Finance Bill (HC Bill 10)

150 (1) This paragraph applies if, immediately before 6 April 2014, the scheme was
an approved SAYE option scheme which contains provision authorised by
paragraph 28(3) of Schedule 3 to ITEPA 2003.

(2) On and after 6 April 2014, the scheme has effect with any modifications
5needed to reflect the amendments made by paragraph 111 above.

151 (1) The amendment made by paragraph 112 above has no effect in relation to
share options granted before 6 April 2014 under the scheme.

(2) If the scheme was an approved SAYE option scheme immediately before 6
April 2014, on and after that date the scheme has effect with any
10modifications needed to reflect the amendment made by paragraph 112
above (subject to sub-paragraph (1) of this paragraph).

152 (1) The amendments made by paragraph 113 above have no effect in a case
where P ceases to hold the scheme-related employment before 6 April 2014.

(2) If immediately before 6 April 2014 the scheme was an approved SAYE
15option scheme which contains provision authorised by paragraph 34(5) of
Schedule 3 to ITEPA 2003, on and after that date the scheme has effect with
any modifications needed to reflect the amendments made by paragraph 113
above (subject to sub-paragraph (1) of this paragraph).

153 (1) This paragraph applies if, immediately before 6 April 2014, the scheme was
20an approved SAYE option scheme which contains provision authorised by
paragraph 37(1) of Schedule 3 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 114(3) above.

154 (1) Paragraph 40A of Schedule 3 to ITEPA 2003 (as inserted by paragraph 117
25above) 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
falls before 6 April 2014—

(i) 30as 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 40A to the first grant date were
references to 6 April 2014,

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

(iii) 35as 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) But the scheme cannot be a Schedule 3 SAYE option scheme if, before 6 April
402014, 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 41 or 44 of Schedule 3 to ITEPA 2003 against the refusal or
decision to withdraw approval.

(4) 45The amendments made by this Part do not affect any right of appeal under
paragraph 41 or 44 of Schedule 3 to ITEPA 2003 against a refusal or decision
made before 6 April 2014 in relation to the scheme.

(5) Sub-paragraphs (6) and (7) apply if a share option was granted before 6
April 2014 under the scheme at a time when the scheme was an approved
SAYE option scheme.

(6) On and after 6 April 2014, the SAYE code has effect in relation to the option
5as if it were granted under the scheme at a time when the scheme was a
Schedule 3 SAYE option scheme (even if no notice is given under paragraph
40A of Schedule 3 to ITEPA 2003 in relation to the scheme or the scheme
cannot be a Schedule 3 SAYE option scheme because of sub-paragraph (2) of
this paragraph).

(7) 10If no notice is given under paragraph 40A of Schedule 3 to ITEPA 2003 in
relation to the scheme, paragraph 40B of that Schedule (as inserted by
paragraph 117 above) is to apply in relation to the scheme despite no notice
being given; and, for this purpose, the relevant date is to be taken to be 6
April 2014.

(8) 15Sub-paragraph (9) applies in relation to a share option granted before 6 April
2014 under the scheme at a time when the scheme was an approved SAYE
option scheme if—

(a) no notice is given under paragraph 40A of Schedule 3 to ITEPA 2003
in relation to the scheme or the scheme cannot be a Schedule 3 SAYE
20option scheme because of sub-paragraph (2) of this paragraph, and

(b) the option is exercised on or after 6 April 2014.

(9) The scheme is to be taken to be a Schedule 3 SAYE option scheme at the time
of the exercise of the option for the purposes of the following provisions in
their application to the option—

(a) 25section 519 of ITEPA 2003 (exemption in respect of exercise of share
option), and

(b) paragraph 10(1)(b) of Schedule 7D to TCGA 1992 (market value rule
not to apply).

(10) In relation to the scheme—

(a) 30paragraph 40F of Schedule 3 to ITEPA 2003 (as inserted by
paragraph 117 above) has effect as if for sub-paragraph (2) there
were substituted—

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

(b) the cases covered by paragraphs 40F(4)(b), 40H(1)(a)(ii) and
40I(1)(a)(ii) of Schedule 3 to ITEPA 2003 (as inserted by paragraph
117 above) include cases in which requirements of Parts 2 to 7 of that
Schedule were not met before 6 April 2014.

155 40If the scheme was an approved SAYE option scheme before 6 April 2014, the
amendments made by this Part do not affect the deductions which may be
made in relation to the scheme under section 999 of CTA 2009 (deduction for
costs of setting up scheme) if they would otherwise do so.

156 The amendments made by paragraph 118 above do not affect a notice given
45in relation to the scheme under paragraph 45 of Schedule 3 to ITEPA 2003
before 6 April 2014.

Part 3 CSOP schemes

Amendments to Chapter 8 of Part 7 of ITEPA 2003

157 Chapter 8 of Part 7 of ITEPA 2003 (employment income: income and
5exemptions relating to securities: CSOP schemes) is amended as follows.

158 In the title omit “Approved”.

159 (1) Section 521 (introduction to CSOP schemes) is amended as follows.

(2) In the heading omit “Approved”.

(3) In subsection (1)—

(a) 10omit paragraph (a), and

(b) in paragraph (b) for “those” substitute “CSOP schemes which are
Schedule 4 CSOP”.

(4) Omit subsection (2).

(5) In subsection (3)(c) for “approved” substitute “Schedule 4”.

(6) 15In subsection (4)—

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

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

• ““Schedule 4” CSOP scheme is to be read in accordance
  with paragraph 1 and Part 7 of Schedule 4;”.

160 20In section 522 (share options to which Chapter applies) in subsection (1)(a)
for “an approved” substitute “a Schedule 4”.

161 (1) Section 524 (no charge in respect of exercise of option) is amended as
follows.

(2) In subsection (1)(a) for “approved” substitute “a Schedule 4 CSOP scheme”.

(3) 25In subsection (2E)—

(a) in paragraph (a) for “approved” substitute “a Schedule 4 CSOP
scheme”,

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

“(iia) 30the non-UK company reorganisation
arrangement, or”, and

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

“(iia) the making of any non-UK company
reorganisation arrangement which would fall
35within subsection (2L), or”.

(4) In subsection (2L)—

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

(b) in paragraph (b) for “an approved” substitute “a Schedule 4”.

162 40Schedule 4 is amended as follows.

163 In the title omit “Approved”.

164 In the cross-heading before paragraph 1 for “Approval of” substitute
“Introduction to Schedule 4”.

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

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

“(A1) 5For the purposes of the CSOP code a CSOP scheme is a Schedule
4 CSOP scheme if the requirements of Parts 2 to 6 of this Schedule
are met in relation to the scheme.”

(3) For sub-paragraph (4) substitute—

“(4) Sub-paragraph (A1) is subject to Part 7 of this Schedule which—

(a) 10requires notice of a scheme to be given to Her Majesty’s
Revenue and Customs (“HMRC”) in order for the scheme
to be a Schedule 4 CSOP scheme (see paragraph 28A(1)),

(b) provides for a scheme in relation to which such notice is
given to be a Schedule 4 CSOP scheme (see paragraph
1528A(4)), and

(c) gives power to HMRC to enquire into a scheme and to
decide that the scheme should not be a Schedule 4 CSOP
scheme (see paragraphs 28F to 28I).”

166 In the title for Part 2 omit “for approval”.

167 20In the cross-heading before paragraph 4 omit “for approval”.

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

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

(2) 25The scheme must not provide benefits to employees or directors
otherwise than in accordance with this Schedule.

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

169 30In paragraph 6 (limit on value of shares subject to options) in sub-paragraph
(1)(b) for “approved” substitute “Schedule 4”.

170 In paragraph 15 (requirements relating to shares that may be subject to share
options) after sub-paragraph (1) insert—

“(1A) Sub-paragraph (1) and the other paragraphs of this Part are subject
35to paragraph 25A(7B).”

171 In paragraph 21 (requirements relating to share options) in sub-paragraph
(1) before the entry for paragraph 22 insert—

172 After paragraph 21 insert—

“General requirements as to terms of option

21A (1) The following terms of a share option which is granted under the
scheme must be stated at the time the option is granted—

(a) 5the price at which shares may be acquired by the exercise
of the option,

(b) the number and description of the shares which may be
acquired by the exercise of the option,

(c) the restrictions to which those shares may be subject,

(d) 10the times at which the option may be exercised (in whole
or in part), and

(e) the circumstances under which the option will lapse or be
cancelled (in whole or in part), including any conditions to
which the exercise of the option is subject (in whole or in
15part).

(2) Terms stated as required by sub-paragraph (1) may be varied after
the grant of the option, but—

(a) in the case of the price, only as provided for in paragraph
22,

(b) 20in the case of the number or description of shares, only as
provided for in paragraph 22 or by way of a mechanism
which is stated at the time the option is granted, and

(c) in any other case, only by way of a mechanism which is
stated at the time the option is granted.

(3) 25Any mechanism stated for the purposes of sub-paragraph (2)(b) or
(c) must be applied in a way that is fair and reasonable.

(4) Terms stated as required by sub-paragraph (1), and any
mechanism stated for the purposes of sub-paragraph (2)(b) or (c),
must be notified to the participant as soon as practicable after the
30grant of the option.”

173 (1) Paragraph 22 (requirements as to price for acquisition of shares etc) is
amended as follows.

(2) In sub-paragraph (1)—

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

(b) 35in paragraph (b) for “that time” substitute “the time when the option
is granted”.

(3) 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
40of 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,
45and

(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) 5Sub-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.”

(4) Omit sub-paragraph (4).

(5) Omit sub-paragraph (5).

174 (1) 10Paragraph 25 (exercise of options: death) is amended as follows.

(2) Make the existing text sub-paragraph (1).

(3) In the new sub-paragraph (1) omit “but not later than 12 months after that
date”.

(4) After the new sub-paragraph (1) insert—

“(2) 15Provision made under sub-paragraph (1) must permit the exercise
of the options at any time on or after the date of death but not later
than 12 months after that date.”

175 (1) Paragraph 25A (exercise of options: company events) is amended as follows.

(2) In sub-paragraph (1) for “or (6)” substitute “, (6) or (6A)”.

(3) 20In sub-paragraph (6)(b) for “an approved” substitute “a Schedule 4”.

(4) After sub-paragraph (6) insert—

“(6A) 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—

(a) 25all 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
held by a class of shareholders identified otherwise than
30by reference to their employments or directorships or their
participation in a Schedule 4 CSOP scheme,

becomes binding on the shareholders covered by it.”

(5) After sub-paragraph (7) insert—

“(7A) Sub-paragraphs (7B) to (7F) apply if the scheme makes provision
35under sub-paragraph (1) or (7).

(7B) 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
option may be exercised under the provision made under sub-
40paragraph (1) or (7) (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.

(7C) In sub-paragraph (7B) “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
5compromise or arrangement sanctioned by the court as
mentioned in sub-paragraph (6);

(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
10mentioned in sub-paragraph (6A);

(d) a person who is bound or entitled to acquire shares in the
company as mentioned in sub-paragraph (7) obtaining
control of the company.

(7D) Provision made under sub-paragraph (7B) may not authorise the
15exercise of a share option, as the case may be—

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

(b) at a time not covered by sub-paragraph (7).

(7E) The scheme may provide that a share option relating to shares in
20a company which is exercised during the period of 20 days ending
with—

(a) the relevant date for the purposes of sub-paragraph (2), (6)
or (6A), or

(b) the date on which any person becomes bound or entitled
25to acquire shares in the company as mentioned in sub-
paragraph (7),

is to be treated as if it had been exercised in accordance with the
provision made under sub-paragraph (1) or (7) (as the case may
be).

(7F) 30If the scheme makes provision under sub-paragraph (7E) it must
also provide that if—

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

(i) an event mentioned in sub-paragraph (2), (6) or
35(6A) occurring, or

(ii) a person becoming bound or entitled to acquire
shares in the company as mentioned in sub-
paragraph (7), but

(b) as the case may be—

(i) 40the relevant date for the purposes of sub-paragraph
(2), (6) or (6A) does not fall during the period of 20
days beginning with the date on which the share
option is exercised, or

(ii) the person does not become bound or entitled to
45acquire 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
effect.”

176 (1) Paragraph 26 (exchanges of options on company reorganisation) is amended
as follows.

(2) In sub-paragraph (2) after paragraph (b) insert—

“(ba) obtains control of the scheme company as a result of a non-
5UK 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
10beginning with the date on which the non-UK company
reorganisation arrangement becomes binding on the
shareholders covered by it, and”.

177 (1) Paragraph 27 (requirements about share options granted in exchange) is
amended as follows.

(2) 15In 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) 20For 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.”

178 For Part 7 substitute—

“ Part 7 25Notification of schemes, annual returns and enquiries

28A Notice of scheme to be given to HMRC

(1) For a CSOP scheme to be a Schedule 4 CSOP scheme, notice of the
scheme must be given to Her Majesty’s Revenue and Customs
(“HMRC”).

(2) 30The notice must—

(a) be given by the scheme organiser,

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

(c) contain a declaration within sub-paragraph (3) made by
35such persons as HMRC may require.

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

(a) that the requirements of Parts 2 to 6 of this Schedule are
met in relation to the scheme, and

(b) if the declaration is made after the first date on which share
40options are granted under the scheme (“the first grant
date”), that those requirements—

(i) were 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
outstanding.

(4) 5If notice is given under this paragraph in relation to a CSOP
scheme, for the purposes of the CSOP code the scheme is to be a
Schedule 4 CSOP scheme at all times on and after the relevant date
(but not before that date).

(5) But if the notice is given after the initial notification deadline, the
10scheme is to be a Schedule 4 CSOP scheme only from the
beginning of the relevant tax year.

(6) For the purposes of this Part—

• “the initial notification deadline” is 6 July in the tax year
  following that in which the first grant date falls,

• 15“outstanding”, in relation to a share option, means that the
  option—

  (a)

  has not been exercised, but

  (b)

  is capable of being exercised in accordance with the
  scheme (whether on the meeting of any condition or
  20otherwise),

• “the relevant date” is—

  (a)

  the date on which the declaration within sub-
  paragraph (3) is made, or

  (b)

  if that declaration is made after the first grant date,
  25the first grant date, and

• “the relevant tax year” is—

  (a)

  the tax year in which the notice under this paragraph
  is given, or

  (b)

  if that notice is given on or before 6 July in that tax
  30year, the preceding tax year.

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

28B Annual returns

(1) This paragraph applies if notice is given in relation to a CSOP
35scheme under paragraph 28A.

(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
(subject to sub-paragraph (9)).

(3) If paragraph 28A(5) applies in relation to the scheme, in sub-
40paragraph (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) contain, or be accompanied by, such information as HMRC
may require, and

(b) 45be 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
determine the liability to tax, including capital gains tax, of—

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

(b) 5any other person whose liability to tax the operation of the
scheme is relevant to.

(6) If during a tax year—

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

(b) variations are made under a provision made under
10paragraph 22(3) to take account of a variation in any share
capital,

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

(7) A declaration within this sub-paragraph is a declaration, as the
15case may be—

(a) that the alteration has, or

(b) that the variations have,

not caused the requirements of Parts 2 to 6 of this Schedule not to
be met in relation to the scheme.

(8) 20For 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 6 of this Schedule to be met in
relation to the scheme.

(9) A return is not required for any tax year following that in which
25the 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) all share options granted under the scheme—

(i) have been exercised, or

(ii) 30are no longer capable of being exercised in
accordance with the scheme (because, for example,
they have lapsed or been cancelled), and

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

(11) If the scheme organiser becomes aware that—

(a) 35anything 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
40included in, or accompanied, the return, or

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

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

(1) 45This 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
paragraph 28B(4)(b) (“the date for delivery”).