Finance (No. 2) Bill (HC Bill 190)

194 In section 475 (no charge in respect of acquisition of option) in subsection (2)
omit “approved”.

195 In section 476 (charge on occurrence of chargeable event) in subsection (6),
in the entry for section 524, omit “approved”.

196 5In section 480 (deductible amounts) in subsection (4) omit “approved”.

197 In section 539 (CSOP and other options relevant for purposes of section 536)
in subsection (4) for “approved under Schedule 4 (CSOP schemes)”
substitute “which is a Schedule 4 CSOP scheme (see Schedule 4)”.

198 In section 549 (application of Chapter 11 of Part 7) in subsection (2)(c) omit
10“approved”.

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

(2) In subsection (1)(c) for “an approved” substitute “a Schedule 4”.

(3) In subsection (3)(a)(ii) and (b)(ii) for the second “an approved” substitute “a
Schedule 4”.

(4) 15In subsection (4)(a) and (b) for the third “approved” substitute “Schedule 4”.

200 In section 697 (PAYE: enhancing the value of an asset) in subsection (4)
before paragraph (b) insert—

“(ab) any shares acquired by the employee under a scheme which
is a Schedule 4 CSOP scheme (see Schedule 4),”.

201 20In section 701 (PAYE: meaning of “asset”) in subsection (2)(c)(ia) for
“approved under Schedule 4 (approved CSOP schemes)” substitute “which
is a Schedule 4 CSOP scheme (see Schedule 4)”.

202 In paragraph 5 of Schedule 5 (enterprise management incentives: maximum
entitlement of employee) in sub-paragraph (5) for “approved under
25Schedule 4 (CSOP schemes)” substitute “which is a Schedule 4 CSOP scheme
(see Schedule 4)”.

Commencement and transitional provision

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

204 Paragraphs 205 to 214 below apply in relation to a CSOP scheme established
30before 6 April 2014.

205 (1) If the scheme was an approved CSOP scheme immediately before 6 April
2014, this paragraph applies to any provision which the scheme contains
immediately before that date and which requires the approval or agreement
of Her Majesty’s Revenue and Customs or an officer of Revenue and
35Customs 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
a requirement for approval or agreement set out in Schedule 4 to ITEPA 2003
(as amended by this Part).

206 (1) 40If the scheme was an approved CSOP scheme immediately before 6 April
2014, the amendment made by paragraph 168 above has effect in relation to
the scheme only if, and when, there is an alteration in a key feature of the
scheme on or after that date.

(2) In sub-paragraph (1) “key feature” has the meaning given in paragraph
28B(8) of Schedule 4 to ITEPA 2003 (as inserted by paragraph 178 above).

207 If the scheme was an approved CSOP scheme immediately before 6 April
2014, on and after that date the scheme has effect with any modifications
5needed to reflect the amendment made by paragraph 169 above.

208 (1) The amendments made by paragraphs 171, 172 and 173(2) and (5) above
have no effect in relation to share options granted under the scheme before
6 April 2014.

(2) If the scheme was an approved CSOP scheme immediately before 6 April
102014, on and after that date the scheme has effect with any modifications
needed to reflect the amendments made by paragraphs 171, 172 and 173(2)
and (5) above (subject to sub-paragraph (1) of this paragraph).

209 (1) This paragraph applies if, immediately before 6 April 2014 the scheme was
an approved CSOP scheme which contains provision authorised by
15paragraph 22(3) of Schedule 4 to ITEPA 2003.

(2) On and after 6 April 2014, the scheme has effect with any modifications
needed to reflect the amendments made by paragraph 173(3) and (4) above.

210 (1) The amendments made by paragraph 174 above have no effect in relation to
share options granted before 6 April 2014 under the scheme.

(2) 20If immediately before 6 April 2014 the scheme was an approved CSOP
scheme which contains provision authorised by paragraph 25 of Schedule 4
to ITEPA 2003, on and after that date the scheme has effect with any
modifications needed to reflect the amendments made by paragraph 174
above (subject to sub-paragraph (1) of this paragraph).

211 (1) 25This paragraph applies if immediately before 6 April 2014 the scheme was
an approved CSOP scheme which contains provision authorised by
paragraph 25A(1) of Schedule 4 to ITEPA 2003.

(2) On and after 6 April 2014, the scheme has effect with any modifications
needed to reflect the amendment made by paragraph 175(3) above.

212 (1) 30Paragraph 28A of Schedule 4 to ITEPA 2003 (as inserted by paragraph 178
above) has effect in relation to the scheme—

(a) as if, at the end of sub-paragraph (1), the words “on or before 6 July
2015” were inserted,

(b) if the first date on which share options are granted under the scheme
35falls 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
references in paragraph 28A to the first grant date were
references to 6 April 2014,

(ii) 40as 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

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

(2) 45But the scheme cannot be a Schedule 4 CSOP scheme if, before 6 April 2014,
an application for its approval was refused or an officer of Revenue and
Customs decided to withdraw its approval.

(3) Sub-paragraph (2) is without prejudice to the outcome of any appeal under
paragraph 29 or 32 of Schedule 4 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
5paragraph 29 or 32 of Schedule 4 to ITEPA 2003 against a refusal or decision
made before 6 April 2014 in relation to the scheme.

(5) Sub-paragraph (6) applies if a share option was granted before 6 April 2014
under the scheme at a time when the scheme was an approved CSOP
scheme.

(6) 10On and after 6 April 2014, the CSOP code has effect in relation to the option
as if it were granted under the scheme at a time when the scheme was a
Schedule 4 CSOP scheme (but not if no notice under paragraph 28A of
Schedule 4 to ITEPA 2003 is given in relation to the scheme or if the scheme
cannot be a Schedule 4 CSOP scheme because of sub-paragraph (2) of this
15paragraph).

(7) In relation to the scheme—

(a) paragraph 28F of Schedule 4 to ITEPA 2003 (as inserted by
paragraph 178 above) has effect as if for sub-paragraph (2) there
were substituted—

“(2) 20HMRC may enquire into the scheme if HMRC give notice
to the scheme organiser of HMRC’s intention to do so no
later than 6 July 2016.”, and

(b) the cases covered by paragraphs 28F(4)(b), 28H(1)(a)(ii) and
28I(1)(a)(ii) of Schedule 4 to ITEPA 2003 (as inserted by paragraph
25178 above) include cases in which requirements of Parts 2 to 6 of that
Schedule were not met before 6 April 2014.

213 If the scheme was an approved CSOP scheme before 6 April 2014, the
amendments made by this Part and paragraph 141 above do not affect the
deductions which may be made in relation to the scheme under section 999
30of CTA 2009 (deduction for costs of setting up scheme) if they would
otherwise do so.

214 The amendments made by paragraph 179 above do not affect a notice given
in relation to the scheme under paragraph 33 of Schedule 4 to ITEPA 2003
before 6 April 2014.

35Part 4 Enterprise management incentives

Amendments to Schedule 5 to ITEPA 2003

215 Schedule 5 to ITEPA 2003 (enterprise management incentives) is amended
as follows.

216 (1) 40Paragraph 44 (notice of option to be given to HMRC) is amended as follows.

(2) In sub-paragraph (2) omit paragraph (b) and the “and” before it.

(3) In sub-paragraph (4) for “each of sub-paragraphs (5) and (6)” substitute
“sub-paragraph (5)”.

(4) In sub-paragraph (5)—

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

(b) after paragraph (b) insert “, and

“(c) that the individual to whom the option has been
5granted has made and signed a written declaration
within sub-paragraph (6) and that the declaration
is held by the employer company”.

(5) After sub-paragraph (5) insert—

“(5A) The employer company must—

(a) 10retain the declaration mentioned in sub-paragraph (5)(c)
and, if requested to do so by an officer of Revenue and
Customs, produce it to such an officer before the end of the
period of 7 days after the day on which the request is
made, and

(b) 15give a copy of that declaration to the individual before the
end of the period of 7 days after the day on which the
declaration is signed by the individual.”

(6) After sub-paragraph (7) insert—

“(8) The notice, and any information supporting it, must be given
20electronically.

(9) But, if an officer of Revenue and Customs considers it appropriate
to do so, the officer may allow the employer company to give the
notice or any supporting information in another way; and, if the
officer does so, the notice or information must be given in that
25other way.

(10) The Commissioners for Her Majesty’s Revenue and Customs—

(a) must prescribe how notices and supporting information
are to be given electronically;

(b) may make different provision for different cases or
30circumstances.”

217 For paragraph 52 (annual returns) substitute—

“52 (1) This paragraph applies in relation to a company whose shares are
(or have been) subject to qualifying options.

(2) The company must give to Her Majesty’s Revenue and Customs
35(“HMRC”) a return for each tax year falling (wholly or partly) in
the company’s qualifying option period.

(3) The company’s “qualifying option period” is the period—

(a) beginning when the first qualifying option to which the
company’s shares are subject is granted, and

(b) 40ending when the termination condition is met.

(4) “The termination condition” is met when the company’s shares—

(a) are no longer subject to qualifying options, and

(b) will no longer become subject to qualifying options.

(5) The return for a tax year must—

(a) contain, or be accompanied by, such information as HMRC
may require, and

(b) be given on or before 6 July in the following tax year.

(6) The information which may be required under sub-paragraph
5(5)(a) includes (in particular) information to enable HMRC to
determine the liability to tax, including capital gains tax, of any
person who has been granted a qualifying option to which the
company’s shares are subject.

(7) If the company becomes aware that—

(a) 10anything which should have been included in, or should
have accompanied, a return for a tax year was not included
in, or did not accompany, the return,

(b) anything which should not have been included in, or
should not have accompanied, a return for a tax year was
15included in, or accompanied, the return, or

(c) any other error or inaccuracy has occurred in relation to a
return for a tax year,

the company must give an amended return correcting the position
to HMRC without delay.

52A (1) 20A return under paragraph 52, and any information accompanying
the return, must be given electronically.

(2) But, if HMRC consider it appropriate to do so, HMRC may allow
a company to give a return or any accompanying information in
another way; and, if HMRC do so, the return or information must
25be given in that other way.

(3) The Commissioners for Her Majesty’s Revenue and Customs—

(a) must prescribe how returns and accompanying
information are to be given electronically;

(b) may make different provision for different cases or
30circumstances.”

218 (1) Paragraph 53 (compliance with time limits) is amended as follows.

(2) In sub-paragraph (1)—

(a) after “a person” insert “(“P”)”, and

(b) in paragraphs (a) and (b) for “the person” substitute “P”.

(3) 35After sub-paragraph (2) insert—

“(3) For the purposes of sub-paragraph (1)—

(a) an insufficiency of funds is not a reasonable excuse, unless
attributable to events outside P’s control, and

(b) where P relies on any other person to do anything, that is
40not a reasonable excuse unless P took reasonable care to
avoid the failure.”

219 After paragraph 57 insert—

“Penalties

57A A company is liable for a penalty of £500 if the company fails—

(a) to produce a declaration to an officer of Revenue and
Customs as required by paragraph 44(5A)(a) before the
end of the period mentioned in that provision, or

(b) to provide a copy of a declaration to an individual as
5required by paragraph 44(5A)(b) before the end of the
period mentioned in that provision,

and Her Majesty’s Revenue and Customs (“HMRC”) decide that
such a penalty should be payable.

57B (1) This paragraph applies if a company fails to give a return for a tax
10year (containing, or accompanied by, all required information) on
or before the date mentioned in paragraph 52(5)(b) (“the date for
delivery”).

(2) The company is liable for a penalty of £100.

(3) If the company’s failure continues after the end of the period of 3
15months beginning with the date for delivery, the company is liable
for a further penalty of £300.

(4) If the company’s failure continues after the end of the period of 6
months beginning with the date for delivery, the company is liable
for a further penalty of £300.

(5) 20The company is liable for a further penalty under this sub-
paragraph if—

(a) the company’s failure continues after the end of the period
of 9 months beginning with the date for delivery,

(b) HMRC decide that such a penalty should be payable, and

(c) 25HMRC give notice to the company specifying the period in
respect of which the penalty is payable.

(The company may be liable for more than one penalty under this
sub-paragraph.)

(6) The penalty under sub-paragraph (5) is £10 for each day that the
30failure continues during the period specified in the notice under
sub-paragraph (5)(c).

(7) The period specified in the notice under sub-paragraph (5)(c)—

(a) may begin earlier than the date on which the notice is
given, but

(b) 35may not begin until after the end of the period mentioned
in sub-paragraph (5)(a) or, if relevant, the end of any
period specified in any previous notice under sub-
paragraph (5)(c) given in relation to the failure.

57C (1) This paragraph applies if a return under paragraph 52, or any
40information accompanying such a return—

(a) is given otherwise than in accordance with paragraph 52A,
or

(b) contains a material inaccuracy—

(i) which is careless or deliberate, or

(ii) 45which is not corrected as required by paragraph
52(7).

(2) The company is liable for a penalty of an amount decided by
HMRC.

(3) The penalty must not exceed £5,000.

(4) For the purposes of sub-paragraph (1)(b)(i) an inaccuracy is
5careless if it is due to a failure by the company to take reasonable
care.

57D (1) This paragraph applies if a company is liable for a penalty under
this Part.

(2) HMRC must assess the penalty and notify the company of the
10assessment.

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

(4) In the case of a penalty under paragraph 57C(1)(b), the assessment
15must be made no later than—

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

(b) 6 years after the date on which the company becomes liable
for the penalty.

(5) 20A 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
paragraph 57E(1) or (2), no later than 30 days after the date
25on which the appeal is determined or withdrawn.

(6) 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.

(7) Sections 100 to 103 of TMA 1970 do not apply to a penalty under
30this Part.

57E (1) A company may appeal against a decision of HMRC that the
company is liable for a penalty under this Part.

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

(3) 35Notice of appeal must be given to HMRC no later than 30 days
after the date on which the notice under paragraph 57D(2) is given
to the company.

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

(5) 40On an appeal under sub-paragraph (2) which is notified to the
tribunal, the tribunal may—

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

(b) substitute another amount for that amount.

(6) Subject to this paragraph and paragraph 57D, the provisions of
Part 5 of TMA 1970 relating to appeals have effect in relation to an
appeal under this paragraph as they have effect in relation to an
appeal against an assessment to corporation tax or, if the company
5is not within the charge to corporation tax, income tax.”

Other amendment: section 98 of TMA 1970

220 In the second column of the Table in section 98 of TMA 1970 (special returns
etc) omit the entry for paragraph 52 of Schedule 5 to ITEPA 2003.

Commencement and transitional provision

221 10This Part is treated as having come into force on 6 April 2014.

222 The amendments made by paragraph 216 above have no effect in relation to
options granted before 6 April 2014.

223 (1) The amendment made by paragraph 217 above has effect so as to require
returns for the tax year 2014-15 and subsequent tax years.

(2) 15It has effect in relation to companies whose qualifying option periods begin
before 6 April 2014 (as well as those whose qualifying option periods begin
on or after that date).

(3) It does not affect the duty of a company to deliver a return for a tax year
earlier than the tax year 2014-15 in accordance with paragraph 52 of
20Schedule 5 to ITEPA 2003 as that paragraph stood before its substitution;
and the effect of the amendment made by paragraph 220 above is limited
accordingly.

(4) In paragraphs 57B(1) and 57C(1) of Schedule 5 to ITEPA 2003 (as inserted by
paragraph 219 above) the reference to a return is to a return under
25paragraph 52 of that Schedule as substituted.

224 The amendment made by paragraph 218(3) above does not affect a
reasonable excuse which began before 6 April 2014.

Part 5 Other employee share schemes

30Amendments to Chapter 1 of Part 7 of ITEPA 2003

225 Chapter 1 of Part 7 of ITEPA 2003 (employment income: income and
exemptions relating to securities: general) is amended as follows.

226 (1) Section 421J (duty to provide information) is amended as follows.

(2) Omit subsections (3), (7), (8), (11) and (12).

(3) 35In subsection (10) for “by, or by a notice under,” substitute “by a notice
under”.

227 After section 421J insert—

“421JA Annual returns

(1) This section applies in relation to a person who is (or has been) a
responsible person (see section 421L) in relation to reportable events
5(see section 421K).

(2) The person must give to Her Majesty’s Revenue and Customs
(“HMRC”) a return for each tax year falling (wholly or partly) in the
person’s reportable event period.

(3) The person’s “reportable event period” is the period—

(a) 10beginning when the first reportable event occurs in relation
to which the person is a responsible person, and

(b) ending when the person will no longer be a responsible
person in relation to reportable events.

(4) The return for a tax year must—

(a) 15contain, or be accompanied by, such information as HMRC
may require, and

(b) be given on or before 6 July in the following tax year.

(5) The information which may be required under subsection (4)(a)
includes (in particular) information to enable HMRC to determine
20the liability to tax, including capital gains tax, of any employee.

(6) If the person becomes aware that—

(a) anything which should have been included in, or should
have accompanied, a return for a tax year was not included
in, or did not accompany, the return,

(b) 25anything which should not have been included in, or should
not have accompanied, a return for a tax year was included
in, or accompanied, the return, or

(c) any other error or inaccuracy has occurred in relation to a
return for a tax year,

30the person must give an amended return correcting the position to
HMRC without delay.

(7) A person’s return for a tax year under this section need not contain,
or be accompanied by, duplicate information and a person is not
required to give a return for a tax year under this section if it would
35only contain, or be accompanied by, duplicate information.

(8) “Duplicate information” means information which is contained in or
accompanies—

(a) a return which another person gives for the tax year under
this section, or

(b) 40a return which any person gives for the tax year under any of
the following provisions—

(i) paragraph 81B of Schedule 2 (annual return for
Schedule 2 SIP);

(ii) paragraph 40B of Schedule 3 (annual return for
45Schedule 3 SAYE option scheme);

(iii) paragraph 28B of Schedule 4 (annual return for
Schedule 4 CSOP scheme);

(iv) paragraph 52 of Schedule 5 (annual return for
company whose shares are subject to qualifying
options under the EMI code).

421JB Returns to be given electronically

(1) 5A return under section 421JA, and any information accompanying
the return, must be given electronically.

(2) But, if HMRC consider it appropriate to do so, HMRC may allow a
person to give a return or any accompanying information in another
way; and, if HMRC do so, the return or information must be given in
10that other way.

(3) The Commissioners for Her Majesty’s Revenue and Customs—

(a) must prescribe how returns and accompanying information
are to be given electronically;

(b) may make different provision for different cases or
15circumstances.

421JC Penalties for late returns

(1) This section applies if a person fails to give a return under section
421JA for a tax year (containing, or accompanied by, all required
information) on or before the date mentioned in section 421JA(4)(b)
20(“the date for delivery”).

(2) The person is liable for a penalty of £100.

(3) If the person’s failure continues after the end of the period of 3
months beginning with the date for delivery, the person is liable for
a further penalty of £300.

(4) 25If the person’s failure continues after the end of the period of 6
months beginning with the date for delivery, the person is liable for
a further penalty of £300.

(5) The person is liable for a further penalty under this subsection if—

(a) the person’s failure continues after the end of the period of 9
30months beginning with the date for delivery,

(b) HMRC decide that such a penalty should be payable, and

(c) HMRC give notice to the person specifying the period in
respect of which the penalty is payable.

(The person may be liable for more than one penalty under this
35subsection.)

(6) The penalty under subsection (5) is £10 for each day that the failure
continues during the period specified in the notice under subsection
(5)(c).

(7) The period specified in the notice under subsection (5)(c)—

(a) 40may begin earlier than the date on which the notice is given,
but

(b) may not begin until after the end of the period mentioned in
subsection (5)(a) or, if relevant, the end of any period
specified in any previous notice under subsection (5)(c) given
45in relation to the failure.