(9) A return is not required for any tax year following that in which
the termination condition is met in relation to the scheme.

(10) For the purposes of this Part “the termination condition” is met in
relation to a scheme when—

(a) 5all share options granted under the scheme—

(i) have been exercised, or

(ii) are no longer capable of being exercised in
accordance with the scheme (because, for example,
they have lapsed or been cancelled), and

(b) 10no more share options will be granted under the scheme.

(11) If the scheme organiser 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) 15anything 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,

20the scheme organiser must give an amended return correcting the
position to HMRC without delay.

(1) This paragraph applies if the scheme organiser fails to give a
return for a tax year (containing, or accompanied by, all required
information and declarations) on or before the date mentioned in
25paragraph 40B(4)(b) (“the date for delivery”).

(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) 30If 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) 35the 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
40period 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
45sub-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
in sub-paragraph (5)(a) or, if relevant, the end of any
5period 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
paragraph 40K, the tribunal) that there is a reasonable excuse for
10its 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
control,

(b) 15where 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) where the scheme organiser had a reasonable excuse for
20the 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.

40D Notices and returns to be given electronically etc

(1) 25A notice under paragraph 40A, and any information
accompanying the notice, must be given electronically.

(2) A return under paragraph 40B, and any information
accompanying the return, must be given electronically.

(3) But, if HMRC consider it appropriate to do so, HMRC may allow
30the scheme organiser to give a notice or return or any
accompanying 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
35information are to be given electronically;

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

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

(a) 40is given otherwise than in accordance with paragraph 40D,
or

(b) contains a material inaccuracy—

(i) which is careless or deliberate, or

(ii) which is not corrected as required by paragraph
4540B(11).

(2) The 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
reasonable care.

40F 5Enquiries

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

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

(a) 106 July in the tax year following the tax year in which the
initial notification deadline falls, or

(b) if the notice under paragraph 40A is given after the initial
notification deadline, 6 July in the second tax year
following the relevant tax year.

(3) 15HMRC 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
40B(7) is given to HMRC.

(4) Sub-paragraph (5) applies if (at any time) HMRC have reasonable
20grounds for believing that requirements of Parts 2 to 7 of this
Schedule—

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

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

(5) HMRC may enquire into the scheme if HMRC give notice to the
25scheme 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
condition is met in relation to the scheme.

(1) An enquiry under paragraph 40F(2), (3) or (5) is completed when
30HMRC give the scheme organiser a notice (a “closure notice”)
stating—

(a) that HMRC have completed the enquiry, and

(b) that—

(i) paragraph 40H is to apply,

(ii) 35paragraph 40I is to apply, or

(iii) neither paragraph 40H nor paragraph 40I is to
apply.

(2) If the scheme organiser receives notice under paragraph 40F(2), (3)
or (5), the scheme organiser may make an application to the
40tribunal 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
of 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) 5that requirements of Parts 2 to 7 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) 10If this paragraph applies—

(a) the scheme is not to be a Schedule 3 SAYE option scheme
with effect from—

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

(ii) 15if 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) Sub-paragraph (4) applies in relation to a share option granted
20under the scheme if the option—

(a) is granted at a time before that mentioned in sub-
paragraph (2)(a)(i) or (ii) (as the case may be) when the
scheme is a Schedule 3 SAYE option scheme, but

(b) is exercised at or after the time mentioned in sub-
25paragraph (2)(a)(i) or (ii) (as the case may be).

(4) For the purposes of section 519 (exemption in respect of exercise of
share option) in its application to the option, the scheme is to be
taken still to be a Schedule 3 SAYE option scheme at the time of the
exercise of the option.

(5) 30The penalty under sub-paragraph (2)(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) 35the 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 scheme having been a Schedule 3 SAYE
option scheme at any relevant time before the time mentioned in
40sub-paragraph (2)(a)(i) or (ii) (as the case may be).

(6) The liabilities covered by sub-paragraph (5) include liabilities for
income tax or contributions which a person has not had, or will not
have, in consequence of sub-paragraph (4).

(7) In this paragraph “relevant time” means any time before the
45giving of the closure notice when requirements of Parts 2 to 7 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 7 of this Schedule—

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

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

(b) that the situation is not, or was not, so serious that
5paragraph 40H should apply.

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

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

(b) must, no later than 90 days after the relevant day, secure
that the requirements of Parts 2 to 7 of this Schedule are
10met 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) the last day of the period in which notice of an appeal
under paragraph 40K(2)(b) may be given, or

(b) 15if 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
was 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
20sub-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
the case (a “default notice”).

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

(a) 25the scheme is not to be a Schedule 3 SAYE option scheme
with effect from—

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

(ii) if no relevant time is specified, the time of the
30giving of the default notice, and

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

(8) Sub-paragraph (9) applies in relation to a share option granted
under the scheme if the option—

(a) 35is granted at a time before that mentioned in sub-
paragraph (7)(a)(i) or (ii) (as the case may be) when the
scheme is a Schedule 3 SAYE option scheme, but

(b) is exercised at or after the time mentioned in sub-
paragraph (7)(a)(i) or (ii) (as the case may be).

(9) 40For the purposes of section 519 (exemption in respect of exercise of
share option) in its application to the option, the scheme is to be
taken still to be a Schedule 3 SAYE option scheme at the time of the
exercise of the option.

(10) The penalty under sub-paragraph (7)(b) must not exceed an
45amount 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
5SSCB(NI)A 1992 for which any persons have not been
liable, or will not be liable in the future,

in consequence of the scheme having been a Schedule 3 SAYE
option scheme at any relevant time before the time mentioned in
sub-paragraph (7)(a)(i) or (ii) (as the case may be).

(11) 10The 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-paragraph (9).

(12) In this paragraph “relevant time” means any time before the
giving of the default notice when requirements of Parts 2 to 7 of
15this Schedule were not met in relation to the scheme.

40J Assessment of penalties

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

(2) HMRC must assess the penalty and notify the scheme organiser of
20the 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) In the case of a penalty under paragraph 40E(1)(b), the assessment
25must 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
becomes liable for the penalty.

(5) 30In the case of a penalty under paragraph 40H(2)(b) or 40I(2)(a) or
(7)(b) where notice of appeal is given under paragraph 40K(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) A penalty payable under this Part must be paid—

(a) 35no 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
paragraph 40K(1) or (4), no later than 30 days after the date
40on 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) Sections 100 to 103 of TMA 1970 do not apply to a penalty under
45this Part.

40K Appeals

(1) The scheme organiser may appeal against a decision of HMRC
that the scheme organiser is liable for a penalty under paragraph
40C or 40E.

(2) 5The scheme organiser may appeal against—

(a) a decision of HMRC mentioned in paragraph 40H(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 40I(1).

(3) 10The scheme organiser may appeal against a decision of HMRC—

(a) to give the scheme organiser a default notice under
paragraph 40I;

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

(4) 15The 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) Notice of appeal must be given to HMRC no later than 30 days
after the date on which—

(a) 20in the case of an appeal under sub-paragraph (1) or (4), the
notice under paragraph 40J(2) is given to the scheme
organiser;

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

(c) 25in 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
to the tribunal, the tribunal may affirm or cancel the decision.

(7) On an appeal under sub-paragraph (2) or (3)(b) which is notified
30to 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.

(8) On an appeal under sub-paragraph (4) which is notified to the
35tribunal, the tribunal may—

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

(b) substitute another amount for that amount.

(9) Subject to this paragraph and paragraph 40J, the provisions of Part
5 of TMA 1970 relating to appeals have effect in relation to an
40appeal 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.”

118 (1) Paragraph 45 (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
5of any functions of Her Majesty’s Revenue and Customs or
an officer of Revenue and Customs under the SAYE code,
and

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

(3) 10In sub-paragraph (2)(a)—

(a) for sub-paragraph (i) substitute—

“(i) to check anything contained in a notice
under paragraph 40A or a return under
paragraph 40B or to check any information
15accompanying 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”.

119 After paragraph 47 insert—

20“Non-UK company reorganisation arrangements

47A (1) For the purposes of the SAYE 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) 25which 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
30company.

(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.”

120 35In paragraph 49 (index of defined expressions)—

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

(b) at the appropriate places insert—

Other amendments: TCGA 1992

121 TCGA 1992 is amended as follows.

122 (1) 45Section 105A (shares acquired on same day: election for alternative
treatment) is amended as follows.

(2) For “approved-scheme” (in all places) substitute “tax-advantaged-scheme”.

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

123 In section 105B (provision supplementary to section 105A) in subsections (7)
50and (8) for “approved-scheme” substitute “tax-advantaged-scheme”.

124 In section 238A (share schemes and share incentives) in subsection (2)(b) for
“approved” substitute “Schedule 3”.

125 Part 2 of Schedule 7D (SAYE option schemes) is amended as follows.

126 In the title for “Approved” substitute “Schedule 3”.

127 55In paragraph 9 (introduction) in sub-paragraphs (1) and (2) omit
“approved”.

128 (1) Paragraph 10 (market value rule not to apply) is amended as follows.

(2) In sub-paragraph (1)—

(a) in paragraph (a)(i) for “an approved” substitute “a Schedule 3”, and

(b) 60in paragraph (b) for “approved” substitute “a Schedule 3 SAYE
option scheme”.

(3) For sub-paragraph (3) substitute—

“(3) Sub-paragraph (3A) applies for the purposes of sub-paragraph
(1)(b) if—

(a) 65the SAYE option scheme is not to be a Schedule 3 SAYE
option scheme by virtue of paragraph 40H or 40I of
Schedule 3 to ITEPA 2003, and

(b) the option was granted before, but exercised at or after, the
time mentioned in paragraph 40H(2)(a)(i) or (ii) or
7040I(7)(a)(i) or (ii) of that Schedule (as the case may be).

(3A) The scheme is to be taken still to be a Schedule 3 SAYE option
scheme when the option is exercised.”

Other amendments: ITEPA 2003, Part 4 of FA 2004, ITTOIA 2005 and CTA 2009

129 ITEPA 2003 is amended as follows.

130 75In section 227 (scope of Part 4) in subsection (4)(e) omit “approved”.

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

132 In section 431A (provision relating to restricted securities) in subsection
(2)(b) for “an approved” substitute “a Schedule 3”.

133 80In section 473 (introduction to taxation of securities options) in subsection
(4)(a) for “approved” substitute “Schedule 3”.

134 In section 476 (charge on occurrence of chargeable event) in subsection (6),
in the entry for section 519, omit “approved”.

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

136 (1) 5Section 554E (exclusions under Part 7A) is amended as follows.

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

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

(4) In subsection (4)(a) and (b) for the second “approved” substitute “Schedule
103”.

137 In section 697 (PAYE: enhancing the value of an asset) in subsection (4)—

(a) in paragraph (a) omit the words from “Schedule 3” to the second
“or”,

(b) after paragraph (a) insert—

“(aa) 15any shares acquired by the employee under a scheme
which is a Schedule 3 SAYE option scheme (see
Schedule 3),”, and

(c) in paragraph (b) for “such a scheme” substitute “a scheme mentioned
in any of the preceding paragraphs”.

138 20In section 701 (PAYE: meaning of “asset”) in subsection (2)(c)—

(a) in sub-paragraph (i) omit “Schedule 3 (approved SAYE option
schemes) or”, and

(b) after sub-paragraph (i) insert—

“(iza) any shares acquired by the employee under a
25scheme which is a Schedule 3 SAYE option
scheme (see Schedule 3),”.

139 In section 195 of FA 2004 (pensions: transfer of certain shares to be treated as
payment of contribution) in subsection (5), in the definition of “SAYE option
scheme”, omit “approved”.

140 (1) 30Section 703 of ITTOIA 2005 (SAYE interest: meaning of “certified SAYE
savings arrangement”) is amended as follows.

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

(3) In subsection (3) for the definition of “SAYE option scheme” substitute—

• ““Schedule 3 SAYE option scheme” has the meaning given in
  35Schedule 3 to ITEPA 2003.”

141 (1) Section 999 of CTA 2009 (deduction for costs of setting up SAYE option
scheme etc) is amended as follows.

(2) In subsection (1)—

(a) in paragraph (a) omit “that is approved by an officer of Revenue and
40Customs”, and

(b) omit paragraph (b) and the “and” before it.

(3) In subsection (2)—

(a) at the beginning of paragraph (a) insert “Schedule 3”,

(b) at the beginning of paragraph (b) insert “Schedule 4”, and

(c) omit the final sentence.

(4) In subsection (6) for “approval is given” (in all places) substitute “relevant
date falls”.

(5) After subsection (6) insert—

“(6A) 5In subsection (6) “the relevant date”—

(a) in relation to a Schedule 3 SAYE option scheme, has the
meaning given in paragraph 40A(6) of Schedule 3 to ITEPA
2003, and

(b) in relation to a Schedule 4 CSOP scheme, has the meaning
10given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.”

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

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

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

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

(b) 15at the appropriate place insert—

• ““Schedule 3 SAYE option scheme” shall be construed in
  accordance with the SAYE code (see section 516(3) of
  ITEPA 2003);”.

144 In regulation 7 (qualifying investments) in paragraphs (2)(h)(i) and (10)(a)
20for “an approved” substitute “a Schedule 3”.

Commencement and transitional provision

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

146 Paragraphs 147 to 156 below apply in relation to an SAYE option scheme
established before 6 April 2014.

147 (1) 25If the scheme was an approved SAYE option 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) 30On 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 3 to ITEPA 2003
(as amended by this Part).

148 (1) If the scheme was an approved SAYE option scheme immediately before 6
35April 2014, the amendment made by paragraph 108 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
40B(8) of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117 above).

149 40If the scheme was an approved SAYE option 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 110
above.