Finance (No. 3) Bill (HC Bill 200)

(ii) any relevant income in relation to any of the
earmarked shares mentioned in sub-paragraph (i)
(see subsection (13)), and

(b) by reason of which Chapter 2 is to apply (subject only to
35section 554A(4)).

(10) This subsection applies to any earmarked shares if—

(a) A receives the shares before the end of the vesting date, and

(b) the receipt of the shares by A gives rise to employment
income of A which is chargeable to income tax or which is
40exempt income.

(11) This subsection applies to any earmarked shares if—

(a) the sum of money mentioned in subsection (1)(a)(ii) (or a part
of it) is paid to A before the end of the vesting date,

(b) the payment of the sum to A gives rise to employment
45income of A which is chargeable to income tax or which is
exempt income, and

(c) the payment represents the proceeds of the disposal of the
shares, or the payment is made from another source and,

correspondingly, the shares are no longer held by any person
in relation to the award.

(12) This subsection applies to any earmarked shares if—

(a) before the end of the vesting date, the award (or any part of
5it) is revoked in accordance with the deferred award terms,
and

(b) correspondingly, the shares are no longer held by any person
in relation to the award.

(13) In subsections (5)(a)(ii), (7)(a)(ii) and (9)(a)(ii) “relevant income”, in
10relation to any earmarked shares, means any income—

(a) which, before the relevant step is treated as being taken by
subsection (5), (7) or (9) (as the case may be)—

(i) arises (directly or indirectly) from the shares, and

(ii) is the subject of a relevant step within section 554B
15taken by P by reason of which Chapter 2 would apply
apart from section 554Q, and

(b) which, at the time the relevant step is treated as being taken,
continues to be held by or on behalf of P on the basis
mentioned in section 554B(1)(a) or (b).

554K 20 Exclusions: earmarking for employee share schemes (2)

(1) This 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) 25relevant shares, or

(ii) a 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 would not be the provision of
30relevant benefits,

(c) the relevant shares would be—

(i) shares (including stock) in, or

(ii) instruments within paragraph (b) of the definition of
“relevant shares” in section 554I(4) issued by,

35a trading company or a company which controls a trading
company,

(d) the award would be on terms the main purpose of which is to
ensure—

(i) that the relevant shares are received, or

(ii) 40that the sum of money is paid,

only if a specified exit event, or an exit event within a
specified description, occurs, and

(e) as at the time the award is made, there would be a reasonable
chance that the specified exit event, or an exit event within
45the specified description, will occur.

(2) Chapter 2 does not apply by reason of a relevant step within section
554B (by reason of which it would otherwise apply) taken by a
person (“P”) if—