Finance Bill

House of Lords

Session 2013 - 14
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Finance Bill

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
152

(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.
(2N)
In subsections (2H), (2L) and (2M) “the relevant company” means the
company whose shares are acquired by the exercise of the option.”
5
27
Part 5 of Schedule 4 (requirements etc relating to share options) is amended
as follows.
28
In paragraph 21 (introduction) in sub-paragraph (2)—
(a)
after the entry for paragraph 24 omit “or”, and
(b)
after the entry for paragraph 25 insert “, or
10

paragraph 25A (exercise of options: company
events)”.
29
After paragraph 25 insert—
“Exercise of options: company events
25A   (1)
The scheme may provide that share options relating to shares in a
15
company may be exercised within 6 months after the relevant date
for the purposes of sub-paragraph (2) or (6).
      (2)
The relevant date for the purposes of this sub-paragraph is the
date when—
(a)
a person has obtained control of the company as a result of
20
making an offer falling within sub-paragraph (3), and
(b)
any condition subject to which the offer is made has been
satisfied.
      (3)
An offer falls within this sub-paragraph if it is—
(a)
a general offer to acquire the whole of the issued ordinary
25
share capital of the company which is made on a condition
such that, if it is met, the person making the offer will have
control of the company, or
(b)
a general offer to acquire all the shares in the company
which are of the same class as the shares to which the
30
option relates.
      (4)
In sub-paragraph (3)(a) the reference to the issued ordinary share
capital of the 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 (3)(b) the reference to the shares in
35
the company does not include any shares already held by the
person making the offer or a person connected with that person.
      (5)
For the purposes of sub-paragraph (3)(a) and (b) it does not matter
if the general offer is made to different shareholders by different
means.
40
      (6)
The relevant date for the purposes of this sub-paragraph is the
date when the court sanctions under section 899 of the Companies
Act 2006 (court sanction for compromise or arrangement) a

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 2 — “Good leavers” (other than retirees)
153

compromise or arrangement 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
relates, or
(b)
all the shares, or all the shares of that same class, which are
5
held by a class of shareholders identified otherwise than
by reference to their employment or directorships or their
participation in an approved CSOP scheme.
      (7)
The scheme may provide that share options relating to shares in a
company may be exercised at any time when any person is bound
10
or entitled to acquire shares in the company under sections 979 to
982 or 983 to 985 of the Companies Act 2006 (takeover offers: right
of offeror to buy out minority shareholder etc).
      (8)
For the purposes of this paragraph a person is to be treated as
obtaining control of a company if that person and others acting in
15
concert together obtain control of it.”
30    (1)
In Part 6 of Schedule 4 (exercise of share options) paragraph 26 (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
20
(b)
after “shareholder” insert “etc”.
      (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
25
with that person and in sub-paragraph (2)(a)(ii) the reference to
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
30
matter if the general offer is made to different shareholders by
different means.”
      (4)
A CSOP scheme approved before the day on which this Act is passed which
contains provision under paragraph 26 of Schedule 4 to ITEPA 2003 has
effect with any modifications needed to reflect the amendments made by
35
this paragraph.
Enterprise management incentives
31    (1)
In Part 6 of Schedule 5 (company reorganisations) in paragraph 39
(introduction) after sub-paragraph (3) insert—
    “(4)
In sub-paragraph (2)(a)(i) the reference to the issued share capital
40
of the 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 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.
45

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 3 — Material interest rules
154

      (5)
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
different means.”
      (2)
The amendment made by this paragraph comes into force on such day as the
Treasury may by order appoint.
5
Part 3
Material interest rules
Introduction
32
Part 7 of ITEPA 2003 (employment income: income and exemptions relating
to securities) is amended as follows.
10
Share incentive plans
33
Part 3 of Schedule 2 (eligibility of individuals) is amended as follows.
34
In paragraph 13 (introduction)—
(a)
after the entry for paragraph 18 insert “and”, and
(b)
omit the entry for paragraph 19 and the “and” before it.
15
35
In paragraph 14 (time of eligibility to participate) in sub-paragraph (7)—
(a)
after paragraph (b) insert “and”, and
(b)
omit paragraph (c) and the “and” before it.
36
Omit paragraphs 19 to 24 (the “no material interest” requirement).
37
In Part 11 of Schedule 2 (supplementary provisions) in paragraph 100 (index
20
of defined expressions), in the entry for “close company”, omit “(and see
paragraph 20(4))”.
38    (1)
The amendments made by paragraphs 33 to 37 above have effect for the
purpose of determining whether an individual is eligible to participate in an
award of shares on the day on which this Act is passed or any later day.
25
      (2)
A SIP approved before the day on which this Act is passed has effect
accordingly with the omission of any provision falling within a provision of
Schedule 2 to ITEPA 2003 omitted by those paragraphs.
SAYE option schemes
39
Part 3 of Schedule 3 (eligibility of individuals) is amended as follows.
30
40
In paragraph 9 (introduction) omit the entry for paragraph 11 and the “and”
before it.
41
Omit paragraphs 11 to 16 (the “no material interest” requirement).
42
In Part 9 of Schedule 3 (supplementary provisions) in paragraph 49 (index
of defined expressions), in the entry for “close company”, omit “(and see
35
paragraph 11(4))”.
43    (1)
The amendments made by paragraphs 39 to 42 above have effect for the
purpose of determining whether an individual is eligible to participate in a
scheme on the day on which this Act is passed or any later day.

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
155

      (2)
A SAYE option scheme approved before the day on which this Act is passed
has effect accordingly with the omission of any provision falling within a
provision of Schedule 3 to ITEPA 2003 omitted by those paragraphs.
CSOP schemes
44    (1)
In Part 3 of Schedule 4 (eligibility of individuals) in paragraphs 10(2) and (3),
5
11(3) and (4) and 13(2) (which relate to the “no material interest”
requirement) for “25%” substitute “30%”.
      (2)
The amendments made by this paragraph have effect for the purpose of
determining whether a person is eligible to participate in a scheme on the
day on which this Act is passed or any later day (by altering what constitutes
10
a material interest on that day and within the 12 months preceding that day).
      (3)
A CSOP scheme approved before the day on which this Act is passed has
effect with any modifications needed to reflect the amendments made by
this paragraph.
Part 4
15
Restricted shares
Introduction
45
Part 7 of ITEPA 2003 (employment income: income and exemptions relating
to securities) is amended as follows.
Share incentive plans
20
46
Part 4 of Schedule 2 (types of shares that may be awarded) is amended as
follows.
47
In paragraph 25 (introduction) in sub-paragraph (1)—
(a)
after the entry for paragraph 28 insert “and”, and
(b)
omit the entry for paragraph 30 and the “and” before it.
25
48
Omit paragraphs 30 to 33 (only certain kinds of restrictions allowed).
49
In Part 5 of Schedule 2 (free shares) in paragraph 35 (maximum annual
award) omit sub-paragraphs (3) and (4).
50
In Part 6 of Schedule 2 (partnership shares) in paragraph 43 (introduction)
after sub-paragraph (2) insert—
30
   “(2A)
The plan must provide that partnership shares are not to be subject
to any provision for forfeiture.”
51
In Part 7 of Schedule 2 (matching shares) in paragraph 59 (general
requirement for matching shares) omit sub-paragraph (2).
52
In Part 9 of Schedule 2 (trustees) in paragraph 75 (duty to give notice of
35
award of shares etc) in sub-paragraphs (2) and (3) after paragraph (a)
insert—
“(aa)
if the shares are subject to any restriction, giving details of
the restriction,”.

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
156

53    (1)
In Part 10 of Schedule 2 (approval of plans) paragraph 84 (disqualifying
events) is amended as follows.
      (2)
In sub-paragraph (3)—
(a)
after paragraph (b) insert “or”, and
(b)
omit paragraph (c) and the “or” after it.
5
      (3)
In sub-paragraph (4)(b) for “provision for forfeiture” substitute “restriction”.
54
Part 11 of Schedule 2 (supplementary provision) is amended as follows.
55
In paragraph 92 (determination of market value) for sub-paragraph (2)
substitute—
    “(2)
For the purposes of this Schedule the market value of shares
10
subject to a restriction is to be determined as if they were not
subject to the restriction.”
56
In paragraph 99 (minor definitions) after sub-paragraph (3) insert—
    “(4)
For the purposes of the SIP code—
(a)
shares are subject to a “restriction” if there is any contract,
15
agreement, arrangement or condition which makes
provision to which any of subsections (2) to (4) of section
423 (restricted securities) would apply if the references in
those subsections to the employment-related securities
were to the shares, and
20
(b)
the “restriction” is that provision.”
57
In paragraph 100 (index of defined expressions) at the appropriate place
insert—

“restriction (in relation to
paragraph 99(4)”.

shares)

25
58    (1)
The amendments made by paragraphs 46 to 48 and 50 to 52 above have effect
in relation to awards of shares made on or after the day on which this Act is
passed.
      (2)
A SIP approved, or a trust instrument made, before that day has effect with
any modifications needed to reflect the amendments made by paragraphs 46
30
to 57 above.
      (3)
In particular, in relation to awards of shares on or after that day, such a SIP
has effect with the omission of any provision falling within a provision of
Schedule 2 to ITEPA 2003 omitted by paragraph 48 above.
SAYE option schemes
35
59
Part 4 of Schedule 3 (shares to which schemes can apply) is amended as
follows.
60
In paragraph 17 (introduction) in sub-paragraph (1)—
(a)
after the entry for paragraph 20 insert “and”, and
(b)
omit the entry for paragraph 21 and the “and” after it.
40

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
157

61
Omit paragraph 21 (only certain kinds of restrictions allowed).
62
In Part 6 of Schedule 3 (requirements etc relating to share options) in
paragraph 28 (requirements as to price of acquisition of shares) after sub-
paragraph (4) insert—
    “(5)
At the time a share option is granted—
5
(a)
it must be stated whether or not the shares which may be
acquired by the exercise of the option may be subject to any
restriction, and
(b)
if so, the details of the restriction must also be stated.
      (6)
For the purposes of this paragraph the market value of shares
10
subject to a restriction is to be determined as if they were not
subject to the restriction.”
63
In Part 7 of Schedule 3 (exchange of share options) in paragraph 39
(requirements about share options granted in exchange) after sub-
paragraph (6) insert—
15
    “(7)
For the purposes of this paragraph the market value of shares
subject to a restriction is to be determined as if they were not
subject to the restriction.”
64
Part 9 of Schedule 3 (supplementary provisions) is amended as follows.
65
In paragraph 48 (minor definitions) after sub-paragraph (2) insert—
20
    “(3)
For the purposes of the SAYE code—
(a)
shares are subject to a “restriction” if there is any contract,
agreement, arrangement or condition which makes
provision to which any of subsections (2) to (4) of section
423 (restricted securities) would apply if the references in
25
those subsections to the employment-related securities
were to the shares, and
(b)
the “restriction” is that provision.”
66
In paragraph 49 (index of defined expressions) at the appropriate place
insert—
30

“restriction (in relation to
paragraph 48(3)”.

shares)

67    (1)
The amendments made by paragraphs 59 to 62 above have effect in relation
to options granted on or after the day on which this Act is passed.
      (2)
The amendment made by paragraph 63 above has effect for cases where the
35
old options are granted on or after that day.
      (3)
A SAYE option scheme approved before that day has effect with any
modifications needed to reflect the amendments made by paragraphs 59 to
66 above.
      (4)
In particular, in relation to options granted on or after that day, such a SAYE
40
option scheme has effect with the omission of any provision falling within a
provision of Schedule 3 to ITEPA 2003 omitted by paragraph 61 above.

Finance Bill
Schedule 2 — Tax advantaged employee share schemes
Part 4 — Restricted shares
158

CSOP schemes
68
In Part 2 of Schedule 4 (general requirements for approval) in paragraph 6
(limit on value of shares subject to options) after sub-paragraph (3) insert—
    “(4)
For the purposes of this paragraph the market value of shares
subject to a restriction is to be determined as if they were not
5
subject to the restriction.”
69
Part 4 of Schedule 4 (shares to which schemes can apply) is amended as
follows.
70
In paragraph 15 (introduction)—
(a)
after the entry for paragraph 18 insert “and”, and
10
(b)
omit the entry relating to paragraph 19 and the “and” after it.
71
Omit paragraph 19 (only certain kinds of restrictions allowed).
72
In Part 5 of Schedule 4 (requirements etc relating to share options) in
paragraph 22 after sub-paragraph (4) insert—
    “(5)
At the time a share option is granted—
15
(a)
it must be stated whether or not the shares which may be
acquired by the exercise of the option may be subject to any
restriction, and
(b)
if so, the details of the restriction must also be stated.
      (6)
For the purposes of this paragraph the market value of shares
20
subject to a restriction is to be determined as if they were not
subject to the restriction.”
73
In Part 6 of Schedule 4 (exchange of share options) in paragraph 27
(requirements about share options granted in exchange) after sub-
paragraph (6) insert—
25
    “(7)
For the purposes of this paragraph the market value of shares
subject to a restriction is to be determined as if they were not
subject to the restriction.”
74
Part 8 of Schedule 4 (supplementary provisions) is amended as follows.
75
In paragraph 36 (minor definitions) after sub-paragraph (2) insert—
30
    “(3)
For the purposes of the CSOP code—
(a)
shares are subject to a “restriction” if there is any contract,
agreement, arrangement or condition which makes
provision to which any of subsections (2) to (4) of section
423 (restricted securities) would apply if the references in
35
those subsections to the employment-related securities
were to the shares, and
(b)
the “restriction” is that provision.”
76
In paragraph 37 (index of defined expressions) at the appropriate place
insert—
40

“restriction (in relation to
paragraph 36(3)”.

shares)