Finance Bill

House of Commons

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
152

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)

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
153

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)(b) for “provision for forfeiture” substitute “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—
    “(2)
For the purposes of this Schedule the market value of shares
20
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—
(a)
shares are subject to a “restriction” if there is any contract,
25
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
were to the shares, and
30
(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)”.

shares)

35
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
any modifications needed to reflect the amendments made by paragraphs 45
40
to 56 above.

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
154

      (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 Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
155

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 Bill
Schedule 2 — Tax advantaged employee share schemes
Part 5 — Share incentive plans: partnership shares
156

(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 Bill
Schedule 2 — Tax advantaged employee share schemes
Part 6 — Share incentive plans: dividend shares
157

      (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) for the first “all” substitute “some or all of the”.
      (3)
After sub-paragraph (1) insert—
   “(1A)
The company’s direction must set out—
30
(a)
the amount of the cash dividends to be applied as
mentioned in sub-paragraph (1), or
(b)
how that amount is to be determined.”
      (4)
In sub-paragraph (4) after “may” insert “modify or”.
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 Bill
Schedule 2 — Tax advantaged employee share schemes
Part 7 — Share incentive plans: employee share ownership trusts
158

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)
Sub-paragraph (3) applies to a direction requiring the reinvestment of cash
5
dividends which is given before that day.
      (3)
For the purposes of paragraph 62(1A) of Schedule 2 to ITEPA 2003 the
direction is to be treated as requiring the reinvestment of all the cash
dividends, subject to any modification of the direction which is made on or
after that day under paragraph 62(4) of that Schedule.
10
Removal of limit on amount reinvested
86
In paragraph 63 (requirements to be met as regards cash dividends) in sub-
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
15
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
of any provision falling within a provision of Schedule 2 to ITEPA 2003
omitted by paragraph 87 above.
Amounts to be carried forward
20
89    (1)
Paragraph 68 (reinvestment: amounts to be carried forward) is amended as
follows.
      (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”.
25
      (3)
Omit sub-paragraph (6).
      (4)
The amendments made by this paragraph have effect in relation to amounts
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
30
that date).
      (5)
A SIP approved before 6 April 2013 has effect accordingly with the omission
of any provision falling within a provision of Schedule 2 to ITEPA 2003
omitted by this paragraph.
Part 7
35
Share incentive plans: employee share ownership trusts
90
Part 9 of Schedule 2 to ITEPA 2003 (trustees) is amended as follows.
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.
40