

(e) 5as at the award date, there would be a reasonable chance that
the award of the relevant shares or sum of money will be
revoked because not all the specified conditions will be met
on or before the vesting date.

(2) In addition to the provision relating to revocation required by
10subsection (1)(c) (which must be included), the deferred award terms
may also provide that the award of the relevant shares or sum of
money is partly revoked if specified conditions are not met on or
before the vesting date.

(3) Chapter 2 does not apply by reason of a relevant step within section
15554B (by reason of which it would otherwise apply) taken by a
person (“P”) if—

(a) the subject of the relevant step is relevant shares (“earmarked
shares”) which are earmarked, or otherwise start being held,
solely with a view to the meeting of—

(i) 20an award of relevant shares or a sum of money made
to A under B’s employee share scheme as mentioned
in subsection (1)(a) in relation to which the
requirements of subsection (1)(b) to (e) are met, or

(ii) an award of relevant shares or a sum of money which
25is expected to be made to A under B’s employee share
scheme as mentioned in subsection (1)(a) and in
relation to which the requirements of subsection
(1)(b) to (e) would be met,

(b) the number of relevant shares of any type which are
30earmarked shares does not exceed the maximum number of
relevant shares of that type which might reasonably be
expected to be needed for meeting the award or expected
award, and

(c) there is no connection (direct or indirect) between the
35relevant step and a tax avoidance arrangement.

(4) If the relevant step mentioned in subsection (3) is taken in relation to
an expected award as mentioned in subsection (3)(a)(ii), subsection
(5) applies if—

(a) the award is not made before the end of the date (“the final
40award date”) falling immediately after the period of three
months starting with the date on which P takes the relevant
step, and

(b) as at the end of the final award date, any of the earmarked
shares continue to be held by or on behalf of P solely on the
45basis mentioned in subsection (3)(a).

(5) This Part has effect as if a relevant step within section 554B were
taken at the end of the final award date—

(a) the subject of which is—

(i) the shares which continue to be held as mentioned in
50subsection (4)(b), and

(ii) any relevant income in relation to those shares (see
subsection (13)), and

(b) by reason of which Chapter 2 is to apply (subject only to
section 554A(4)).

(6) 5Subsection (7) applies if, at any time (“the relevant time”)—

(a) any of the earmarked shares cease to be held by or on behalf
of P solely on the basis mentioned in subsection (3)(a), but

(b) the shares continue to be held by or on behalf of P on the basis
mentioned in section 554B(1)(a) or (b).

(7) 10This Part has effect as if a relevant step within section 554B were
taken at the relevant time—

(a) the subject of which is—

(i) the shares mentioned in subsection (6), and

(ii) any relevant income in relation to those shares (see
15subsection (13)), and

(b) by reason of which Chapter 2 is to apply (subject only to
section 554A(4)).

(8) Subsection (9) applies if—

(a) the relevant step mentioned in subsection (3) is taken in
20relation to an award which has been made as mentioned in
subsection (3)(a)(i), or

(b) the relevant step mentioned in subsection (3) is taken in
relation to an expected award as mentioned in subsection
(3)(a)(ii) and the award is made before the end of the final
25award date.

(9) This Part has effect as if a relevant step within section 554B were
taken at the end of the vesting date—

(a) the subject of which is—

(i) any of the earmarked shares to which none of
30subsections (10) to (12) applies, and