Finance Bill

House of Lords

Session 2013 - 14
Internet Publications
Other Bills before Parliament

Finance Bill

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
145

(i)
the compromise, arrangement or scheme,
(ii)
the general offer, or
(iii)
the takeover offer,

not been made, or
(b)
had any arrangements for the making of—
5
(i)
a compromise, arrangement or scheme which would
fall within subsection (9),
(ii)
a general offer which would fall within subsection
(10), or
(iii)
a takeover offer (as defined in section 974 of the
10
Companies Act 2006) which would fall within
subsection (13),

which were in place or under consideration at any time not
been in place or under consideration.
(7)
In subsection (6) the reference to shares being awarded to the
15
participant is to be read, in the case of dividend shares, as a reference
to the shares being acquired by the trustees on the participant’s
behalf.
(8)
In subsection (6)(b) “arrangements” includes any plan, scheme,
agreement or understanding, whether or not legally enforceable.
20
(9)
A compromise, arrangement or scheme falls within this subsection if
it is applicable to or affects—
(a)
all the ordinary share capital of the relevant company or all
the shares of the same class as the relevant shares, or
(b)
all the shares, or all the shares of that same class, which are
25
held by a class of shareholders identified otherwise than by
reference to their employment or their participation in an
approved SIP.
(10)
A general offer falls within this subsection if—
(a)
it is made to holders of shares of the same class as the relevant
30
shares or to holders of shares in the relevant company, and
(b)
it is made in the first instance on a condition such that if it is
satisfied the person making the offer will have control of the
relevant company.
(11)
For the purposes of subsection (10) it does not matter if the general
35
offer is made to different shareholders by different means.
(12)
In subsection (10)(b) “control” has the meaning given by sections 450
and 451 of CTA 2010.
(13)
A takeover offer falls within this subsection if—
(a)
it relates to the relevant company, and
40
(b)
where there is more than one class of share in the relevant
company, the class or classes to which it relates is or include
the class of the relevant shares.”
20    (1)
In Part 5 of Schedule 2 (free shares) in paragraph 37 (holding period: power
of participant to direct trustees to accept general offers etc) after sub-
45

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
146

paragraph (6) insert—
    “(7)
For the purposes of sub-paragraph (5) it does not matter if the
general offer is made to different shareholders by different means.
      (8)
If in the case of a takeover offer (as defined in section 974 of the
Companies Act 2006) there arises a right under section 983 of that
5
Act to require the offeror to acquire the participant’s free shares,
or such of them as are of a particular class, the participant may
direct the trustees to exercise that right.”
      (2)
A SIP approved before the day on which this Act is passed has effect with
any modifications needed to reflect the amendment made by this paragraph.
10
SAYE option schemes
21
In section 519 (no charge in respect of exercise of option) after subsection (3)
insert—
“(3A)
In relation to any shares acquired by the exercise of the share option,
no liability to income tax arises in respect of its exercise if—
15
(a)
the individual exercises the option before the third
anniversary of the date on which the option was granted at a
time when the SAYE option scheme is approved,
(b)
the option is exercised by virtue of a provision included in the
scheme—
20
(i)
under paragraph 37(1) of Schedule 3 where the
relevant date is the relevant date for the purposes of
paragraph 37(2) or (4), or
(ii)
under paragraph 37(6) of Schedule 3,
(c)
as a result of, as the case may be—
25
(i)
the general offer,
(ii)
the compromise or arrangement, or
(iii)
the takeover offer,

the individual receives cash (and no other assets) in exchange
for the shares,
30
(d)
when the decision to grant the option was taken—
(i)
the general offer,
(ii)
the compromise or arrangement, or
(iii)
the takeover offer,

as the case may be, had not been made,
35
(e)
when that decision was taken, no arrangements were in place
or under consideration for—
(i)
the making of a general offer which would fall within
subsection (3D),
(ii)
the making of any compromise or arrangement which
40
would fall within subsection (3H), or
(iii)
the making of a takeover offer (as defined in section
974 of the Companies Act 2006) which would fall
within subsection (3I),
(f)
if the scheme includes a provision under paragraph 38 of
45
Schedule 3 (“the paragraph 38 provision”), in connection
with—

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
147

(i)
the general offer,
(ii)
the compromise or arrangement, or
(iii)
the takeover offer,

as the case may be, no course of action was open to the
individual which, had it been followed, would have resulted
5
in the individual making an agreement under the paragraph
38 provision which would have prevented the individual
from acquiring the shares by the exercise of the option, and
(g)
the avoidance of tax or national insurance contributions is not
the main purpose (or one of the main purposes) of any
10
arrangements under which the option was granted or is
exercised.
(3B)
In subsection (3A)(c)(iii), (d)(iii) and (f)(iii) “the takeover offer”
means the takeover offer (as defined in section 974 of the Companies
Act 2006) giving rise to the application of sections 979 to 982 or 983
15
to 985 of that Act.
(3C)
In subsection (3A)(e) “arrangements” includes any plan, scheme,
agreement or understanding, whether or not legally enforceable.
(3D)
A general offer falls within this subsection if it is—
(a)
a general offer to acquire the whole of the issued ordinary
20
share capital of the relevant company which is made on a
condition such that, if it is met, the person making the offer
will have control of the relevant company, or
(b)
a general offer to acquire all the shares in the relevant
company which are of the same class as those acquired by the
25
exercise of the option.
(3E)
In subsection (3D)(a) the reference to the issued ordinary share
capital of the relevant company does not include any capital already
held by the person making the offer or a person connected with that
person and in subsection (3D)(b) the reference to the shares in the
30
relevant company does not include any shares already held by the
person making the offer or a person connected with that person.
(3F)
For the purposes of subsection (3D)(a) and (b) it does not matter if the
general offer is made to different shareholders by different means.
(3G)
For the purposes of subsection (3D)(a) a person is to be treated as
35
obtaining control of a company if that person and others acting in
concert together obtain control of it.
(3H)
A compromise or arrangement falls within this subsection if it is
applicable to or affects—
(a)
all the ordinary share capital of the relevant company or all
40
the shares of the same class as those acquired by the exercise
of the option, or
(b)
all the shares, or all the shares of that same class, which are
held by a class of shareholders identified otherwise than by
reference to their employment or directorships or their
45
participation in an approved SAYE option scheme.
(3I)
A takeover offer falls within this subsection if—
(a)
it relates to the relevant company, and

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
148

(b)
where there is more than one class of share in the relevant
company, the class or classes to which it relates is or include
the class of the shares acquired by the exercise of the option.
(3J)
In subsections (3D), (3H) and (3I) “the relevant company” means the
company whose shares are acquired by the exercise of the option.”
5
22
Part 6 of Schedule 3 (requirements etc relating to share options) is amended
as follows.
23    (1)
Paragraph 34 (exercise of options: scheme-related employment ends) is
amended as follows.
      (2)
In sub-paragraph (2)—
10
(a)
omit the “or” after paragraph (a), and
(b)
after paragraph (b) insert—
“(c)
a relevant transfer within the meaning of the
Transfer of Undertakings (Protection of
Employment) Regulations 2006, or
15
(d)
if P holds office or is employed in a company which
is an associated company (as defined in paragraph
35(4)) of the scheme organiser, that company
ceasing to be an associated company of the scheme
organiser by reason of a change of control (as
20
determined in accordance with sections 450 and
451 of CTA 2010),”.
      (3)
In sub-paragraphs (4) and (5A)(b) for “or (b)” substitute “to (d)”.
      (4)
A SAYE option scheme approved before the day on which this Act is passed
has effect with any modifications needed to reflect the amendments made by
25
this paragraph.
24    (1)
Paragraph 37 (exercise of options: company events) is amended as follows.
      (2)
After sub-paragraph (3) insert—
   “(3A)
In sub-paragraph (3)(a) the reference to the issued ordinary share
capital of the company does not include any capital already held
30
by the person making the offer or a person connected with that
person and in sub-paragraph (3)(b) the reference to the shares in
the company does not include any shares already held by the
person making the offer or a person connected with that person.
     (3B)
For the purposes of sub-paragraph (3)(a) and (b) it does not matter
35
if the general offer is made to different shareholders by different
means.”
      (3)
A SAYE option scheme approved before the day on which this Act is passed
which contains provision under paragraph 37(1) of Schedule 3 to ITEPA
2003 by reference to paragraph 37(2) has effect with any modifications
40
needed to reflect the amendment made by sub-paragraph (2).
      (4)
In sub-paragraph (4) for the words from “proposed” to the end substitute
“applicable to or affecting—
(a)
all the ordinary share capital of the company or all the
shares of the same class as the shares to which the option
45
relates, or

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
149

(b)
all the shares, or all the shares of that same class, which are
held by a class of shareholders identified otherwise than
by reference to their employment or directorships or their
participation in an approved SAYE option scheme.”
      (5)
A SAYE option scheme approved before the day on which this Act is passed
5
which contains provision under paragraph 37(1) of Schedule 3 to ITEPA
2003 by reference to paragraph 37(4) has effect with any modifications
needed to reflect the amendment made by sub-paragraph (4).
      (6)
In sub-paragraph (6)—
(a)
after “982” insert “or 983 to 985”, and
10
(b)
after “shareholder” insert “etc”.
      (7)
A SAYE option scheme approved before the day on which this Act is passed
which contains provision under paragraph 37(6) of Schedule 3 to ITEPA
2003 has effect with any modifications needed to reflect the amendments
made by sub-paragraph (6).
15
25    (1)
In Part 7 of Schedule 3 (exercise of share options) paragraph 38 (exchange of
options on company reorganisation) is amended as follows.
      (2)
In sub-paragraph (2)(c)—
(a)
after “982” insert “or 983 to 985”, and
(b)
after “shareholder” insert “etc”.
20
      (3)
After sub-paragraph (2) insert—
   “(2A)
In sub-paragraph (2)(a)(i) the reference to the issued ordinary
share capital of the scheme company does not include any capital
already held by the person making the offer or a person connected
with that person and in sub-paragraph (2)(a)(ii) the reference to
25
the shares in the scheme company does not include any shares
already held by the person making the offer or a person connected
with that person.
     (2B)
For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not
matter if the general offer is made to different shareholders by
30
different means.”
      (4)
A SAYE option scheme approved before the day on which this Act is passed
which contains provision under paragraph 38 of Schedule 3 to ITEPA 2003
has effect with any modifications needed to reflect the amendments made by
this paragraph.
35
CSOP schemes
26    (1)
Section 524 (no charge in respect of exercise of option) is amended as
follows.
      (2)
In subsection (2B) for paragraph (a) substitute—
“(a)
has ceased to be in qualifying employment because of—
40
(i)
injury, disability, redundancy or retirement,
(ii)
a relevant transfer within the meaning of the Transfer
of Undertakings (Protection of Employment)
Regulations 2006, or

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
150

(iii)
in the case of a group scheme where the qualifying
employment is as a director or employee of a
constituent company, that company ceasing to be
controlled by the scheme organiser, and”.
      (3)
After subsection (2B) insert—
5
“(2BA)
For the purposes of subsection (2B) an individual is in “qualifying
employment” if the individual is a full-time director or qualifying
employee (as defined in paragraph 8(2) of Schedule 4) of—
(a)
the scheme organiser, or
(b)
in the case of a group scheme, a constituent company.”
10
      (4)
In subsection (2C) for “(2B)” substitute “(2B)(a)(i)”.
      (5)
After subsection (2C) insert—
“(2D)
Subsection (2B)(a)(iii) does not cover a case where the constituent
company was controlled by the scheme organiser by virtue of
paragraph 34 of Schedule 4 (jointly owned companies).
15
(2E)
In relation to any shares acquired by the exercise of the share option,
no liability to income tax arises in respect of its exercise if—
(a)
the individual exercises the option before the third
anniversary of the date on which the option was granted at a
time when the CSOP scheme is approved,
20
(b)
the option is exercised by virtue of a provision included in the
scheme under paragraph 25A of Schedule 4,
(c)
as a result of, as the case may be—
(i)
the general offer,
(ii)
the compromise or arrangement, or
25
(iii)
the takeover offer,

the individual receives cash (and no other assets) in exchange
for the shares,
(d)
when the decision to grant the option was taken—
(i)
the general offer,
30
(ii)
the compromise or arrangement, or
(iii)
the takeover offer,

as the case may be, had not been made,
(e)
when that decision was taken, no arrangements were in place
or under consideration for—
35
(i)
the making of a general offer which would fall within
subsection (2H),
(ii)
the making of any compromise or arrangement which
would fall within subsection (2L), or
(iii)
the making of a takeover offer (as defined in section
40
974 of the Companies Act 2006) which would fall
within subsection (2M),
(f)
if the scheme includes a provision under paragraph 26 of
Schedule 4 (“the paragraph 26 provision”), in connection
with—
45
(i)
the general offer,
(ii)
the compromise or arrangement, or

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
151

(iii)
the takeover offer,

as the case may be, no course of action was open to the
individual which, had it been followed, would have resulted
in the individual making an agreement under the paragraph
26 provision which would have prevented the individual
5
from acquiring the shares by the exercise of the option, and
(g)
the avoidance of tax or national insurance contributions is not
the main purpose (or one of the main purposes) of any
arrangements under which the option was granted or is
exercised.
10
(2F)
In subsection (2E)(c)(iii), (d)(iii) and (f)(iii) “the takeover offer”
means the takeover offer (as defined in section 974 of the Companies
Act 2006) giving rise to the application of sections 979 to 982 or 983
to 985 of that Act.
(2G)
In subsection (2E)(e) “arrangements” includes any plan, scheme,
15
agreement or understanding, whether or not legally enforceable.
(2H)
A general offer falls within this subsection if it is—
(a)
a general offer to acquire the whole of the issued ordinary
share capital of the relevant company which is made on a
condition such that, if it is met, the person making the offer
20
will have control of the relevant company, or
(b)
a general offer to acquire all the shares in the relevant
company which are of the same class as those acquired by the
exercise of the option.
(2I)
In subsection (2H)(a) the reference to the issued ordinary share
25
capital of the relevant company does not include any capital already
held by the person making the offer or a person connected with that
person and in subsection (2H)(b) the reference to the shares in the
relevant company does not include any shares already held by the
person making the offer or a person connected with that person.
30
(2J)
For the purposes of subsection (2H)(a) and (b) it does not matter if
the general offer is made to different shareholders by different
means.
(2K)
For the purposes of subsection (2H)(a) a person is to be treated as
obtaining control of a company if that person and others acting in
35
concert together obtain control of it.
(2L)
A compromise or arrangement falls within this subsection if it is
applicable to or affects—
(a)
all the ordinary share capital of the relevant company or all
the shares of the same class as those acquired by the exercise
40
of the option, or
(b)
all the shares, or all the shares of that same class, which are
held by a class of shareholders identified otherwise than by
reference to their employment or directorships or their
participation in an approved CSOP scheme.
45
(2M)
A takeover offer falls within this subsection if—
(a)
it relates to the relevant company, and