Finance (No. 2) Bill

Session 2012 - 13
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Finance (No. 2) Bill

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
144

38 provision which would have prevented the individual
from acquiring the shares by the exercise of the option, and
(g)
the avoidance of tax or national insurance contributions is not
the main purpose (or one of the main purposes) of any
arrangements under which the option was granted or is
5
exercised.
(3B)
In subsection (3A)(c)(iii), (d)(iii) and (f)(iii) “the takeover offer”
means the takeover offer (as defined in section 974 of the Companies
Act 2006) giving rise to the application of sections 979 to 982 or 983
to 985 of that Act.
10
(3C)
In subsection (3A)(e) “arrangements” includes any plan, scheme,
agreement or understanding, whether or not legally enforceable.
(3D)
A general offer falls within this subsection if it is—
(a)
a general offer to acquire the whole of the issued ordinary
share capital of the relevant company which is made on a
15
condition such that, if it is met, the person making the offer
will have control of the relevant company, or
(b)
a general offer to acquire all the shares in the relevant
company which are of the same class as those acquired by the
exercise of the option.
20
(3E)
For the purposes of subsection (3D)(a) a person is to be treated as
obtaining control of a company if that person and others acting in
concert together obtain control of it.
(3F)
A compromise or arrangement falls within this subsection if it is
applicable to or affects—
25
(a)
all the ordinary share capital of the relevant company or all
the shares of the same class as those acquired by the exercise
of the option, or
(b)
all the shares, or all the shares of that same class, which are
held by a class of shareholders identified otherwise than by
30
reference to their employment or directorships or their
participation in an approved SAYE option scheme.
(3G)
A takeover offer falls within this subsection if—
(a)
it relates to the relevant company, and
(b)
where there is more than one class of share in the relevant
35
company, the class or classes to which it relates is or include
the class of the shares acquired by the exercise of the option.
(3H)
In subsections (3D), (3F) and (3G) “the relevant company” means the
company whose shares are acquired by the exercise of the option.”
22
Part 6 of Schedule 3 (requirements etc relating to share options) is amended
40
as follows.
23    (1)
Paragraph 34 (exercise of options: scheme-related employment ends) is
amended as follows.
      (2)
In sub-paragraph (2)—
(a)
omit the “or” after paragraph (a), and
45

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
145

(b)
after paragraph (b) insert—
“(c)
a relevant transfer within the meaning of the
Transfer of Undertakings (Protection of
Employment) Regulations 2006, or
(d)
if P holds office or is employed in a company which
5
is an associated company (as defined in paragraph
35(4)) of the scheme organiser, that company
ceasing to be an associated company of the scheme
organiser by reason of a change of control (as
determined in accordance with sections 450 and
10
451 of CTA 2010),”.
      (3)
In sub-paragraphs (4) and (5A)(b) for “or (b)” substitute “to (d)”.
      (4)
A SAYE option scheme approved before the day on which this Act is passed
has effect with any modifications needed to reflect the amendments made by
this paragraph.
15
24    (1)
Paragraph 37 (exercise of options: company events) is amended as follows.
      (2)
In sub-paragraph (4) for the words from “proposed” to the end substitute
“applicable to or affecting—
(a)
all the ordinary share capital of the company or all the
shares of the same class as the shares to which the option
20
relates, or
(b)
all the shares, or all the shares of that same class, which are
held by a class of shareholders identified otherwise than
by reference to their employment or directorships or their
participation in an approved SAYE option scheme.”
25
      (3)
A SAYE option scheme approved before the day on which this Act is passed
which contains provision under paragraph 37(1) of Schedule 3 to ITEPA
2003 by reference to paragraph 37(4) has effect with any modifications
needed to reflect the amendment made by sub-paragraph (2).
      (4)
In sub-paragraph (6)—
30
(a)
after “982” insert “or 983 to 985”, and
(b)
after “shareholder” insert “etc”.
      (5)
A SAYE option scheme approved before the day on which this Act is passed
which contains provision under paragraph 37(6) of Schedule 3 to ITEPA
2003 has effect with any modifications needed to reflect the amendments
35
made by sub-paragraph (4).
25    (1)
In Part 7 of Schedule 3 (exercise of share options) in paragraph 38 (exchange
of options on company reorganisation) in sub-paragraph (2)(c)—
(a)
after “982” insert “or 983 to 985”, and
(b)
after “shareholder” insert “etc”.
40
      (2)
A SAYE option scheme approved before the day on which this Act is passed
which contains provision under paragraph 38 of Schedule 3 to ITEPA 2003
has effect with any modifications needed to reflect the amendments made by
this paragraph.

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
146

CSOP schemes
26    (1)
Section 524 (no charge in respect of exercise of option) is amended as
follows.
      (2)
In subsection (2B) for paragraph (a) substitute—
“(a)
has ceased to be in qualifying employment because of—
5
(i)
injury, disability, redundancy or retirement,
(ii)
a relevant transfer within the meaning of the Transfer
of Undertakings (Protection of Employment)
Regulations 2006, or
(iii)
in the case of a group scheme where the qualifying
10
employment is as a director or employee of a
constituent company, that company ceasing to be
controlled by the scheme organiser, and”.
      (3)
After subsection (2B) insert—
“(2BA)
For the purposes of subsection (2B) an individual is in “qualifying
15
employment” if the individual is a full-time director or qualifying
employee (as defined in paragraph 8(2) of Schedule 4) of—
(a)
the scheme organiser, or
(b)
in the case of a group scheme, a constituent company.”
      (4)
In subsection (2C) for “(2B)” substitute “(2B)(a)(i)”.
20
      (5)
After subsection (2C) insert—
“(2D)
Subsection (2B)(a)(iii) does not cover a case where the constituent
company was controlled by the scheme organiser by virtue of
paragraph 34 of Schedule 4 (jointly owned companies).
(2E)
In relation to any shares acquired by the exercise of the share option,
25
no liability to income tax arises in respect of its exercise if—
(a)
the individual exercises the option before the third
anniversary of the date on which the option was granted at a
time when the CSOP scheme is approved,
(b)
the option is exercised by virtue of a provision included in the
30
scheme under paragraph 25A of Schedule 4,
(c)
as a result of, as the case may be—
(i)
the general offer,
(ii)
the compromise or arrangement, or
(iii)
the takeover offer,
35

the individual receives cash (and no other assets) in exchange
for the shares,
(d)
when the decision to grant the option was taken—
(i)
the general offer,
(ii)
the compromise or arrangement, or
40
(iii)
the takeover offer,

as the case may be, had not been made,
(e)
when that decision was taken, no arrangements were in place
or under consideration for—
(i)
the making of a general offer which would fall within
45
subsection (2H),

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
147

(ii)
the making of any compromise or arrangement which
would fall within subsection (2J), or
(iii)
the making of a takeover offer (as defined in section
974 of the Companies Act 2006) which would fall
within subsection (2K),
5
(f)
if the scheme includes a provision under paragraph 26 of
Schedule 4 (“the paragraph 26 provision”), in connection
with—
(i)
the general offer,
(ii)
the compromise or arrangement, or
10
(iii)
the takeover offer,

as the case may be, no course of action was open to the
individual which, had it been followed, would have resulted
in the individual making an agreement under the paragraph
26 provision which would have prevented the individual
15
from acquiring the shares by the exercise of the option, and
(g)
the avoidance of tax or national insurance contributions is not
the main purpose (or one of the main purposes) of any
arrangements under which the option was granted or is
exercised.
20
(2F)
In subsection (2E)(c)(iii), (d)(iii) and (f)(iii) “the takeover offer”
means the takeover offer (as defined in section 974 of the Companies
Act 2006) giving rise to the application of sections 979 to 982 or 983
to 985 of that Act.
(2G)
In subsection (2E)(e) “arrangements” includes any plan, scheme,
25
agreement or understanding, whether or not legally enforceable.
(2H)
A general offer falls within this subsection if it is—
(a)
a general offer to acquire the whole of the issued ordinary
share capital of the relevant company which is made on a
condition such that, if it is met, the person making the offer
30
will have control of the relevant company, or
(b)
a general offer to acquire all the shares in the relevant
company which are of the same class as those acquired by the
exercise of the option.
(2I)
For the purposes of subsection (2H)(a) a person is to be treated as
35
obtaining control of a company if that person and others acting in
concert together obtain control of it.
(2J)
A compromise or arrangement falls within this subsection if it is
applicable to or affects—
(a)
all the ordinary share capital of the relevant company or all
40
the shares of the same class as those acquired by the exercise
of the option, or
(b)
all the shares, or all the shares of that same class, which are
held by a class of shareholders identified otherwise than by
reference to their employment or directorships or their
45
participation in an approved CSOP scheme.
(2K)
A takeover offer falls within this subsection if—
(a)
it relates to the relevant company, and

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
148

(b)
where there is more than one class of share in the relevant
company, the class or classes to which it relates is or include
the class of the shares acquired by the exercise of the option.
(2L)
In subsections (2H), (2J) and (2K) “the relevant company” means the
company whose shares are acquired by the exercise of the option.”
5
27
Part 5 of Schedule 4 (requirements etc relating to share options) is amended
as follows.
28
In paragraph 21 (introduction) in sub-paragraph (2)—
(a)
after the entry for paragraph 24 omit “or”, and
(b)
after the entry for paragraph 25 insert “, or
10

paragraph 25A (exercise of options: company
events)”.
29
After paragraph 25 insert—
“Exercise of options: company events
25A   (1)
The scheme may provide that share options relating to shares in a
15
company may be exercised within 6 months after the relevant date
for the purposes of sub-paragraph (2) or (4).
      (2)
The relevant date for the purposes of this sub-paragraph is the
date when—
(a)
a person has obtained control of the company as a result of
20
making an offer falling within sub-paragraph (3), and
(b)
any condition subject to which the offer is made has been
satisfied.
      (3)
An offer falls within this sub-paragraph if it is—
(a)
a general offer to acquire the whole of the issued ordinary
25
share capital of the company which is made on a condition
such that, if it is met, the person making the offer will have
control of the company, or
(b)
a general offer to acquire all the shares in the company
which are of the same class as the shares to which the
30
option relates.
      (4)
The relevant date for the purposes of this sub-paragraph is the
date when the court sanctions under section 899 of the Companies
Act 2006 (court sanction for compromise or arrangement) a
compromise or arrangement applicable to or affecting—
35
(a)
all the ordinary share capital of the company or all the
shares of the same class as the shares to which the option
relates, or
(b)
all the shares, or all the shares of that same class, which are
held by a class of shareholders identified otherwise than
40
by reference to their employment or directorships or their
participation in an approved CSOP scheme.
      (5)
The scheme may provide that share options relating to shares in a
company may be exercised at any time when any person is bound
or entitled to acquire shares in the company under sections 979 to
45

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 3 — Material interest rules
149

982 or 983 to 985 of the Companies Act 2006 (takeover offers: right
of offeror to buy out minority shareholder etc).
      (6)
For the purposes of this paragraph a person is to be treated as
obtaining control of a company if that person and others acting in
concert together obtain control of it.”
5
30    (1)
In Part 6 of Schedule 4 (exercise of share options) in paragraph 26 (exchange
of options on company reorganisation) in sub-paragraph (2)(c)—
(a)
after “982” insert “or 983 to 985”, and
(b)
after “shareholder” insert “etc”.
      (2)
A CSOP scheme approved before the day on which this Act is passed which
10
contains provision under paragraph 26 of Schedule 4 to ITEPA 2003 has
effect with any modifications needed to reflect the amendments made by
this paragraph.
Part 3
Material interest rules
15
Introduction
31
Part 7 of ITEPA 2003 (employment income: income and exemptions relating
to securities) is amended as follows.
Share incentive plans
32
Part 3 of Schedule 2 (eligibility of individuals) is amended as follows.
20
33
In paragraph 13 (introduction)—
(a)
after the entry for paragraph 18 insert “and”, and
(b)
omit the entry for paragraph 19 and the “and” before it.
34
In paragraph 14 (time of eligibility to participate) in sub-paragraph (7)—
(a)
after paragraph (b) insert “and”, and
25
(b)
omit paragraph (c) and the “and” before it.
35
Omit paragraphs 19 to 24 (the “no material interest” requirement).
36
In Part 11 of Schedule 2 (supplementary provisions) in paragraph 100 (index
of defined expressions), in the entry for “close company”, omit “(and see
paragraph 20(4))”.
30
37    (1)
The amendments made by paragraphs 32 to 36 above have effect for the
purpose of determining whether an individual is eligible to participate in an
award of shares on the day on which this Act is passed or any later day.
      (2)
A SIP approved before the day on which this Act is passed has effect
accordingly with the omission of any provision falling within a provision of
35
Schedule 2 to ITEPA 2003 omitted by those paragraphs.
SAYE option schemes
38
Part 3 of Schedule 3 (eligibility of individuals) is amended as follows.

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
150

39
In paragraph 9 (introduction) omit the entry for paragraph 11 and the “and”
before it.
40
Omit paragraphs 11 to 16 (the “no material interest” requirement).
41
In Part 9 of Schedule 3 (supplementary provisions) in paragraph 49 (index
of defined expressions), in the entry for “close company”, omit “(and see
5
paragraph 11(4))”.
42    (1)
The amendments made by paragraphs 38 to 41 above have effect for the
purpose of determining whether an individual is eligible to participate in a
scheme on the day on which this Act is passed or any later day.
      (2)
A SAYE option scheme approved before the day on which this Act is passed
10
has effect accordingly with the omission of any provision falling within a
provision of Schedule 3 to ITEPA 2003 omitted by those paragraphs.
CSOP schemes
43    (1)
In Part 3 of Schedule 4 (eligibility of individuals) in paragraphs 10(2) and (3),
11(3) and (4) and 13(2) (which relate to the “no material interest”
15
requirement) for “25%” substitute “30%”.
      (2)
The amendments made by this paragraph have effect for the purpose of
determining whether a person is eligible to participate in a scheme on the
day on which this Act is passed or any later day (by altering what constitutes
a material interest on that day and within the 12 months preceding that day).
20
      (3)
A CSOP scheme approved before the day on which this Act is passed has
effect with any modifications needed to reflect the amendments made by
this paragraph.
Part 4
Restricted shares
25
Introduction
44
Part 7 of ITEPA 2003 (employment income: income and exemptions relating
to securities) is amended as follows.
Share incentive plans
45
Part 4 of Schedule 2 (types of shares that may be awarded) is amended as
30
follows.
46
In paragraph 25 (introduction) in sub-paragraph (1)—
(a)
after the entry for paragraph 28 insert “and”, and
(b)
omit the entry for paragraph 30 and the “and” before it.
47
Omit paragraphs 30 to 33 (only certain kinds of restrictions allowed).
35
48
In Part 5 of Schedule 2 (free shares) in paragraph 35 (maximum annual
award) omit sub-paragraphs (3) and (4).
49
In Part 6 of Schedule 2 (partnership shares) in paragraph 43 (introduction)