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PART XIII |
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SUPPLEMENTARY PROVISIONS |
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Company reconstructions |
| | 115. - (1) This paragraph applies where there occurs in relation to any of the participant's plan shares ("the original holding")-
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(a) a transaction which results in a new holding being equated with the original holding for the purposes of capital gains tax, or |
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(b) a transaction that would have that result but for the fact that what would be the new holding consists of or includes a qualifying corporate bond, |
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other than a transaction within sub-paragraph (2).
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| | A transaction in relation to which this paragraph applies is referred to below as a "company reconstruction".
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(2) Where an issue of shares of any of the following descriptions (in respect of which a charge to income tax arises) is made as part of a company reconstruction, those shares shall be treated for the purposes of this paragraph as not forming part of the new holding-
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(a) redeemable shares or securities issued as mentioned in section 209(2)(c) of the Taxes Act 1988; |
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(b) share capital issued in circumstances such that section 210(1) of that Act applies; |
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(c) share capital to which section 249 of that Act applies. |
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(3) In this paragraph-
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"corresponding shares", in relation to any new shares, means the shares in respect of which the new shares are issued or which the new shares otherwise represent; |
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"new shares" means shares comprised in the new holding which were issued in respect of, or otherwise represent, shares comprised in the original holding; |
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"original holding" has the meaning given by sub-paragraph (1). |
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(4) Subject to the following provisions of this paragraph, in relation to an employee share ownership plan, references in this Schedule to a participant's plan shares shall be construed, after the time of the company reconstruction, as being or, as the case may be, as including references to any new shares.
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(5) For the purposes of this Schedule-
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(a) a company reconstruction shall be treated as not involving a disposal of shares comprised in the original holding, |
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(b) the date on which any new shares are to be treated as having been awarded to the participant shall be that on which the corresponding shares were awarded, |
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(c) the conditions in Part VIII shall be treated as fulfilled with respect to any new shares if they were (or were treated as) fulfilled with respect to the corresponding shares, and |
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(d) the provisions of Part X (income tax) and Part XI (capital gains tax) shall apply in relation to the new shares as they would have applied to the corresponding shares. |
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Where the corresponding shares were dividend shares, the reference in paragraph (b) to the shares being awarded shall be read as a reference to the shares being acquired on behalf of the participant.
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(6) Sub-paragraphs (4) and (5) are subject to paragraph 116 (treatment of shares acquired under rights issue).
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(7) For the purposes of this Schedule if, as part of a company reconstruction, trustees become entitled to a capital receipt, their entitlement to the capital receipt shall be taken to arise before the new holding comes into being.
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(8) In the context of a new holding, any reference in this Schedule to shares includes securities and rights of any description which form part of the new holding for the purposes of Chapter II of Part IV of the Taxation of Chargeable Gains Act 1992.
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Treatment of shares acquired under rights issue |
| | 116. - (1) Where the trustees exercise rights under a rights issue conferred in respect of a participant's plan shares, any shares or securities or rights allotted as a result shall be treated for the purposes of this Schedule as if they were plan shares-
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(a) identical to the shares in respect of which the rights were conferred, and |
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(b) appropriated to, or acquired on behalf of, the participant under the plan in the same way and at the same time as those shares. |
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This is subject to sub-paragraphs (2) to (4).
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(2) Where the funds used by the trustees to exercise rights under a rights issue are provided otherwise than by virtue of the exercise by the trustees of their powers under paragraph 72 (power of trustees to raise funds to subscribe for rights issue)-
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(a) any shares, securities or rights allotted are not plan shares, and |
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(b) sections 127 to 130 of the Taxation of Chargeable Gains Act 1992 shall not apply in relation to them. |
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(3) Sub-paragraph (1) does not apply in relation to rights arising under a rights issue unless similar rights are conferred in respect of all ordinary shares in the company.
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(4) Where sub-paragraph (1) does not apply by virtue of sub-paragraph (3)-
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(a) any shares, securities or rights allotted are not plan shares, and |
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(b) sections 127 to 130 of the Taxation of Chargeable Gains Act 1992 shall not apply in relation to them. |
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(5) In this paragraph references to rights arising under a rights issue are to be construed in accordance with paragraph 72(2).
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Power to require information |
| | 117. - (1) The Inland Revenue may by notice require any person to provide them with such information as they reasonably require for the performance of their functions under this Schedule and as the person to whom the notice is addressed has or can reasonably obtain.
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(2) The power conferred by this paragraph extends, in particular, to-
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(a) information to enable the Inland Revenue- |
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(i) to decide whether to approve an employee share ownership plan or withdraw an approval already given, or
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(ii) to determine the liability to tax, including capital gains tax, of any person who has participated in a plan; and
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(b) information about the administration of a plan and any proposed alteration of the terms of a plan. |
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(3) The notice must require the information to be provided within a specified time, which must not be less than three months.
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(4) In section 98 of the Taxes Management Act 1970 (penalties in connection with returns, etc.), in the first column of the table, after the final entry insert-
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 | " paragraph 117 of Schedule 8 to the Finance Act 2000".
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Withdrawal of approval |
| | 118. - (1) If any disqualifying event occurs in relation to an approved employee share ownership plan, the Inland Revenue may by notice to the company withdraw the approval with effect from the time at which the disqualifying event occurred or such later time as the Inland Revenue may specify.
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(2) The following are disqualifying events-
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(a) a contravention in relation to the operation of the plan of any of the requirements of this Schedule, the plan itself or the plan trust; |
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(b) any alteration being made in a key feature of the plan, or in the terms of the plan trust, without the approval of the Inland Revenue; |
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(c) if the plan provides for performance allowances in accordance with paragraph 30 (method two), the setting, in respect of an award of shares, of performance targets that, at the time they are set in accordance with the plan, cannot reasonably be viewed as being comparable; |
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(d) any alteration being made in the share capital of the company whose shares are the subject of the plan, or in the rights attaching to any shares of that company, that materially affects the value of participants' plan shares; |
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(e) shares of a class of which shares have been awarded to participants receiving different treatment in any respect from the other shares of that class; |
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(f) the trustees, the company or, in the case of a group plan, a company which is or has been a participating company failing to furnish any information which they are or it is required to furnish under paragraph 117. |
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(3) For the purposes of sub-paragraph (2)(b)-
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(a) an alteration is an alteration of a "key feature" of the plan if it relates to a provision that is necessary in order to meet the requirements of this Schedule; and |
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(b) the Inland Revenue shall not withhold their approval unless it appears to them that the plan as proposed to be altered would not now be approved on an application under paragraph 4. |
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(4) For the purposes of sub-paragraph (2)(c) performance targets are comparable if they are comparable in terms of the likelihood of their being met by the performance units to which they apply.
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(5) Sub-paragraph (2)(e) applies, in particular, to different treatment in respect of-
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(a) the dividend payable; |
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(c) the restrictions attaching to the shares; or |
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(d) any offer of substituted or additional shares, securities or rights of any description in respect of the shares. |
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This is subject to sub-paragraph (6).
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(6) Sub-paragraph (2)(e) does not apply-
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(a) where the difference in treatment arises from- |
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(i) a key feature of the plan, or
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(ii) any of the participants' shares being subject to provision for forfeiture, or
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(b) on the ground only that shares which have been newly issued receive, in respect of dividends payable with respect to a period beginning before the date on which they were issued, treatment less favourable than that accorded to shares issued before that date. |
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(7) The withdrawal of approval of an employee share ownership plan does not affect the operation of this Schedule in relation to shares awarded to participants in the plan before the time with effect from which approval was withdrawn.
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References in this Schedule to an approved employee share ownership plan in relation to such shares are to a plan that was approved at the time the shares were awarded.
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Appeal against withdrawal of approval |
| | 119. - (1) The company may appeal against a decision of the Inland Revenue-
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(a) to withdraw approval of an employee share ownership plan, or |
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(b) to give a direction under paragraph 113 (withdrawal of corporation tax deductions on withdrawal of approval), or |
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(c) to refuse approval under paragraph 118(2)(b) (approval of alteration of plan or plan trust). |
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(2) The appeal lies to the Special Commissioners.
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(3) Notice of appeal must be given to the Inland Revenue within 30 days after notice of their decision is given to the company.
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Termination of plan |
| | 120. - (1) The plan may provide for the company to issue a plan termination notice in respect of the plan in such circumstances as are specified in the plan.
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(2) The plan must provide that, where a plan termination notice is issued, a copy of the notice is to be given, without delay, to-
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(i) who has plan shares, or
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(ii) who has entered a partnership share agreement which was in force immediately before the notice was issued.
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Effect of plan termination notice |
| | 121. - (1) This paragraph applies where the company has issued a plan termination notice under paragraph 120.
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(2) No further shares may be awarded to individuals under the plan.
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(3) The trustees must remove the plan shares from the plan as soon as practicable after-
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(a) the end of the notice period, or |
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(b) if later, the first date on which the shares may be removed from the plan without giving rise to a charge to income tax under Part X of this Schedule on the participant on whose behalf they are held. |
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Paragraph 46 (repayment of partnership share money) and paragraph 58(2) (cash dividend paid over if not reinvested) provide for the payment to employees of money held on their behalf.
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(4) In sub-paragraph (3) "the notice period" means the period of three months beginning with the date on which the requirements imposed by the plan in accordance with paragraph 120(2) (copy of termination notice to Inland Revenue, participants etc.) are met in respect of the plan termination notice.
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(5) The trustees may remove the participant's shares from the plan at an earlier date with the participant's consent.
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(6) Any consent given by the participant before he receives a copy of the plan termination notice shall be disregarded for this purpose.
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(7) The trustees must as soon as practicable after the plan termination notice is issued pay to an individual any money held on his behalf.
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(8) In this paragraph references to the trustees removing the plan shares from the plan are to their-
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(a) transferring the shares to the participant on behalf of whom they are held, or to another person, at his direction, or |
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(b) disposing of the shares and accounting (or holding themselves ready to account) for the proceeds to the participant or to another person at his direction. |
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(9) Where the participant has died, the references in sub-paragraph (8) to the participant shall be read as references to his personal representatives.
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