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PART X |
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INCOME TAX |
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Introduction |
| | 77. - (1) The provisions of this Part of this Schedule apply for income tax purposes in relation to an approved employee share ownership plan.
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This is subject to sub-paragraph (2).
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(2) Nothing in this Part applies to an individual if, at the time of the award in question, he is not chargeable to tax under Schedule E in respect of the employment by reference to which he meets the requirement of paragraph 14 (the employment requirement) in relation to the plan.
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No charge on award of shares etc. |
| | 78. - (1) Notwithstanding that the beneficial interest in the shares passes to the employee-
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(a) on the award to him of free, matching or partnership shares under the plan, or |
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(b) on the acquisition on his behalf of dividend shares under the plan, |
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the value of that interest at the time of the award or acquisition is not treated as income of his chargeable to tax.
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(2) An employee is not chargeable to tax under Schedule E by virtue of section 162(1) of the Taxes Act 1988 (deemed loan in case of shares acquired at an under-value) in respect of the award to him of shares under the plan.
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This does not affect any charge to tax under section 162(6) of that Act (stop-loss provision).
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Capital receipts in respect of participant's shares |
| | 79. - (1) Where-
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(a) a capital receipt is received by a participant in respect of or by reference to any of his plan shares, and |
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(b) the plan shares in respect of or by reference to which it is received are- |
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(i) free, matching or partnership shares that were awarded to the participant fewer than five years before he received the capital receipt, or
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(ii) dividend shares that were acquired on his behalf fewer than three years before he received that receipt,
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the participant is chargeable to income tax under Schedule E for the tax year in which the capital receipt is received by him on the amount or value of the receipt. |
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(2) For the purposes of this paragraph any money or money's worth is a "capital receipt" subject to the following provisions.
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(3) Money or money's worth is not a capital receipt for the purposes of this paragraph to the extent that-
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(a) it constitutes income in the hands of the recipient for the purposes of income tax (or would do so but for this Part of this Schedule), or |
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(b) it consists of the proceeds of disposal of the shares, or |
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(c) it consists of new shares within the meaning of paragraph 115 (company reconstructions). |
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(4) If, pursuant to a direction given by or on behalf of the participant for the purposes of paragraph 72(1), the trustees-
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(a) dispose of some of the rights under a rights issue, and |
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(b) use the proceeds of that disposal to exercise other such rights, |
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the money or money's worth that constitutes the proceeds of that disposal is not a capital receipt for the purposes of this paragraph.
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The references in this sub-paragraph to rights under a rights issue are to rights, conferred in respect of a participant's plan shares, to be allotted, on payment, other shares or securities or rights of any description in the same company.
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(5) This paragraph does not apply in relation to a capital receipt referable to the shares of a participant if it is received by the participant's personal representative after his death.
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Exclusion of certain charges in relation to participant's shares |
| | 80. - (1) There is no charge to tax on the participant under-
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(a) section 140A of the Taxes Act 1988 (charge on conditional acquisition of shares), or |
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(b) section 78 of the Finance Act 1988 (charge on removal of restriction), |
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when any provision for forfeiture to which the shares are subject, in accordance with paragraph 65 (permitted restrictions: provision for forfeiture), is varied or removed.
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(2) A participant is not chargeable to tax under Schedule E by virtue of section 78 of the Finance Act 1988 (charge on removal of restriction) if the chargeable event (within the meaning of that section) is the ending of the holding period in relation to his free, matching or dividend shares.
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(3) A participant is not chargeable to tax under Schedule E by virtue of section 79 of that Act (charge on chargeable increase in value) in respect of any shares of his that are subject to the plan at the end of the period for which the chargeable increase is determined for the purposes of that section.
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Charge on free or matching shares ceasing to be subject to plan |
| | 81. - (1) When free or matching shares cease to be subject to the plan, income tax may be chargeable depending on the period that has elapsed between-
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(a) the date on which the shares were awarded to the participant, and |
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(b) the date on which they cease to be subject to the plan. |
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(2) If the period is less than three years, the participant is chargeable to tax under Schedule E on the market value of the shares when they cease to be subject to the plan.
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(3) If the period is three years or more but less than five years, the participant is chargeable to tax under Schedule E on-
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(a) the market value of the shares at the date they were awarded to him, or |
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(b) the market value of the shares when they cease to be subject to the plan, |
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whichever is less.
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(4) Where the participant is charged to tax under sub-paragraph (3)(a) the tax due shall be reduced by the amount or aggregate amount of any tax paid on any capital receipts within paragraph 79 in respect of those shares.
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(5) There is no charge to tax under this paragraph on the forfeiture of free or matching shares.
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(6) This paragraph has effect subject to-
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paragraph 82 (charge to tax on disposal of beneficial interest in shares during the holding period); and |
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paragraph 87 (circumstances in which there is no charge to tax on shares ceasing to be subject to plan). |
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(7) Except as provided by this paragraph and paragraph 82 there is no charge to tax on free or matching shares ceasing to be subject to the plan.
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Charge on disposal of beneficial interest during the holding period |
| | 82. - (1) Where free or matching shares cease to be subject to the plan by virtue of a participant, in breach of his obligations under paragraph 31(1)(b), assigning, charging or otherwise disposing of his beneficial interest in those shares-
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(a) paragraph 81 does not apply, and |
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(b) the participant is chargeable to income tax under Schedule E on the market value of the shares when they cease to be subject to the plan. |
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(2) Where the participant is charged to tax under sub-paragraph (1) the tax due shall be reduced by the amount or aggregate amount of any tax paid on any capital receipts within paragraph 79 in respect of those shares.
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Partnership share money deducted before tax |
| | 83. - (1) Partnership share money deducted from an employee's salary in accordance with a partnership share agreement is not regarded as income of the employee chargeable to tax under Schedule E.
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(2) The deduction of partnership share money shall be disregarded for the purpose of ascertaining the amount of-
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(a) the employee's remuneration for the purposes of Chapter I of Part XIV of the Taxes Act 1988 (retirement benefit schemes), or |
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(b) the employee's relevant earnings for the purposes of Chapter III or IV of that Part (retirement annuities or personal pension schemes). |
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Charge on partnership share money paid over to employee |
| | 84. - (1) An individual is chargeable to income tax under Schedule E on any amount paid over to him under-
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paragraph 36(4) (deductions in excess of permitted maximum amount); |
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paragraph 40(4)(b) or 42(5)(b) (surplus partnership share money remaining after acquisition of shares); |
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paragraph 42(6) (partnership share money paid over on individual leaving relevant employment); |
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paragraph 42(7) (partnership share money paid over where accumulation period brought to an end by event specified in plan); |
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paragraph 45(3) (partnership share money paid over on withdrawal from partnership share agreement); or |
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paragraph 46 (partnership share money paid over on withdrawal of plan approval or termination of plan). |
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(2) A charge to tax under sub-paragraph (1) arises at the time the amount is paid over.
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Charge on cancellation payments in respect of partnership share agreement |
| | 85. An individual is chargeable to tax under Schedule E on the amount or value of any money or money's worth received by him in respect of the cancellation of a partnership share agreement entered into by him.
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Charge on partnership shares ceasing to be subject to plan |
| | 86. - (1) When partnership shares cease to be subject to the plan, income tax may be chargeable depending on the period that has elapsed between-
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(a) the acquisition date in respect of those shares (as defined by paragraph 40(2) or, as the case may be, 42(3)), and |
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(b) the date on which they cease to be subject to the plan. |
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(2) If the period is less than three years, the employee is chargeable to income tax under Schedule E on an amount equal to the market value of the shares when they cease to be subject to the plan.
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(3) If the period is three years or more but less than five years, the employee is chargeable to income tax under Schedule E on-
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(a) the amount of partnership share money used to acquire the shares, or |
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(b) the market value of the shares when they cease to be subject to the plan, |
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whichever is less.
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(4) Where the participant is charged to tax under sub-paragraph (3)(a) the tax due shall be reduced by the amount or aggregate amount of any tax paid on any capital receipts within paragraph 79 in respect of those shares.
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(5) This paragraph has effect subject to paragraph 87 (circumstances in which there is no charge on shares ceasing to be subject to plan).
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(6) Except as provided by this paragraph, there is no charge to income tax on the employee on partnership shares ceasing to be subject to the plan.
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Circumstances in which there is no charge on shares ceasing to be subject to plan |
| | 87. - (1) There is no charge to tax on shares ceasing to be subject to the plan on the occurrence of any of the following events.
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(2) Those events are the participant ceasing to be in relevant employment-
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(a) because of injury or disability; |
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(b) on being dismissed by reason of redundancy; |
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(c) by reason of a transfer to which the Transfer of Undertakings (Protection of Employment) Regulations 1981 apply; |
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(d) by reason of a change of control or other circumstances ending the associated company status of the company by which he is employed; |
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(e) by reason of his retirement on or after he reaches retirement age; or |
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(3) In sub-paragraph (2)(b) "redundancy" has the same meaning as in the Employment Rights Act 1996 or the Employment Rights (Northern Ireland) Order 1996.
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(4) In sub-paragraph (2)(e) "retirement age" means the retirement age specified in the plan, which-
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(a) must be the same for men and women, and |
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(b) must be not less than 50. |
