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Dividends etc. in respect of unappropriated shares |
| | 88. - (1) This paragraph applies to income of the trustees consisting of dividends or other distributions in respect of shares held by them in relation to which the requirements of Part VIII are met.
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(2) Income to which this paragraph applies is income to which section 686 of the Taxes Act 1988 (accumulation and discretionary trusts: special rates of tax) applies only if and when-
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(a) the period applicable to the shares under the following provisions comes to an end without the shares being awarded to a participant in accordance with the plan, or |
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(b) if earlier, the shares are disposed of by the trustees. |
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(3) Subject to sub-paragraph (4), the period applicable to the shares is the period of two years beginning with the date on which the shares were acquired by the trustees.
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(4) If at the time of the acquisition of the shares by the trustees none of the shares in the company in question are readily convertible assets, the period within which the shares must be awarded is-
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(a) five years beginning with the date on which the shares were acquired by the trustees, or |
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(b) if within that period the shares in question become readily convertible assets, two years beginning with the date on which they did so, |
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whichever ends first.
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(5) For the purposes of determining whether shares are awarded to a participant within the period applicable under the above provisions, shares acquired by the trustees at an earlier time are taken to be awarded to a participant before shares of the same class acquired by the trustees at a later time.
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(6) For the purposes of this paragraph shares which are subject to provision for forfeiture are treated as acquired by the trustees if and when the forfeiture occurs.
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(7) In this paragraph references to the shares being awarded include references to shares being acquired on behalf of a participant as dividend shares.
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Reinvestment of cash dividend on behalf of participant |
| | 89. - (1) The amount applied by the trustees in acquiring dividend shares on behalf of a participant is not treated as income of the participant for any tax purposes.
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(2) The participant has no entitlement to a tax credit in respect of the amounts of dividends so applied.
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(3) Sub-paragraphs (1) and (2) do not affect-
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(a) any charge under paragraph 93(1) (charge on dividend shares ceasing to be subject to plan), or |
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(b) any entitlement to a tax credit in respect of the amount so charged. |
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(4) Section 234A(4) of the Taxes Act 1988 (information relating to distributions to be provided by nominee) shall not apply in relation to any amount applied by the trustees in acquiring dividend shares on behalf of a participant.
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This is subject to paragraph 93(4).
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Repayment of excess cash dividend |
| | 90. Section 234A(4) to (11) of the Taxes Act 1988 (information relating to distributions to be provided by nominee) shall apply in relation to the balance of any cash dividend paid over to the participant under paragraph 54(3) as if it were a payment to which subsection (4)(b) of that section applies.
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Treatment of cash dividend retained for reinvestment |
| | 91. - (1) An amount retained under paragraph 58(1) (amount of cash dividend not reinvested) shall not be treated as income of the participant for any tax purposes.
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(2) The participant has no entitlement to a tax credit in respect of any such amount.
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(3) This paragraph does not affect any charge-
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(a) under paragraph 92 (treatment of cash dividend retained and then later paid out), or |
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(b) paragraph 93 (charge on dividend shares ceasing to be subject to plan), |
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or any tax credit in respect of an amount so charged.
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Treatment of cash dividend retained and then later paid out |
| | 92. - (1) Where a cash dividend is paid over to a participant under paragraph 58(2) (cash dividend paid over if not reinvested), the participant is chargeable to tax on that amount-
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(b) to the extent that the dividend is a foreign cash dividend, under Case V of Schedule D, |
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for the tax year in which the dividend is paid over to him.
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(2) For the purposes of determining the tax credit (if any) to which the participant is entitled under section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions), the reference in subsection (1) of that section to the tax credit fraction in force when the distribution is made shall be read as a reference to the fraction in force when the dividend is paid over to him.
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(3) Section 234A(4) to (11) of the Taxes Act 1988 (information relating to distributions to be provided by nominee) shall apply in relation to an amount paid under paragraph 58(2) as if-
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(a) it were a payment to which subsection (4)(b) of that section applies, and |
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(b) the cash dividend had been paid when the payment was paid over to the participant under paragraph 58(2). |
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Charge on dividend shares ceasing to be subject to plan |
| | 93. - (1) If dividend shares cease to be subject to the plan before the end of the period of three years beginning with the date on which the shares were acquired on his behalf, the participant is chargeable to tax on the amount of the relevant dividend-
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(b) to the extent that the amount represents a foreign cash dividend, under Case V of Schedule D, |
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for the tax year in which the shares cease to be subject to the plan.
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For this purpose "the relevant dividend" is the cash dividend applied to acquire those shares on the participant's behalf.
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(2) For the purposes of determining the tax credit (if any) to which the participant is entitled under section 231 of the Taxes Act 1988 (tax credits for certain recipients of qualifying distributions), the reference in subsection (1) of that section to the tax credit fraction in force when the distribution is made shall be read as a reference to the fraction in force when the relevant dividend is paid over to him.
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(3) Where the participant is charged to tax under this paragraph 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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For this purpose "the tax due" means the amount of tax due after deduction of the tax credit determined under sub-paragraph (2).
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(4) Section 234A(4) to (11) of the Taxes Act 1988 (information relating to distributions to be provided by nominee) shall apply in relation to the relevant dividend as if it were a payment to which subsection (4)(b) of that section applies.
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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 tax on dividend shares ceasing to be subject to the plan.
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PAYE: shares ceasing to be subject to plan |
| | 94. Where as a result of shares ceasing to be subject to the plan a participant is chargeable to tax under this Part of this Schedule, subsection (3) of section 203F of the Taxes Act 1988 (PAYE: tradeable assets) shall have effect as if the reference in that subsection to the amount of income likely to be chargeable to tax under Schedule E in respect of the provision of the asset were a reference to the amount on which tax is likely to be chargeable under this Part of this Schedule by virtue of the shares ceasing to be subject to the plan.
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PAYE: shares ceasing to be subject to the plan |
| | 95. - (1) Sub-paragraphs (2) to (5) apply where as a result of any shares ("the relevant shares") ceasing to be subject to the plan-
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(a) a participant is chargeable to income tax under Schedule E in accordance with this Part of this Schedule, and |
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(b) an obligation to make a PAYE deduction arises in respect of that charge. |
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(2) The trustees must pay to the employer company a sum which is sufficient to enable the employer company to discharge that obligation.
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This is subject to sub-paragraphs (3) and (7).
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(3) Sub-paragraph (2) only applies where, or to the extent that, the plan does not require the participant to pay the employer company a sum that is sufficient to discharge the obligation mentioned in sub-paragraph (1)(b).
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(4) Section 203J(1) of the Taxes Act 1988 (sections 203B to 203I: accounting for tax) shall have effect as if it required the deduction of income tax to be made from any sum or sums received by the employer-
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(a) from the trustees under sub-paragraph (2), or |
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(b) from the participant in accordance with the plan, as mentioned in sub-paragraph (3). |
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(5) After making the necessary PAYE deduction from the sum or sums received as mentioned in sub-paragraph (4), the employer company shall pay any remaining amounts to the participant.
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(6) For the purposes of this paragraph "the employer company" means a company-
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(a) of which the participant is an employee at the time when the relevant shares cease to be subject to the plan, and |
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(b) to whom the PAYE regulations (within the meaning of section 203L(3) of the Taxes Act 1988) at that time apply. |
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(7) Where, as a result of any shares ceasing to be subject to the plan, a participant is chargeable to income tax under Schedule E in accordance with this Part and either-
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(a) there is no company which falls within sub-paragraph (6), or |
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(b) the Inland Revenue are of the opinion that it is impracticable for the company which falls within that sub-paragraph to make a PAYE deduction and accordingly direct that this sub-paragraph shall apply, |
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then sub-paragraph (2) shall not apply and the trustees shall make a PAYE deduction in respect of an amount equal to that on which income tax is payable as if the participant were a former employee of the trustees.
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(8) In a case where sub-paragraph (7) applies, section 203C of the Taxes Act 1988 (PAYE: employee of non-UK employer) does not apply.
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(9) Where-
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(a) a participant disposes of his beneficial interest in any of his plan shares to the trustees, and |
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(b) the trustees are deemed by virtue of paragraph 74 to have disposed of the shares in question, |
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this paragraph shall apply as if the consideration payable by the trustees to the participant on the disposal had been received by the trustees as the proceeds of disposal of plan shares.
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(10) For the purposes of this paragraph "PAYE deduction" means a deduction required by regulations under section 203 of the Taxes Act 1988.
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PAYE: capital receipts |
| | 96. - (1) Where the trustees receive a sum of money which constitutes (or forms part of) a capital receipt in respect of which a participant is chargeable to income tax under Schedule E, in accordance with this Part of this Schedule, when it is received by him-
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(a) the trustees shall pay out of that sum of money to the employer company an amount equal to that on which income tax is so payable, and |
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(b) the employer company shall then pay over that amount to the participant, but in so doing shall make a PAYE deduction. |
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This is subject to sub-paragraph (3).
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(2) For the purposes of this paragraph "the employer company" means the company-
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(a) of which the participant is an employee at the time the trustees receive the sum of money referred to in sub-paragraph (1), and |
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(b) to whom the PAYE regulations (within the meaning of section 203L(3) of the Taxes Act 1988) at that time apply. |
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(3) Where the trustees receive a sum of money to which sub-paragraph (1) applies but-
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(a) there is no company which falls within sub-paragraph (2), or |
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(b) the Inland Revenue are of the opinion that it is impracticable for the company which falls within that sub-paragraph to make a PAYE deduction and accordingly direct that this sub-paragraph shall apply, |
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then, in paying over to the participant the capital receipt, the trustees shall make a PAYE deduction in respect of an amount equal to that on which income tax is payable as mentioned in sub-paragraph (1) as if the participant were a former employee of the trustees.
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(4) In a case where sub-paragraph (3) applies, section 203C of the Taxes Act 1988 (PAYE: employee of non-UK employer) does not apply.
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(5) For the purposes of this paragraph "PAYE deduction" means a deduction required by regulations under section 203 of the Taxes Act 1988.
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