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(4) In sub-paragraph (2)(b) “the relevant day” means—

Finance (No. 2) BillPage 245

(a) the last day of the period in which notice of an appeal
under paragraph 81K(2)(b) may be given, or

(b) if notice of such an appeal is given, the day on which the
appeal is determined or withdrawn.

(5) 5Sub-paragraph (2)(b) does not apply if the termination condition
was met in relation to the SIP before the giving of the closure
notice or is met before the end of the 90 day period mentioned in
sub-paragraph (2)(b).

(6) If the company fails to comply with sub-paragraph (2)(b), HMRC
10may give the company a notice stating that that is the case (a
“default notice”).

(7) If the company is given a default notice—

(a) the SIP is not to be a Schedule 2 SIP with effect from—

(i) such relevant time as is specified in the default
15notice, or

(ii) if no relevant time is specified, the time of the
giving of the default notice, and

(b) the company is liable for a further penalty of an amount
decided by HMRC.

(8) 20Sub-paragraph (7)(a) does not affect the operation of the SIP code
in relation to shares appropriated to, or acquired on behalf of, an
individual under the SIP before the time mentioned in sub-
paragraph (7)(a)(i) or (ii) (as the case may be).

(9) In particular, if the SIP was a Schedule 2 SIP when the shares were
25appropriated to, or acquired on behalf of, the individual, the SIP is
to continue to be a Schedule 2 SIP in relation to those shares.

(10) The penalty under sub-paragraph (7)(b) must not exceed an
amount equal to twice HMRC’s reasonable estimate of—

(a) the total income tax for which participants in the SIP have
30not been liable, or will not be liable in the future, and

(b) the total contributions under Part 1 of SSCBA 1992 or
SSCB(NI)A 1992 for which any persons have not been
liable, or will not be liable in the future,

in consequence of the SIP having been a Schedule 2 SIP at any
35relevant time before the time mentioned in sub-paragraph (7)(a)(i)
or (ii) (as the case may be).

(11) The liabilities covered by sub-paragraph (10) include liabilities for
income tax or contributions which a person has not had, or will not
have, in consequence of sub-paragraphs (8) and (9).

(12) 40In this paragraph “relevant time” means any time before the
giving of the default notice when requirements of Parts 2 to 9 of
this Schedule were not met in relation to the SIP.

81J Assessment of penalties

(1) This paragraph applies if the company is liable for a penalty under
45this Part.

Finance (No. 2) BillPage 246

(2) HMRC must assess the penalty and notify the company of the
assessment.

(3) Subject to sub-paragraphs (4) and (5), the assessment must be
made no later than 12 months after the date on which the company
5becomes liable for the penalty.

(4) In the case of a penalty under paragraph 81E(1)(b), the assessment
must be made no later than—

(a) 12 months after the date on which HMRC become aware of
the inaccuracy, and

(b) 106 years after the date on which the company becomes liable
for the penalty.

(5) In the case of a penalty under paragraph 81H(2)(b) or 81I(2)(a) or
(7)(b) where notice of appeal is given under paragraph 81K(2) or
(3), the assessment must be made no later than 12 months after the
15date on which the appeal is determined or withdrawn.

(6) A penalty payable under this Part must be paid—

(a) no later than 30 days after the date on which the notice
under sub-paragraph (2) is given to the company, or

(b) if notice of appeal is given against the penalty under
20paragraph 81K(1) or (4), no later than 30 days after the date
on which the appeal is determined or withdrawn.

(7) The penalty may be enforced as if it were corporation tax or, if the
company is not within the charge to corporation tax, income tax
charged in an assessment and due and payable.

(8) 25Sections 100 to 103 of TMA 1970 do not apply to a penalty under
this Part.

81K Appeals

(1) The company may appeal against a decision of HMRC that the
company is liable for a penalty under paragraph 81C or 81E.

(2) 30The company may appeal against—

(a) a decision of HMRC mentioned in paragraph 81H(1) or a
decision of HMRC to specify, or not to specify, a relevant
time in the closure notice;

(b) a decision of HMRC mentioned in paragraph 81I(1).

(3) 35The company may appeal against a decision of HMRC

(a) to give the company a default notice under paragraph 81I;

(b) to specify, or not to specify, a relevant time in the default
notice.

(4) The company may appeal against a decision of HMRC as to the
40amount of a penalty payable by the company under this Part.

(5) The company may appeal against a decision of an officer of
Revenue and Customs to give a direction under section 998 of
CTA 2009 (withdrawal of corporation tax deductions in relation to
a Schedule 2 SIP).

Finance (No. 2) BillPage 247

(6) Notice of appeal must be given to HMRC no later than 30 days
after the date on which—

(a) in the case of an appeal under sub-paragraph (1) or (4), the
notice under paragraph 81J(2) is given to the company;

(b) 5in the case of an appeal under sub-paragraph (2), the
closure notice is given;

(c) in the case of an appeal under sub-paragraph (3), the
default notice is given;

(d) in the case of an appeal under sub-paragraph (5), notice of
10the officer’s decision is given to the company.

(7) On an appeal under sub-paragraph (1), (3)(a) or (5) which is
notified to the tribunal, the tribunal may affirm or cancel the
decision.

(8) On an appeal under sub-paragraph (2) or (3)(b) which is notified
15to the tribunal, the tribunal may—

(a) affirm or cancel the decision, or

(b) substitute for the decision another decision which HMRC
had power to make.

(9) On an appeal under sub-paragraph (4) which is notified to the
20tribunal, the tribunal may—

(a) affirm the amount of the penalty decided, or

(b) substitute another amount for that amount.

(10) Subject to this paragraph and paragraph 81J, the provisions of Part
5 of TMA 1970 relating to appeals have effect in relation to an
25appeal under this paragraph as they have effect in relation to an
appeal against an assessment to corporation tax or, if the company
is not within the charge to corporation tax, income tax.

29 In paragraph 89 (termination of plan) in sub-paragraph (2) omit paragraph
(a).

30 30In paragraph 90 (effect of plan termination notice) in sub-paragraph (2) for
“awarded to” substitute “appropriated to, or acquired on behalf of,”.

31 (1) Paragraph 93 (power to require information) is amended as follows.

(2) For sub-paragraph (1) substitute—

(1) An officer of Revenue and Customs may by notice require a
35person to provide the officer with any information—

(a) which the officer reasonably requires for the performance
of any functions of Her Majesty’s Revenue and Customs or
an officer of Revenue and Customs under the SIP code, and

(b) which the person to whom the notice is addressed has or
40can reasonably obtain.

(3) In sub-paragraph (2)(a)—

(a) for sub-paragraph (i) substitute—

(i) to check anything contained in a notice
under paragraph 81A or a return under
45paragraph 81B or to check any information

Finance (No. 2) BillPage 248

accompanying such a notice or return, or”,
and

(b) in sub-paragraph (ii) after “plan” insert “or any other person whose
liability to tax the operation of a plan is relevant to”.

32 In paragraph 100 (index of defined expressions)—

(a) 5omit the entries for “approval” and “approved”, and

(b) at the appropriate place insert—

Schedule 2 SIP paragraph 1 and Part 10 of
this Schedule.

10Other amendments: TCGA 1992

33 TCGA 1992 is amended as follows.

34 In section 236A (relief for transfers to share incentive plans) for “an
approved” substitute “a Schedule 2”.

35 (1) Section 238A (share schemes and share incentives) is amended as follows.

(2) 15In the heading omit “Approved”.

(3) In subsection (1) omit “approved”.

(4) In subsection (2)(a) for “approved” substitute “Schedule 2”.

36 Schedule 7C (relief for transfers to share plans) is amended as follows.

37 In the title for “approved” substitute “Schedule 2”.

38 20In paragraph 2 (conditions relating to disposal) in sub-paragraph (1) for
“approved” substitute “a Schedule 2 SIP”.

39 Schedule 7D (share schemes and share incentives) is amended as follows.

40 In the title omit “Approved”.

41 In the title of Part 1 for “Approved” substitute “Schedule 2”.

42 (1) 25Paragraph 1 (introduction to Part 1) is amended as follows.

(2) In sub-paragraph (1) for “an approved” substitute “a Schedule 2”.

(3) In sub-paragraphs (2) and (3) omit “approved”.

43 In paragraph 2 (gains accruing to trustees) in sub-paragraph (1)(a) omit
“approved”.

30Other amendments: ITEPA 2003 and Part 4 of FA 2004

44 ITEPA 2003 is amended as follows.

45 In section 227 (scope of Part 4) in subsection (4)(c) omit “approved”.

46 In section 417 (scope of Part 7) in subsection (2), in the entry for Chapter 6,
omit “approved”.

47 (1) 35Section 431A (provision relating to restricted securities) is amended as
follows.

Finance (No. 2) BillPage 249

(2) In the heading for “approved” substitute “tax advantaged”.

(3) In subsection (2)(a) for “an approved” substitute “a Schedule 2”.

48 In section 549 (application of Chapter 11 of Part 7) in subsection (2)(a) omit
“approved”.

49 (1) 5Section 554E (exclusions under Part 7A) is amended as follows.

(2) In subsections (1)(a) and (3)(a)(i) and (b)(i) for “an approved” substitute “a
Schedule 2”.

(3) In subsection (4)(a) and (b) for the first “approved” substitute “Schedule 2”.

50 In paragraph 11 of Schedule 4 (CSOP schemes: material interest) in sub-
10paragraph (5)(a) for “approved” substitute “Schedule 2”.

51 In paragraph 30 of Schedule 5 (enterprise management incentives: material
interest) in sub-paragraph (7)(a) for “share incentive plan approved under
Schedule 2 (SIPs)” substitute “Schedule 2 SIP (see Schedule 2)”.

52 In section 195 of FA 2004 (pensions: transfer of certain shares to be treated as
15payment of contribution) in subsection (5), in the definition of “share
incentive plan”, omit “approved”.

Other amendments: ITTOIA 2005

53 Chapter 3 of Part 4 of ITTOIA 2005 (savings and investment income:
dividends etc from UK resident companies) is amended as follows.

54 20In section 382 (contents of Chapter 3) in subsection (1)(c) for “an approved”
substitute “a Schedule 2”.

55 In the cross-heading before section 392 for “approved” substitute “Schedule 2”.

56 In section 392 (SIP shares: introduction) in subsection (1) for “an approved”
substitute “a Schedule 2”.

57 (1) 25Section 394 (distribution when dividend shares cease to be subject to SIP) is
amended as follows.

(2) In subsection (1) for “an approved” substitute “a Schedule 2”.

(3) After subsection (3) insert—

(3A) But if the shares cease to be subject to the plan by virtue of a
30provision of the kind mentioned in paragraph 65(2) of Schedule 2 to
ITEPA 2003 (provision requiring dividend shares to be offered for
sale), the amount of the distribution treated as made is the amount
equal to the relevant fraction of the market value of the shares at the
time they are offered for sale if that amount is less than the amount
35given by subsection (3).

(3B) For the purposes of subsection (3A) “the relevant fraction” is—


where—

(3C) Paragraph 92(2) of Schedule 2 to ITEPA 2003 (market value of shares
5subject to a restriction) applies for the purposes of subsection (3A).

(4) In subsection (7) for “approved” substitute “Schedule 2”.

58 In section 395 (reduction in tax due in cases within section 394) in
subsections (1)(b) and (4) for “approved” substitute “Schedule 2”.

59 In section 396 (interpretation) in subsections (1) and (2) omit “approved”.

60 10Chapter 4 of Part 4 of ITTOIA 2005 (savings and investment income:
dividends etc from non-UK resident companies) is amended as follows.

61 In the cross-heading before section 405 for “approved” substitute “Schedule 2”.

62 (1) Section 405 (SIP shares: introduction) is amended as follows.

(2) In subsection (1) for “an approved” substitute “a Schedule 2”.

(3) 15In subsections (3) and (4) omit “approved”.

63 (1) Section 407 (dividend payment when dividend shares cease to be subject to
SIP) is amended as follows.

(2) In subsection (1) for “an approved” substitute “a Schedule 2”.

(3) After subsection (3) insert—

(3A) 20But if the shares cease to be subject to the plan by virtue of a
provision of the kind mentioned in paragraph 65(2) of Schedule 2 to
ITEPA 2003 (provision requiring dividend shares to be offered for
sale), the amount of the dividend treated as paid is the amount equal
to the relevant fraction of the market value of the shares at the time
25they are offered for sale if that amount is less than the amount given
by subsection (3).

(3B) For the purposes of subsection (3A) “the relevant fraction” is—


where—

(3C) Paragraph 92(2) of Schedule 2 to ITEPA 2003 (market value of shares
subject to a restriction) applies for the purposes of subsection (3A).

(4) In subsection (5) for “approved” substitute “Schedule 2”.

64 In section 408 (reduction in tax due in cases within section 407) in
40subsections (1)(b) and (3) for “approved” substitute “Schedule 2”.

Finance (No. 2) BillPage 251

65 Chapter 9 of Part 6 of ITTOIA 2005 (exempt income) is amended as follows.

66 In the cross-heading before section 770 for “Approved” substitute “Schedule
2
”.

67 (1) Section 770 (amounts applied by SIP trustees) is amended as follows.

(2) 5In subsection (1)(a) for “an approved” substitute “a Schedule 2”.

(3) In subsections (5) and (6) omit “approved”.

Other amendments: Part 9 of ITA 2007

68 Part 9 of ITA 2007 (special rules about settlements and trusts) is amended as
follows.

69 10In section 462 (overview of Part) in subsection (5) for “an approved”
substitute “a Schedule 2”.

70 In section 479 (trustees’ accumulated or discretionary income charged at
special rates) in subsection (5) for “approved” substitute “Schedule 2”.

71 (1) Section 488 (application of section 479 to trustees of SIP) is amended as
15follows.

(2) In the heading for “approved” substitute “Schedule 2”.

(3) In subsection (1)—

(a) in paragraph (a) for “an approved” substitute “a Schedule 2”, and

(b) in paragraph (b) omit “approved”.

72 20In section 489 (“the applicable period”) in subsection (8)(a) for “approved”
substitute “Schedule 2”.

73 In section 490 (interpretation of Chapter 5) in subsection (1) omit
“approved”.

Other amendments: Chapter 1 of Part 11 of CTA 2009

74 25Chapter 1 of Part 11 of CTA 2009 (relief for employee share acquisition
schemes: share incentive plans) is amended as follows.

75 (1) Section 983 (overview of Chapter) is amended as follows.

(2) In subsection (1) for “approved” substitute “Schedule 2”.

(3) In subsection (7) for “approval for a plan is withdrawn” substitute “a plan
30ceases to be a Schedule 2 share incentive plan”.

76 (1) Section 987 (deduction for cost of setting up plan) is amended as follows.

(2) In the heading for “an approved” substitute “a Schedule 2”.

(3) In subsection (1) for “approved by an officer of Revenue and Customs”
substitute “a Schedule 2 share incentive plan”.

(4) 35Omit subsection (3).

(5) In subsection (4) for “approval is given” (in both places) substitute “relevant
date falls”.

Finance (No. 2) BillPage 252

(6) After subsection (4) insert—

(4A) In subsection (4) “the relevant date”, in relation to a share incentive
plan, has the meaning given in paragraph 81A(6) of Schedule 2 to
ITEPA 2003.

77 (1) 5Section 988 (deductions for running expenses) is amended as follows.

(2) In the heading for “an approved” substitute “a Schedule 2”.

(3) In subsections (1) and (3) for “an approved” substitute “a Schedule 2”.

78 In section 989 (deduction for contribution to plan trust) in subsection (1)(a)
for “an approved” substitute “a Schedule 2”.

79 10In section 994 (deduction for providing free or matching shares) in
subsection (1) for “an approved” substitute “a Schedule 2”.

80 In section 995 (deduction for additional expense in providing partnership
shares) in subsection (1)(a) for “an approved” substitute “a Schedule 2”.

81 In section 997 (no deduction for expenses in providing dividend shares) in
15subsection (1) for “an approved” substitute “a Schedule 2”.

82 For the cross-heading before section 998 substitute “Plan ceasing to be a
Schedule 2 SIP
”.

83 (1) Section 998 (withdrawal of deductions) is amended as follows.

(2) In the heading for “approval for share incentive plan withdrawn
20substitute “share incentive plan ceases to be a Schedule 2 share incentive
plan
”.

(3) In subsection (1)—

(a) in paragraph (a)—

(i) after “section” insert “987,”, and

(ii) 25for “an approved” substitute “a Schedule 2”, and

(b) for paragraph (b) substitute—

(b) by virtue of paragraph 81H or 81I of Schedule 2 to
ITEPA 2003 the plan is not to be a Schedule 2 share
incentive plan.

30Other amendments: Individual Savings Account Regulations 1998 (S.I. 1998/1870)

84 The Individual Savings Account Regulations 1998 are amended as follows.

85 In regulation 2 (interpretation) in paragraph (1)(a)—

(a) omit the definition of “approved SIP”,

(b) in the definitions of “ceasing to be subject to the plan”, “participant”
35and “plan shares” for “an approved” substitute “a Schedule 2”, and

(c) at the appropriate place insert—

86 In regulation 7 (qualifying investments) in paragraph (2)(h)(iii) for “an
40approved” substitute “a Schedule 2”.

87 In regulation 34 (capital gains tax: adaptation of enactments) in paragraph
(2)(a)—

Finance (No. 2) BillPage 253

(a) in the inserted subsections (12)(b)(iii) and (13)(d) for “an approved”
substitute “a Schedule 2”, and

(b) in the inserted subsection (13)(c) for “approved” substitute
“Schedule 2”.

5Revocation of Employee Share Schemes (Electronic Communication of Returns and
Information) Regulations 2007 (S.I. 2007/792)

88 The Employee Share Schemes (Electronic Communication of Returns and
Information) Regulations 2007 are revoked.

Commencement and transitional provision

89 10This Part is treated as having come into force on 6 April 2014.

90 Paragraphs 91 to 96 below apply in relation to a SIP established before 6
April 2014.

91 (1) If the SIP was an approved SIP immediately before 6 April 2014, this
paragraph applies to any provision which the SIP contains immediately
15before that date and which requires the approval or agreement of Her
Majesty’s Revenue and Customs or an officer of Revenue and Customs to be
obtained in relation to any matter.

(2) On and after 6 April 2014, the provision is to have effect without the
requirement for the approval or agreement, unless the requirement reflects
20a requirement for approval or agreement set out in Schedule 2 to ITEPA 2003
(as amended by this Part).

92 (1) If the SIP was an approved SIP immediately before 6 April 2014, the
amendments made by paragraph 19 above have effect in relation to the SIP
only if, and when, there is an alteration in a key feature of the SIP or plan
25trust on or after that date.

(2) In sub-paragraph (1) “key feature” has the meaning given in paragraph
81B(8) of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28 above).

93 If the SIP was an approved SIP immediately before 6 April 2014, on and after
that date the SIP and the plan trust have effect with any modifications
30needed to reflect the amendments made by paragraphs 20 to 22, 25, 27, 29
and 30 above.

94 (1) Paragraph 81A of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28
above) has effect in relation to the SIP

(a) as if, at the end of sub-paragraph (1), the words “on or before 6 July
352015” were inserted,

(b) if the first date on which awards of shares are made under the SIP
falls before 6 April 2014—

(i) as if, in sub-paragraph (3)(b), the reference to that date were
a reference to 6 April 2014 and, accordingly, as if all
40references in paragraph 81A to the first award date were
references to 6 April 2014,

(ii) as if sub-paragraph (3)(b)(i) were omitted, and

(iii) as if, in sub-paragraph (3)(b)(ii), “otherwise” were omitted,

(c) as if sub-paragraph (5) were omitted, and

Finance (No. 2) BillPage 254

(d) as if, in sub-paragraph (6), the definitions of “the initial notification
deadline” and “the relevant tax year” were omitted.

(2) But the SIP cannot be a Schedule 2 SIP if, before 6 April 2014, an application
for its approval was refused or an officer of Revenue and Customs decided
5to withdraw its approval.

(3) Sub-paragraph (2) is without prejudice to the outcome of any appeal under
paragraph 82 or 85 of Schedule 2 to ITEPA 2003 against the refusal or
decision to withdraw approval.

(4) The amendments made by this Part do not affect any right of appeal under
10paragraph 82 or 85 of Schedule 2 to ITEPA 2003 against a refusal or decision
made before 6 April 2014 in relation to the SIP.

(5) Sub-paragraphs (6) and (7) apply if shares (“the relevant shares”) were
appropriated to, or acquired on behalf of, an individual before 6 April 2014
under the SIP at a time when the SIP was an approved SIP.

(6) 15On and after 6 April 2014, the SIP code operates in relation to the relevant
shares—

(a) as if the relevant shares were appropriated to, or acquired on behalf
of, the individual under the SIP at a time when the SIP was a
Schedule 2 SIP, and

(b) 20if no notice under paragraph 81A of Schedule 2 to ITEPA 2003 is
given in relation to the SIP or if the SIP cannot be a Schedule 2 SIP
because of sub-paragraph (2) of this paragraph, as if the SIP were a
Schedule 2 SIP despite no notice being given or despite sub-
paragraph (2).

(7) 25If no notice under paragraph 81A of Schedule 2 to ITEPA 2003 is given in
relation to the SIP, paragraph 81B of that Schedule (as inserted by paragraph
28 above) is to apply in relation to the SIP despite no notice being given; and,
for this purpose, the relevant date is to be taken to be 6 April 2014.

(8) In relation to the SIP

(a) 30paragraph 81F of Schedule 2 to ITEPA 2003 (as inserted by
paragraph 28 above) has effect as if for sub-paragraph (2) there were
substituted—

(2) HMRC may enquire into the SIP if HMRC give notice to
the company of HMRC’s intention to do so no later than 6
35July 2016., and

(b) the cases covered by paragraphs 81F(4)(b), 81H(1)(a)(ii) and
81I(1)(a)(ii) of Schedule 2 to ITEPA 2003 (as inserted by paragraph 28
above) include cases in which requirements of Parts 2 to 9 of that
Schedule were not met before 6 April 2014.

95 40If the SIP was an approved SIP before 6 April 2014, the amendments made
by this Part do not affect the deductions which may be made in relation to
the SIP under section 987 of CTA 2009 (deduction for costs of setting up SIP)
if they would otherwise do so; and the amendment made by paragraph
83(3)(a)(i) above has no effect in relation to such deductions.

96 45The amendments made by paragraph 31 above do not affect a notice given
in relation to the SIP under paragraph 93 of Schedule 2 to ITEPA 2003 before
6 April 2014.

Finance (No. 2) BillPage 255

Part 2 SAYE option schemes

Amendments to Chapter 7 of Part 7 of ITEPA 2003

97 Chapter 7 of Part 7 of ITEPA 2003 (employment income: income and
5exemptions relating to securities: SAYE option schemes) is amended as
follows.

98 In the title omit “Approved”.

99 (1) Section 516 (introduction to SAYE option schemes) is amended as follows.

(2) In the heading omit “Approved”.

(3) 10In subsection (1)—

(a) omit paragraph (a) and the “and” after it, and

(b) in paragraph (b) for “those” substitute “SAYE option schemes which
are Schedule 3 SAYE option”.

(4) Omit subsection (2).

(5) 15In subsection (3)(c) for “approved” substitute “Schedule 3”.

(6) In subsection (4)—

(a) omit the definition of “approved”, and

(b) after the definition of “SAYE option scheme” insert—

100 In section 517 (share options to which Chapter applies) in subsection (1)(a)
for “an approved” substitute “a Schedule 3”.

101 (1) Section 519 (no charge in respect of exercise of option) is amended as
25follows.

(2) In subsection (1)(a) for “approved” substitute “a Schedule 3 SAYE option
scheme”.

(3) In subsection (3A)—

(a) in paragraph (a) for “approved” substitute “a Schedule 3 SAYE
30option scheme”,

(b) in paragraph (b)(i) for “or (4)” substitute “, (4) or (4A)”,

(c) in paragraphs (c), (d) and (f) after sub-paragraph (ii) omit “or” and
insert—

( iia) the non-UK company reorganisation
35arrangement, or, and

(d) in paragraph (e) after sub-paragraph (ii) omit “or” and insert—

( iia) the making of any non-UK company
reorganisation arrangement which would fall
within subsection (3H), or.

(4) 40In subsection (3H)—

(a) after “arrangement” insert “or a non-UK company reorganisation
arrangement”, and

Finance (No. 2) BillPage 256

(b) in paragraph (b) for “an approved” substitute “a Schedule 3”.

(5) In subsection (5)(b)—

(a) for “paragraph 42(3) provides” substitute “paragraphs 40H(4) and
40I(9) provide”,

(b) 5for “approved” substitute “a Schedule 3 SAYE option scheme”, and

(c) for “approval of the scheme has been previously withdrawn”
substitute “the scheme is not a Schedule 3 SAYE option scheme”.

102 Schedule 3 is amended as follows.

103 In the title omit “Approved”.

104 10In the cross-heading before paragraph 1 for “Approval of” substitute
Introduction to Schedule 3”.

105 (1) Paragraph 1 (introduction) is amended as follows.

(2) For sub-paragraphs (1) and (2) substitute—

(A1) For the purposes of the SAYE code an SAYE option scheme is a
15Schedule 3 SAYE option scheme if the requirements of Parts 2 to 7
of this Schedule are met in relation to the scheme.

(3) For sub-paragraph (4) substitute—

(4) Sub-paragraph (A1) is subject to Part 8 of this Schedule which—

(a) requires notice of a scheme to be given to Her Majesty’s
20Revenue and Customs (“HMRC”) in order for the scheme
to be a Schedule 3 SAYE option scheme (see paragraph
40A(1)),

(b) provides for a scheme in relation to which such notice is
given to be a Schedule 3 SAYE option scheme (see
25paragraph 40A(4)), and

(c) gives power to HMRC to enquire into a scheme and to
decide that the scheme should not be a Schedule 3 SAYE
option scheme (see paragraphs 40F to 40I).

106 In the title of Part 2 omit “for approval”.

107 30In the cross-heading before paragraph 4 omit “for approval”.

108 For paragraph 5 (general restriction on contents of scheme) substitute—

5 (1) The purpose of the scheme must be to provide, in accordance with
this Schedule, benefits for employees and directors in the form of
share options.

(2) 35The scheme must not provide benefits to employees or directors
otherwise than in accordance with this Schedule.

(3) For example, the scheme must not provide cash as an alternative
to share options or shares which might otherwise be acquired by
the exercise of share options.

109 40In paragraph 17 (requirements relating to shares that may be subject to share
options) after sub-paragraph (1) insert—

(1A) Sub-paragraph (1) and the other paragraphs of this Part are subject
to paragraph 37(6B).

Finance (No. 2) BillPage 257

110 In paragraph 25 (requirements as to contributions to savings arrangements)
in sub-paragraph (3)(a) for “approved” substitute “Schedule 3”.

111 (1) Paragraph 28 (requirements as to price for acquisition of shares) is amended
as follows.

(2) 5After sub-paragraph (3) insert—

(3A) If the scheme makes provision under sub-paragraph (3), the
variation or variations made under that provision to take account
of a variation in any share capital must (in particular) secure—

(a) that the total market value of the shares which may be
10acquired by the exercise of the share option is immediately
after the variation or variations substantially the same as
what it was immediately before the variation or variations,
and

(b) that the total price at which those shares may be acquired
15is immediately after the variation or variations
substantially the same as what it was immediately before
the variation or variations.

(3B) Sub-paragraph (3) does not authorise any variation which would
result in the requirements of the other paragraphs of this Schedule
20not being met in relation to the share option.

(3) Omit sub-paragraph (4).

112 In paragraph 32 (exercise of options: death) after “exercised” insert “at any
time”.

113 In paragraph 34 (exercise of options: scheme-related employment ends) in
25sub-paragraph (5)—

(a) omit paragraph (a) and the “or” after it, and

(b) in paragraph (b) after “organiser” insert “where the transfer is not a
relevant transfer within the meaning of the Transfer of Undertakings
(Protection of Employment) Regulations 2006”.

114 (1) 30Paragraph 37 (exercise of options: company events) is amended as follows.

(2) In sub-paragraph (1) after “(4)” insert “, (4A)”.

(3) In sub-paragraph (4)(b) for “an approved” substitute “a Schedule 3”.

(4) After sub-paragraph (4) insert—

(4A) The relevant date for the purposes of this sub-paragraph is the
35date on which a non-UK company reorganisation arrangement
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
relates, or

(b) 40all 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 employments or directorships or their
participation in a Schedule 3 SAYE option scheme,

becomes binding on the shareholders covered by it.

Finance (No. 2) BillPage 258

(5) After sub-paragraph (6) insert—

(6A) Sub-paragraphs (6B) to (6F) apply if the scheme makes provision
under sub-paragraph (1) or (6).

(6B) The scheme may provide that if, in consequence of a relevant
5event, shares in the company to which a share option relates no
longer meet the requirements of Part 4 of this Schedule, the share
option may be exercised under the provision made under sub-
paragraph (1) or (6) (as the case may be) no later than 20 days after
the day on which the relevant event occurs, notwithstanding that
10the shares no longer meet the requirements of Part 4 of this
Schedule.

(6C) In sub-paragraph (6B) “relevant event” means—

(a) a person obtaining control of the company as mentioned in
sub-paragraph (2)(a);

(b) 15a person obtaining control of the company as a result of a
compromise or arrangement sanctioned by the court as
mentioned in sub-paragraph (4);

(c) a person obtaining control of the company as a result of a
non-UK company reorganisation arrangement which has
20become binding on the shareholders covered by it as
mentioned in sub-paragraph (4A);

(d) a person who is bound or entitled to acquire shares in the
company as mentioned in sub-paragraph (6) obtaining
control of the company.

(6D) 25Provision made under sub-paragraph (6B) may not authorise the
exercise of a share option, as the case may be—

(a) at a time outside the 6 month period mentioned in sub-
paragraph (1), or

(b) at a time not covered by sub-paragraph (6).

(6E) 30The scheme may provide that a share option relating to shares in
a company which is exercised during the period of 20 days ending
with—

(a) the relevant date for the purposes of sub-paragraph (2), (4)
or (4A), or

(b) 35the date on which any person becomes bound or entitled
to acquire shares in the company as mentioned in sub-
paragraph (6),

is to be treated as if it had been exercised in accordance with the
provision made under sub-paragraph (1) or (6) (as the case may
40be).

(6F) If the scheme makes provision under sub-paragraph (6E) it must
also provide that if—

(a) a share option is exercised in reliance on that provision in
anticipation of—

(i) 45an event mentioned in sub-paragraph (2), (4) or
(4A) occurring, or

(ii) a person becoming bound or entitled to acquire
shares in the company as mentioned in sub-
paragraph (6), but

Finance (No. 2) BillPage 259

(b) as the case may be—

(i) the relevant date for the purposes of sub-paragraph
(2), (4) or (4A) does not fall during the period of 20
days beginning with the date on which the share
5option is exercised, or

(ii) the person does not become bound or entitled to
acquire shares in the company by the end of the
period of 20 days beginning with the date on which
the share option is exercised,

10the exercise of the share option is to be treated as having had no
effect.

115 (1) Paragraph 38 (exchanges of options on company reorganisation) is amended
as follows.

(2) In sub-paragraph (2) after paragraph (b) omit “or” and insert—

(ba) 15obtains control of the scheme company as a result of a non-
UK company reorganisation arrangement which has
become binding on the shareholders covered by it; or.

(3) In sub-paragraph (3) after paragraph (b) omit “and” and insert—

(ba) where control is obtained in the way set out in sub-
20paragraph (2)(ba), within the period of 6 months
beginning with the date on which the non-UK company
reorganisation arrangement becomes binding on the
shareholders covered by it, and.

116 (1) Paragraph 39 (requirements about share options granted in exchange) is
25amended as follows.

(2) In sub-paragraph (4)—

(a) in paragraph (c) for “equal” substitute “be substantially the same as”,
and

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