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

(4) Omit subsection (3).

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

(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) 10Section 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 15In 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
20subsection (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(2) In the heading for “approval for share incentive plan withdrawn
25substitute “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) 30for “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.

35Other amendments: Individual Savings Account Regulations 1998 (S.I. 1998/1870S.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”
40and “plan shares” for “an approved” substitute “a Schedule 2”, and

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(c) at the appropriate place insert—

86 In regulation 7 (qualifying investments) in paragraph (2)(h)(iii) for “an
5approved” substitute “a Schedule 2”.

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

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

(b) 10in the inserted subsection (13)(c) for “approved” substitute
“Schedule 2”.

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

88 The Employee Share Schemes (Electronic Communication of Returns and
15Information) Regulations 2007 are revoked.

Commencement and transitional provision

89 This 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) 20If the SIP was an approved SIP immediately before 6 April 2014, this
paragraph applies to any provision which the SIP 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 Customs to be
obtained in relation to any matter.

(2) 25On 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 2 to ITEPA 2003
(as amended by this Part).

92 (1) If the SIP was an approved SIP immediately before 6 April 2014, the
30amendments 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
trust 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 35If 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
needed 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
40above) has effect in relation to the SIP

(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 awards of shares are made under the SIP
falls before 6 April 2014—

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(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 81A to the first award date were
references to 6 April 2014,

(ii) 5as 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) 10But 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
to 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
15decision to withdraw approval.

(4) The amendments made by this Part do not affect any right of appeal under
paragraph 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
20appropriated 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) On 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
25of, the individual under the SIP at a time when the SIP was a
Schedule 2 SIP, and

(b) if 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
30Schedule 2 SIP despite no notice being given or despite sub-
paragraph (2).

(7) If 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,
35for this purpose, the relevant date is to be taken to be 6 April 2014.

(8) In relation to the SIP

(a) paragraph 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) 40HMRC may enquire into the SIP if HMRC give notice to
the company of HMRC’s intention to do so no later than 6
July 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
45above) include cases in which requirements of Parts 2 to 9 of that
Schedule were not met before 6 April 2014.

95 If 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

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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 The amendments made by paragraph 31 above do not affect a notice given
5in relation to the SIP under paragraph 93 of Schedule 2 to ITEPA 2003 before
6 April 2014.

Part 2 SAYE option schemes

Amendments to Chapter 7 of Part 7 of ITEPA 2003

97 10Chapter 7 of Part 7 of ITEPA 2003 (employment income: income and
exemptions 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) 15In the heading omit “Approved”.

(3) In 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) 20Omit subsection (2).

(5) In 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) 30Section 519 (no charge in respect of exercise of option) is amended as
follows.

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

(3) In subsection (3A)—

(a) 35in paragraph (a) for “approved” substitute “a Schedule 3 SAYE
option 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) 40the non-UK company reorganisation
arrangement, or, and

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(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) 5In subsection (3H)—

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

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

(5) In subsection (5)(b)—

(a) 10for “paragraph 42(3) provides” substitute “paragraphs 40H(4) and
40I(9) provide”,

(b) for “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 15Schedule 3 is amended as follows.

103 In the title omit “Approved”.

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

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

(2) 20For sub-paragraphs (1) and (2) substitute—

(A1) For the purposes of the SAYE code an SAYE option scheme is a
Schedule 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) 25Sub-paragraph (A1) is subject to Part 8 of this Schedule which—

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

(b) 30provides for a scheme in relation to which such notice is
given to be a Schedule 3 SAYE option scheme (see
paragraph 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
35option scheme (see paragraphs 40F to 40I).

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

107 In 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
40this Schedule, benefits for employees and directors in the form of
share options.

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

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(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 In paragraph 17 (requirements relating to shares that may be subject to share
5options) after sub-paragraph (1) insert—

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

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

111 (1) 10Paragraph 28 (requirements as to price for acquisition of shares) is amended
as follows.

(2) After 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
15of a variation in any share capital must (in particular) secure—

(a) that the total market value of the shares which may be
acquired 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,
20and

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

(3B) 25Sub-paragraph (3) does not authorise any variation which would
result in the requirements of the other paragraphs of this Schedule
not 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
30time”.

113 In paragraph 34 (exercise of options: scheme-related employment ends) in
sub-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
35relevant transfer within the meaning of the Transfer of Undertakings
(Protection of Employment) Regulations 2006”.

114 (1) Paragraph 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) 40After sub-paragraph (4) insert—

(4A) The relevant date for the purposes of this sub-paragraph is the
date on which a non-UK company reorganisation arrangement
applicable to or affecting—

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(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
5held 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.

(5) After sub-paragraph (6) insert—

(6A) 10Sub-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
event, shares in the company to which a share option relates no
longer meet the requirements of Part 4 of this Schedule, the share
15option 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
the shares no longer meet the requirements of Part 4 of this
Schedule.

(6C) 20In sub-paragraph (6B) “relevant event” means—

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

(b) a person obtaining control of the company as a result of a
compromise or arrangement sanctioned by the court as
25mentioned in sub-paragraph (4);

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

(d) 30a person who is bound or entitled to acquire shares in the
company as mentioned in sub-paragraph (6) obtaining
control of the company.

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

(a) 35at a time outside the 6 month period mentioned in sub-
paragraph (1), or

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

(6E) The scheme may provide that a share option relating to shares in
a company which is exercised during the period of 20 days ending
40with—

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

(b) the date on which any person becomes bound or entitled
to acquire shares in the company as mentioned in sub-
45paragraph (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
be).

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(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) 5an 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

(b) 10as 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
option is exercised, or

(ii) 15the 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,

the exercise of the share option is to be treated as having had no
20effect.

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) obtains control of the scheme company as a result of a non-
25UK 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-
paragraph (2)(ba), within the period of 6 months
30beginning 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
amended as follows.

(2) 35In sub-paragraph (4)—

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

(b) in paragraph (d) for “equal to” substitute “substantially the same as”.

(3) After sub-paragraph (7) insert—

(8) 40For the purposes of this paragraph the market value of any shares
is to be determined using a methodology agreed by Her Majesty’s
Revenue and Customs.

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117 For Part 8 substitute—

Part 8 Notification of schemes, annual returns and enquiries
40A Notice of scheme to be given to HMRC

(1) 5For an SAYE option scheme to be a Schedule 3 SAYE option
scheme, notice of the scheme must be given to Her Majesty’s
Revenue and Customs (“HMRC”).

(2) The notice must—

(a) be given by the scheme organiser,

(b) 10contain, or be accompanied by, such information as HMRC
may require, and

(c) contain a declaration within sub-paragraph (3) made by
such persons as HMRC may require.

(3) A declaration within this sub-paragraph is a declaration—

(a) 15that the requirements of Parts 2 to 7 of this Schedule are
met in relation to the scheme, and

(b) if the declaration is made after the first date on which share
options are granted under the scheme (“the first grant
date”), that those requirements—

(i) 20were met in relation to those grants of share
options, and

(ii) have otherwise been met in relation to the scheme
at all times on or after the first grant date when
share options granted under the scheme are
25outstanding.

(4) If notice is given under this paragraph in relation to an SAYE
option scheme, for the purposes of the SAYE code the scheme is to
be a Schedule 3 SAYE option scheme at all times on and after the
relevant date (but not before that date).

(5) 30But if the notice is given after the initial notification deadline, the
scheme is to be a Schedule 3 SAYE option scheme only from the
beginning of the relevant tax year.

(6) For the purposes of this Part—

(7) Sub-paragraph (4) is subject to the following paragraphs of this
Part.

40B 10Annual returns

(1) This paragraph applies if notice is given in relation to an SAYE
option scheme under paragraph 40A.

(2) The scheme organiser must give to HMRC a return for the tax year
in which the relevant date falls and for each subsequent tax year
15(subject to sub-paragraph (9)).

(3) If paragraph 40A(5) applies in relation to the scheme, in sub-
paragraph (2) the reference to the tax year in which the relevant
date falls is to be read as a reference to the relevant tax year.

(4) A return for a tax year must—

(a) 20contain, 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 sub-paragraph
(4)(a) includes (in particular) information to enable HMRC to
25determine the liability to tax, including capital gains tax, of—

(a) any person who has participated in the scheme, or

(b) any other person whose liability to tax the operation of the
scheme is relevant to.

(6) If during a tax year—

(a) 30an alteration is made in a key feature of the scheme, or

(b) variations are made under a provision made under
paragraph 28(3) to take account of a variation in any share
capital,

the return for the tax year must contain a declaration within sub-
35paragraph (7) made by such persons as HMRC may require.

(7) A declaration within this sub-paragraph is a declaration, as the
case may be—

(a) that the alteration has, or

(b) that the variations have,

40not caused the requirements of Parts 2 to 7 of this Schedule not to
be met in relation to the scheme.

(8) For the purposes of sub-paragraph (6)(a) a “key feature” of a
scheme is a provision of the scheme which is necessary in order for
the requirements of Parts 2 to 7 of this Schedule to be met in
45relation to the scheme.

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