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 4 — Restricted shares
151

after sub-paragraph (2) insert—
   “(2A)
The plan must provide that partnership shares are not to be subject
to any provision for forfeiture.”
50
In Part 7 of Schedule 2 (matching shares) in paragraph 59 (general
requirement for matching shares) omit sub-paragraph (2).
5
51
In Part 9 of Schedule 2 (trustees) in paragraph 75 (duty to give notice of
award of shares etc) in sub-paragraphs (2) and (3) after paragraph (a)
insert—
“(aa)
if the shares are subject to any restriction, giving details of
the restriction,”.
10
52    (1)
In Part 10 of Schedule 2 (approval of plans) paragraph 84 (disqualifying
events) is amended as follows.
      (2)
In sub-paragraph (3)—
(a)
after paragraph (b) insert “or”, and
(b)
omit paragraph (c) and the “or” after it.
15
      (3)
In sub-paragraph (4) before paragraph (a) insert—
“(za)
from any shares being subject to a restriction,”.
53
Part 11 of Schedule 2 (supplementary provision) is amended as follows.
54
In paragraph 92 (determination of market value) for sub-paragraph (2)
substitute—
20
    “(2)
For the purposes of this Schedule the market value of shares
subject to a restriction is to be determined as if they were not
subject to the restriction.”
55
In paragraph 99 (minor definitions) after sub-paragraph (3) insert—
    “(4)
For the purposes of the SIP code—
25
(a)
shares are subject to a “restriction” if there is any contract,
agreement, arrangement or condition which makes
provision to which any of subsections (2) to (4) of section
423 (restricted securities) would apply if the references in
those subsections to the employment-related securities
30
were to the shares, and
(b)
the “restriction” is that provision.”
56
In paragraph 100 (index of defined expressions) at the appropriate place
insert—

“restriction (in relation to
paragraph 99(4)”.

35

shares)

57    (1)
The amendments made by paragraphs 45 to 47 and 49 to 51 above have effect
in relation to awards of shares made on or after the day on which this Act is
passed.
      (2)
A SIP approved, or a trust instrument made, before that day has effect with
40
any modifications needed to reflect the amendments made by paragraphs 45
to 56 above.

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
152

      (3)
In particular, in relation to awards of shares on or after that day, such a SIP
has effect with the omission of any provision falling within a provision of
Schedule 2 to ITEPA 2003 omitted by paragraph 47 above.
SAYE option schemes
58
Part 4 of Schedule 3 (shares to which schemes can apply) is amended as
5
follows.
59
In paragraph 17 (introduction) in sub-paragraph (1)—
(a)
after the entry for paragraph 20 insert “and”, and
(b)
omit the entry for paragraph 21 and the “and” after it.
60
Omit paragraph 21 (only certain kinds of restrictions allowed).
10
61
In Part 6 of Schedule 3 (requirements etc relating to share options) in
paragraph 28 (requirements as to price of acquisition of shares) after sub-
paragraph (4) insert—
    “(5)
At the time a share option is granted—
(a)
it must be stated whether or not the shares which may be
15
acquired by the exercise of the option may be subject to any
restriction, and
(b)
if so, the details of the restriction must also be stated.
      (6)
For the purposes of this paragraph the market value of shares
subject to a restriction is to be determined as if they were not
20
subject to the restriction.”
62
In Part 7 of Schedule 3 (exchange of share options) in paragraph 39
(requirements about share options granted in exchange) after sub-
paragraph (6) insert—
    “(7)
For the purposes of this paragraph the market value of shares
25
subject to a restriction is to be determined as if they were not
subject to the restriction.”
63
Part 9 of Schedule 3 (supplementary provisions) is amended as follows.
64
In paragraph 48 (minor definitions) after sub-paragraph (2) insert—
    “(3)
For the purposes of the SAYE code—
30
(a)
shares are subject to a “restriction” if there is any contract,
agreement, arrangement or condition which makes
provision to which any of subsections (2) to (4) of section
423 (restricted securities) would apply if the references in
those subsections to the employment-related securities
35
were to the shares, and
(b)
the “restriction” is that provision.”
65
In paragraph 49 (index of defined expressions) at the appropriate place
insert—

“restriction (in relation to
paragraph 48(3)”.

40

shares)

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
153

66    (1)
The amendments made by paragraphs 58 to 61 above have effect in relation
to options granted on or after the day on which this Act is passed.
      (2)
The amendment made by paragraph 62 above has effect for cases where the
old options are granted on or after that day.
      (3)
A SAYE option scheme approved before that day has effect with any
5
modifications needed to reflect the amendments made by paragraphs 58 to
65 above.
      (4)
In particular, in relation to options granted on or after that day, such a SAYE
option scheme has effect with the omission of any provision falling within a
provision of Schedule 3 to ITEPA 2003 omitted by paragraph 60 above.
10
CSOP schemes
67
In Part 2 of Schedule 4 (general requirements for approval) in paragraph 6
(limit on value of shares subject to options) after sub-paragraph (3) insert—
    “(4)
For the purposes of this paragraph the market value of shares
subject to a restriction is to be determined as if they were not
15
subject to the restriction.”
68
Part 4 of Schedule 4 (shares to which schemes can apply) is amended as
follows.
69
In paragraph 15 (introduction)—
(a)
after the entry for paragraph 18 insert “and”, and
20
(b)
omit the entry relating to paragraph 19 and the “and” after it.
70
Omit paragraph 19 (only certain kinds of restrictions allowed).
71
In Part 5 of Schedule 4 (requirements etc relating to share options) in
paragraph 22 after sub-paragraph (4) insert—
    “(5)
At the time a share option is granted—
25
(a)
it must be stated whether or not the shares which may be
acquired by the exercise of the option may be subject to any
restriction, and
(b)
if so, the details of the restriction must also be stated.
      (6)
For the purposes of this paragraph the market value of shares
30
subject to a restriction is to be determined as if they were not
subject to the restriction.”
72
In Part 6 of Schedule 4 (exchange of share options) in paragraph 27
(requirements about share options granted in exchange) after sub-
paragraph (6) insert—
35
    “(7)
For the purposes of this paragraph the market value of shares
subject to a restriction is to be determined as if they were not
subject to the restriction.”
73
Part 8 of Schedule 4 (supplementary provisions) is amended as follows.
74
In paragraph 36 (minor definitions) after sub-paragraph (2) insert—
40
    “(3)
For the purposes of the CSOP code—

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 5 — Share incentive plans: partnership shares
154

(a)
shares are subject to a “restriction” if there is any contract,
agreement, arrangement or condition which makes
provision to which any of subsections (2) to (4) of section
423 (restricted securities) would apply if the references in
those subsections to the employment-related securities
5
were to the shares, and
(b)
the “restriction” is that provision.”
75
In paragraph 37 (index of defined expressions) at the appropriate place
insert—

“restriction (in relation to
paragraph 36(3)”.

10

shares)

76    (1)
The amendment made by paragraph 67 above has effect for the purpose of
determining whether options may be granted to an individual on or after the
day on which this Act is passed; but the amendment is to be ignored in
determining the market value of any shares to which an option granted
15
before that day relates.
      (2)
The amendments made by paragraphs 68 to 71 above have effect in relation
to options granted on or after that day.
      (3)
The amendment made by paragraph 72 above has effect for cases where the
old options are granted on or after that day.
20
      (4)
A CSOP scheme approved before that day has effect with any modifications
needed to reflect the amendments made by paragraphs 67 to 75 above.
      (5)
In particular, in relation to options granted on or after that day, such a CSOP
scheme has effect with the omission of any provision falling within a
provision of Schedule 4 to ITEPA 2003 omitted by paragraph 70 above.
25
Part 5
Share incentive plans: partnership shares
77
Schedule 2 to ITEPA 2003 is amended as follows.
78    (1)
In Part 6 (partnership shares) paragraph 52 (application of money deducted
in accumulation period) is amended as follows.
30
      (2)
After sub-paragraph (2) insert—
   “(2A)
The number of shares awarded to the employee must be
determined in accordance with one of sub-paragraphs (3), (3A)
and (3B) and the partnership share agreement must specify which
one of those sub-paragraphs is to apply for the purposes of the
35
agreement.”
      (3)
In sub-paragraph (3) for “The number of shares awarded to each” substitute
“If the agreement specifies that this sub-paragraph is to apply, the number
of shares awarded to the”.

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 6 — Share incentive plans: dividend shares
155

      (4)
After sub-paragraph (3) insert—
   “(3A)
If the agreement specifies that this sub-paragraph is to apply, the
number of shares awarded to the employee must be determined in
accordance with the market value of the shares at the beginning of
the accumulation period.
5
     (3B)
If the agreement specifies that this sub-paragraph is to apply, the
number of shares awarded to the employee must be determined in
accordance with the market value of the shares on the acquisition
date.”
      (5)
In sub-paragraphs (4) and (5) for “and (3)” substitute “to (3B)”.
10
79
In Part 9 (trustees) in paragraph 75 (duty to give notice of award of shares
etc) in sub-paragraph (3) for paragraph (c) substitute—
“(c)
stating the market value in accordance with which the
number of shares awarded to the employee was
determined.”
15
80    (1)
The amendments made by paragraphs 78 and 79 above have effect in
relation to partnership share agreements made on or after the day on which
this Act is passed.
      (2)
A trust instrument made before that day has effect with any modifications
needed to reflect the amendment made by paragraph 79 above.
20
Part 6
Share incentive plans: dividend shares
Introduction
81
Part 8 of Schedule 2 to ITEPA 2003 (cash dividends and dividend shares) is
amended as follows.
25
Company’s power to direct reinvestment of cash dividends
82    (1)
Paragraph 62 (reinvestment of dividends) is amended as follows.
      (2)
In sub-paragraph (1) after “apply” insert “the specified percentage of”.
      (3)
After sub-paragraph (1) insert—
   “(1A)
In sub-paragraph (1) “the specified percentage” means the
30
percentage specified in the company’s direction (which may be
100%), subject to sub-paragraph (1B).
     (1B)
The company may from time to time modify the specified
percentage.”
83
In paragraph 68 (reinvestment: amounts to be carried forward) for sub-
35
paragraph (1) substitute—
    “(1)
This paragraph applies where an amount is not reinvested
because it is not sufficient to acquire a share.”
84
In paragraph 69 (cash dividends with no requirement to reinvest) in sub-
paragraph (2) for “which” substitute “so far as they”.
40

Finance (No. 2) Bill
Schedule 2 — Tax advantaged employee share schemes
Part 7 — Share incentive plans: employee share ownership trusts
156

85    (1)
A SIP approved before the day on which this Act is passed which contains
provision under paragraph 62(1) of Schedule 2 to ITEPA 2003 has effect with
any modifications needed to reflect the amendments made by paragraphs 82
to 84 above.
      (2)
In relation to any direction requiring the reinvestment of cash dividends
5
given before that day, the specified percentage is to be taken to be 100%
subject to any modification on or after that day under paragraph 62(1B) of
Schedule 2 of ITEPA 2003.
Removal of limit on amount reinvested
86
In paragraph 63 (requirements to be met as regards cash dividends) in sub-
10
paragraph (1) omit the entry for paragraph 64.
87
Omit paragraph 64 (limit on amount reinvested).
88    (1)
The amendments made by paragraphs 86 and 87 above have effect in
relation to the tax year 2013-14 and subsequent tax years.
      (2)
A SIP approved before 6 April 2013 has effect accordingly with the omission
15
of any provision falling within a provision of Schedule 2 to ITEPA 2003
omitted by paragraph 87 above.
Amounts to be carried forward
89    (1)
Paragraph 68 (reinvestment: amounts to be carried forward) is amended as
follows.
20
      (2)
In sub-paragraph (4)—
(a)
omit paragraph (a) and the “or” after it, and
(b)
in paragraphs (b) and (c) omit “during that period”.
      (3)
Omit sub-paragraph (6).
      (4)
The amendments made by this paragraph have effect in relation to amounts
25
held by trustees on or after 6 April 2013 (including amounts originally
retained before that date in relation to which an event falling within
paragraph 68(4)(a) to (c) of Schedule 2 to ITEPA 2003 did not occur before
that date).
      (5)
A SIP approved before 6 April 2013 has effect accordingly with the omission
30
of any provision falling within a provision of Schedule 2 to ITEPA 2003
omitted by this paragraph.
Part 7
Share incentive plans: employee share ownership trusts
90
Part 9 of Schedule 2 to ITEPA 2003 (trustees) is amended as follows.
35
91
In paragraph 70 (introduction) in sub-paragraph (2)—
(a)
after the entry for paragraph 77 insert “and”, and
(b)
omit the entry for paragraph 78.
92    (1)
Omit paragraph 78 (acquisition of shares from employee share ownership
trusts).
40

Finance (No. 2) Bill
Schedule 3 — Limit on income tax reliefs
157

      (2)
A trust instrument made before the day on which this Act is passed has
effect with the omission of any provision falling within a provision of
Schedule 2 to ITEPA 2003 omitted by this paragraph.
Part 8
Enterprise management incentives: consequences of disqualifying events
5
93    (1)
In section 532 of ITEPA 2003 (modified tax consequences following
disqualifying events) in subsection (1)(b) for “40” substitute “90”.
      (2)
The amendment made by this paragraph has effect in relation to
disqualifying events occurring on or after the day on which this Act is
passed.
10
Schedule 3
Section 16

Limit on income tax reliefs
The limit
1
In Chapter 3 of Part 2 of ITA 2007 (calculation of income tax liability) after
section 24 insert—
15
“24A
Limit on Step 2 deductions
(1)
If the taxpayer is an individual, there is a limit on certain deductions
which may be made for the tax year at Step 2.
(2)
The limit is determined as follows.
(3)
Amount A must not exceed amount B.
20
(4)
Amount A is—
(a)
the deductions for the tax year at Step 2 for the reliefs listed
in subsection (6) taken together, less
(b)
so much of those deductions as fall within subsection (7).
(5)
Amount B is—
25
(a)
£50,000, or
(b)
if more, 25% of the taxpayer’s adjusted total income for the
tax year (see subsection (8)).
(6)
The reliefs are—
(a)
relief under section 64 (trade loss relief against general
30
income);
(b)
relief under section 72 (early trade losses relief);
(c)
relief under section 96 (post-cessation trade relief);
(d)
relief under section 120 (property loss relief against general
income);
35
(e)
relief under section 125 (post-cessation property relief);
(f)
relief under section 128 (employment loss relief against
general income);
(g)
relief under Chapter 6 of Part 4 (share loss relief);