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

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

(4) 5If the scheme organiser’s failure continues after the end of the
period of 6 months beginning with the date for delivery, the
scheme organiser is liable for a further penalty of £300.

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

(a) 10the scheme organiser’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) HMRC give notice to the scheme organiser specifying the
15period in respect of which the penalty is payable.

(The scheme organiser 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
failure continues during the period specified in the notice under
20sub-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) may not begin until after the end of the period mentioned
25in 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.

(8) Liability for a penalty under this paragraph does not arise if the
scheme organiser satisfies HMRC (or, on an appeal under
30paragraph 28K, the tribunal) that there is a reasonable excuse for
its failure.

(9) For the purposes of sub-paragraph (8)

(a) an insufficiency of funds is not a reasonable excuse, unless
attributable to events outside the scheme organiser’s
35control,

(b) where the scheme organiser relies on any other person to
do anything, that is not a reasonable excuse unless the
scheme organiser took reasonable care to avoid the failure,
and

(c) 40where the scheme organiser had a reasonable excuse for
the failure but the excuse ceased, the scheme organiser is to
be treated as having continued to have the excuse if the
failure is remedied without unreasonable delay after the
excuse ceased.

28D 45Notices and returns to be given electronically etc

(1) A notice under paragraph 28A, and any information
accompanying the notice, must be given electronically.

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(2) A return under paragraph 28B, and any information
accompanying the return, must be given electronically.

(3) But, if HMRC consider it appropriate to do so, HMRC may allow
the scheme organiser to give a notice or return or any
5accompanying information in another way; and, if HMRC do so,
the notice, return or information must be given in that other way.

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

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

(b) 10may make different provision for different cases or
circumstances.

(1) This paragraph applies if a return under paragraph 28B, or any
information accompanying such a return—

(a) is given otherwise than in accordance with paragraph 28D,
15or

(b) contains a material inaccuracy—

(i) which is careless or deliberate, or

(ii) which is not corrected as required by paragraph
28B(11).

(2) 20The scheme organiser 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
careless if it is due to a failure by the scheme organiser to take
25reasonable care.

28F Enquiries

(1) This paragraph applies if notice is given in relation to a CSOP
scheme under paragraph 28A.

(2) HMRC may enquire into the scheme if HMRC give notice to the
30scheme organiser of HMRC’s intention to do so no later than—

(a) 6 July in the tax year following that in which the initial
notification deadline falls, or

(b) if the notice under paragraph 28A is given after the initial
notification deadline, 6 July in the second tax year
35following the relevant tax year.

(3) HMRC may enquire into the scheme if HMRC give notice to the
scheme organiser of HMRC’s intention to do so no later than 12
months after the date on which a declaration within paragraph
28B(7) is given to HMRC.

(4) 40Sub-paragraph (5) applies if (at any time) HMRC have reasonable
grounds for believing that requirements of Parts 2 to 6 of this
Schedule—

(a) are not met in relation to the scheme, or

(b) have not been met in relation to the scheme.

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(5) HMRC may enquire into the scheme if HMRC give notice to the
scheme organiser of HMRC’s intention to do so.

(6) Notice may be given, and an enquiry may be conducted, under
sub-paragraph (2), (3) or (5) even though the termination
5condition is met in relation to the scheme.

(1) An enquiry under paragraph 28F(2), (3) or (5) is completed when
HMRC give the scheme organiser a notice (a “closure notice”)
stating—

(a) that HMRC have completed the enquiry, and

(b) 10that—

(i) paragraph 28H is to apply,

(ii) paragraph 28I is to apply, or

(iii) neither paragraph 28H nor paragraph 28I is to
apply.

(2) 15If the scheme organiser receives notice under paragraph 28F(2), (3)
or (5), the scheme organiser may make an application to the
tribunal for a direction requiring a closure notice for the enquiry
to be given within a specified period.

(3) The application is to be subject to the relevant provisions of Part 5
20of TMA 1970 (see, in particular, section 48(2)(b) of that Act).

(4) The tribunal must give a direction unless satisfied that HMRC
have reasonable grounds for not giving the closure notice within
the specified period.

(1) This paragraph applies if HMRC decide—

(a) 25that requirements of Parts 2 to 6 of this Schedule—

(i) are not met in relation to the scheme, or

(ii) have not been met in relation to the scheme, and

(b) that the situation is, or was, so serious that this paragraph
should apply.

(2) 30If this paragraph applies—

(a) the scheme is not to be a Schedule 4 CSOP scheme with
effect from—

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

(ii) 35if no relevant time is specified, the time of the
giving of the closure notice, and

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

(3) The penalty under sub-paragraph (2)(b) must not exceed an
40amount equal to twice HMRC’s reasonable estimate of—

(a) the total income tax for which persons who have been
granted share options under the scheme have not been
liable, or will not be liable in the future, and

(b) the total contributions under Part 1 of SSCBA 1992 or
45SSCB(NI)A 1992 for which any persons have not been
liable, or will not be liable in the future,

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in consequence of the scheme having been a Schedule 4 CSOP
scheme at any relevant time before the time mentioned in sub-
paragraph (2)(a)(i) or (ii) (as the case may be).

(4) In this paragraph “relevant time” means any time before the
5giving of the closure notice when requirements of Parts 2 to 6 of
this Schedule were not met in relation to the scheme.

(1) This paragraph applies if HMRC decide—

(a) that requirements of Parts 2 to 6 of this Schedule—

(i) are not met in relation to the scheme, or

(ii) 10have not been met in relation to the scheme, but

(b) that the situation is not, or was not, so serious that
paragraph 28H should apply.

(2) If this paragraph applies, the scheme organiser—

(a) is liable for a penalty of an amount decided by HMRC, and

(b) 15must, no later than 90 days after the relevant day, secure
that the requirements of Parts 2 to 6 of this Schedule are
met in relation to the scheme.

(3) The penalty under sub-paragraph (2)(a) must not exceed £5,000.

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

(a) 20the last day of the period in which notice of an appeal
under paragraph 28K(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) Sub-paragraph (2)(b) does not apply if the termination condition
25was met in relation to the scheme before the closure notice was
given or is met before the end of the 90 day period mentioned in
sub-paragraph (2)(b).

(6) If the scheme organiser fails to comply with sub-paragraph (2)(b),
HMRC may give the scheme organiser a notice stating that that is
30the case (a “default notice”).

(7) If the scheme organiser is given a default notice—

(a) the scheme is not to be a Schedule 4 CSOP scheme with
effect from—

(i) such relevant time as is specified in the default
35notice, or

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

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

(8) 40The 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 persons who have been
granted share options under the scheme have not been
liable, or will not be liable in the future, and

(b) 45the 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,

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in consequence of the scheme having been a Schedule 4 CSOP
scheme at any relevant time before the time mentioned in sub-
paragraph (7)(a)(i) or (ii) (as the case may be).

(9) In this paragraph “relevant time” means any time before the
5giving of the default notice when requirements of Parts 2 to 6 of
this Schedule were not met in relation to the scheme.

28J Assessment of penalties

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

(2) 10HMRC must assess the penalty and notify the scheme organiser 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 scheme
organiser becomes liable for the penalty.

(4) 15In the case of a penalty under paragraph 28E(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) 6 years after the date on which the scheme organiser
20becomes liable for the penalty.

(5) In the case of a penalty under paragraph 28H(2)(b) or 28I(2)(a) or
(7)(b) where notice of appeal is given under paragraph 28K(2) or
(3), the assessment must be made no later than 12 months after the
date on which the appeal is determined or withdrawn.

(6) 25A 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 scheme organiser,
or

(b) if notice of appeal is given against the penalty under
30paragraph 28K(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
scheme organiser is not within the charge to corporation tax,
income tax charged in an assessment and due and payable.

(8) 35Sections 100 to 103 of TMA 1970 do not apply to a penalty under
this Part.

28K Appeals

(1) The scheme organiser may appeal against a decision of HMRC
that the scheme organiser is liable for a penalty under paragraph
4028C or 28E.

(2) The scheme organiser may appeal against—

(a) a decision of HMRC mentioned in paragraph 28H(1) or a
decision of HMRC to specify, or not to specify, a relevant
time in the closure notice;

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(b) a decision of HMRC mentioned in paragraph 28I(1).

(3) The scheme organiser may appeal against a decision of HMRC

(a) to give the scheme organiser a default notice under
paragraph 28I;

(b) 5to specify, or not to specify, a relevant time in the default
notice.

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

(5) 10Notice 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 28J(2) is given to the scheme
organiser;

(b) 15in 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.

(6) On an appeal under sub-paragraph (1) or (3)(a) which is notified
20to the tribunal, the tribunal may affirm or cancel the decision.

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

(a) affirm or cancel the decision, or

(b) substitute for the decision another decision which HMRC
25had power to make.

(8) On an appeal under sub-paragraph (4) 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.

(9) 30Subject to this paragraph and paragraph 28J, 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 scheme
organiser is not within the charge to corporation tax, income tax.

179 (1) 35Paragraph 33 (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
person to provide the officer with any information—

(a) which the officer reasonably requires for the performance
40of any functions of Her Majesty’s Revenue and Customs or
an officer of Revenue and Customs under the CSOP code,
and

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

(3) 45In sub-paragraph (2)(a)—

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(a) for sub-paragraph (i) substitute—

(i) to check anything contained in a notice
under paragraph 28A or a return under
paragraph 28B or to check any information
5accompanying such a notice or return, or”,
and

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

180 After paragraph 35 insert—

10Non-UK company reorganisation arrangements

35ZA (1) For the purposes of the CSOP code a “non-UK company
reorganisation arrangement” is an arrangement made in relation
to a company under the law of a territory outside the United
Kingdom—

(a) 15which gives effect to a reorganisation of the company’s
share capital by the consolidation of shares of different
classes, or by the division of shares into shares of different
classes, or by both of those methods, and

(b) which is approved by a resolution of members of the
20company.

(2) A resolution does not count for the purposes of sub-paragraph
(1)(b) unless the members who vote in favour of approving the
arrangement represent more than 50% of the total voting rights of
all the members having the right to vote on the issue.

181 25In paragraph 37 (index of defined expressions)—

(a) omit the entry for “approved”, and

(b) at the appropriate places insert—

non-UK company
reorganisation
arrangement
paragraph 35ZA”

30
“Schedule 4 CSOP
scheme
paragraph 1 and Part 7 of this
Schedule.

Other amendments: TCGA 1992

182 TCGA 1992 is amended as follows.

183 35In section 238A (share schemes and share incentives) in subsection (2)(c) for
“approved” substitute “Schedule 4”.

184 Part 3 of Schedule 7D (CSOP schemes) is amended as follows.

185 In the title for “Approved” substitute “Schedule 4”.

186 (1) Paragraph 11 (introduction) is amended as follows.

(2) 40In sub-paragraphs (1) and (2) omit “approved”.

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

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187 In paragraph 12 (relief where income tax charged in respect of grant of
option) in sub-paragraph (4)(b) for “approved” substitute “a Schedule 4
CSOP scheme”.

188 In paragraph 13 (market value rule not to apply) in sub-paragraphs (1)(a)
5and (3) for “approved” substitute “a Schedule 4 CSOP scheme”.

Other amendments: ITEPA 2003

189 ITEPA 2003 is amended as follows.

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

191 In section 417 (scope of Part 7) in subsection (2), in the entry for Chapter 8,
10omit “approved”.

192 In section 431A (which makes provision relating to restricted securities etc)
in subsection (2)(c) for “an approved” substitute “a Schedule 4”.

193 In section 473 (introduction to taxation of securities options) in subsection
(4)(b) for “approved” substitute “Schedule 4”.

194 15In 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 In section 480 (deductible amounts) in subsection (4) omit “approved”.

197 20In 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
“approved”.

199 (1) 25Section 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) In subsection (4)(a) and (b) for the third “approved” substitute “Schedule 4”.

200 30In 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 In section 701 (PAYE: meaning of “asset”) in subsection (2)(c)(ia) for
35“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
Schedule 4 (CSOP schemes)” substitute “which is a Schedule 4 CSOP scheme
40(see Schedule 4)”.

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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
before 6 April 2014.

205 (1) 5If 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
Customs to be obtained in relation to any matter.

(2) 10On 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) If the scheme was an approved CSOP scheme immediately before 6 April
152014, 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 20If the scheme was an approved CSOP scheme immediately before 6 April
2014, on and after that date the scheme has effect with any modifications
needed 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
256 April 2014.

(2) 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
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) 30This paragraph applies if, immediately before 6 April 2014 the scheme was
an approved CSOP scheme which contains provision authorised by
paragraph 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) 35The amendments made by paragraph 174 above have no effect in relation to
share options granted before 6 April 2014 under the scheme.

(2) If 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
40modifications needed to reflect the amendments made by paragraph 174
above (subject to sub-paragraph (1) of this paragraph).

211 (1) This 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.

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

(a) 5as 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
falls before 6 April 2014—

(i) as if, in sub-paragraph (3)(b), the reference to that date were
10a 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) as if sub-paragraph (3)(b)(i) were omitted, and

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

(c) 15as 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) But 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
20Customs 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
25paragraph 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) 30On 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
35paragraph).

(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) 40HMRC 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
45178 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

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