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Tax charge on increase in value of shares in dependent subsidiaries | |
453 Charge on increase in value of shares of dependent subsidiary | |
(1) This section applies if the shares are shares in a company — | |
(a) which was a dependent subsidiary at the time of the acquisition, or | |
(b) which was not then a dependent subsidiary but becomes one before the | 5 |
employee ceases to have a beneficial interest in the shares, | |
and (in either case) there is a chargeable increase in the value of the shares. | |
(2) The taxable amount determined under section 455 counts as employment | |
income of the employee for the relevant tax year. | |
(3) The “relevant tax year” is the tax year which includes the appropriate time | 10 |
(within the meaning of section 454(2) or (4)) by reference to which the | |
chargeable increase is determined under that provision. | |
(4) Section 454 explains what are chargeable increases for the purposes of this | |
section. | |
(5) This section is subject to— | 15 |
section 456 (cases outside charge under this section), | |
section 495 (approved SIP: no charge on increase in value of shares), | |
section 520 (approved SAYE option scheme: no charge in respect of post- | |
acquisition benefits), and | |
section 525 (approved CSOP scheme: no charge in respect of post- | 20 |
acquisition benefits). | |
454 Chargeable increases | |
(1) This section applies for the purposes of section 453 (charge on increase in value | |
of shares of dependent subsidiary). | |
(2) In a case within section 453(1)(a) (dependent subsidiary at time of the | 25 |
acquisition) there is a “chargeable increase” in the value of the shares if the | |
value of the shares at the appropriate time exceeds their value at the time of the | |
acquisition. | |
(3) In subsection (2) “the appropriate time” means whichever is the earlier of— | |
(a) the end of the period of 7 years after the date of the acquisition, and | 30 |
(b) the time when the employee ceases to have a beneficial interest in the | |
shares. | |
(4) In a case within section 453(1)(b) (company becoming dependent subsidiary | |
after time of acquisition) there is a “chargeable increase” in the value of the | |
shares if the value of the shares at the appropriate time exceeds their value at | 35 |
the time when the company becomes a dependent subsidiary. | |
(5) In subsection (4) “the appropriate time” means whichever is the earlier or | |
earliest of— | |
(a) the end of the period of 7 years after the date on which the company | |
becomes a dependent subsidiary, | 40 |
(b) the time when the employee ceases to have a beneficial interest in the | |
shares, and | |
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(c) if the company ceases to be a dependent subsidiary, the time when it | |
does so. | |
455 Amount of charge | |
(1) The taxable amount for the purposes of section 453 (charge on increase in value | |
of shares in dependent subsidiary) is—![equation: plus[char[I],minus[times[char[D],char[A]]]]](missing.gif) | 5 |
where— | |
I is the amount of the chargeable increase in value of the shares, and | |
DA is the total of any deductible amounts. | |
This is subject to subsections (3) and (4). | |
(2) For the purposes of subsection (1)— | 10 |
(a) if the consideration for the acquisition is subsequently increased in | |
accordance with the terms on which the acquisition was made, the | |
amount of that increase is a “deductible amount”; | |
(b) if, before the time by reference to which the chargeable increase is | |
determined, an event occurs in respect of the shares by virtue of which | 15 |
an amount counts as employment income of the employee under— | |
(i) Chapter 2 of this Part (conditional interests in shares), or | |
(ii) Chapter 3 of this Part (convertible shares), | |
that amount is a “deductible amount”. | |
(3) If, in accordance with the terms on which the acquisition was made, the | 20 |
employee subsequently ceases to have a beneficial interest in the shares as the | |
result of a disposal made for a consideration which is less than the value of the | |
shares or the employee’s interest in them at the time of the disposal, the | |
amount “I” in subsection (1) is— | |
(a) if the disposal is within section 454(3)(b), an amount equal to the excess | 25 |
of that consideration over the value of the shares or interest at the time | |
of the acquisition, or | |
(b) if the disposal is within section 454(5)(b), an amount equal to the excess of that | |
consideration over the value of the shares or interest at the time of the company | |
becoming a dependent subsidiary. | 30 |
(4) If the interest of the employee is less than full beneficial ownership, the amount | |
“I” in subsection (1) is an appropriate proportion of the amount that it would | |
be apart from this subsection. | |
456 Cases outside charge under section 453 | |
(1) Section 453 (charge on increase in value of shares of dependent subsidiary) | 35 |
does not apply in the following cases. | |
(2) Section 453 does not apply if— | |
(a) the chargeable increase arises in relation to a disposal of the employee’s | |
beneficial interest in the shares, and | |
(b) by virtue of section 427 (charge on interest ceasing to be only | 40 |
conditional, etc.), an amount counts as employment income of the | |
employee in respect of the disposal. | |
(3) Section 453 does not apply in relation to shares in a company within subsection | |
(1)(b) of that section (company becoming a dependent subsidiary after | |
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(3) acquisition) if the employee has not, at any time in the period of 7 years ending | |
with the date on which the company became a dependent subsidiary, been a | |
director or employee of— | |
(a) the employer company, | |
(b) if different, the company whose shares they are, or | 5 |
(c) an associated company of a company within paragraph (a) or (b). | |
Tax charge on other benefits from shares | |
457 Charge on other chargeable benefits from shares | |
(1) This section applies if a person within subsection (2) receives a chargeable | |
benefit by virtue of that person’s ownership of or interest in the shares. | 10 |
(2) The persons within this subsection are— | |
(a) the employee, | |
(b) the person referred to as “A” in section 447(5) (shares acquired by | |
connected person), in a case where that provision applies in relation to | |
the shares; | 15 |
(c) any other person, in a case where the employee is for the time being treated as | |
continuing to have a beneficial interest in the shares by virtue of section 463 | |
(disposals of shares to connected persons etc. ignored). | |
(3) The taxable amount determined under section 459 counts as employment | |
income of the employee for the relevant tax year. | 20 |
(4) The “relevant tax year” is the tax year in which the benefit is received. | |
(5) Section 458 explains what are chargeable benefits for the purposes of this | |
section. | |
(6) This section— | |
(a) does not apply if the benefit is otherwise chargeable to income tax, and | 25 |
(b) is subject to section 460 (cases outside charge under this section). | |
458 Chargeable benefits | |
(1) This section applies for the purposes of section 457 (charge on other chargeable | |
benefits from shares). | |
(2) A benefit received by a person is a “chargeable benefit” if subsection (3), (4) or | 30 |
(5) applies to the benefit. | |
(3) This subsection applies to a benefit if, at the time when it becomes available, it | |
is available to less than 90% of the persons who then hold shares of the same | |
class as the shares. | |
(4) This subsection applies to a benefit if, at the time when it is received— | 35 |
(a) the company is a dependent subsidiary, and | |
(b) its shares are of a single class. | |
(5) This subsection applies to a benefit if, at the time when it is received, none of | |
the conditions in subsection (6) is met. | |
(6) The conditions are— | 40 |
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(a) that the majority of the company’s shares in respect of which the benefit | |
is received are held by outside shareholders; | |
(b) that the company is employee-controlled by virtue of holdings of | |
shares of the same class as the shares; | |
(c) that, in a case where the company is a 51% subsidiary which is not a | 5 |
dependent subsidiary, the majority of its shares in respect of which the | |
benefit is received are held otherwise than by or for the benefit of— | |
(i) directors or employees of the company, | |
(ii) a company which is an associated company of the company but | |
is not its parent company, or | 10 |
(iii) directors or employees of a company which is an associated | |
company of the company. | |
(7) For the purposes of this section— | |
(a) “the company”, in relation to the shares (see section 457(1)), means the | |
company whose shares they are; and | 15 |
(b) a company (“P”) is the “parent company” of another company (“S”) if S | |
is a 51% subsidiary of P. | |
459 Amount of charge | |
The taxable amount for the purposes of section 457 (charge on other chargeable | |
benefits) is the amount which the person receiving the benefit might | 20 |
reasonably expect to obtain from a sale in the open market. | |
460 Cases outside charge under section 457 | |
Section 457 (charge on other chargeable benefits) does not apply in relation to | |
shares in a company if the employee has not, at any time in the period of 7 years | |
ending with the date on which the benefit is received, been a director or | 25 |
employee of— | |
(a) the employer company, | |
(b) if different, the company whose shares they are, or | |
(c) an associated company of a company within paragraph (a) or (b). | |
Supplementary provisions | 30 |
461 Related acquisitions of additional shares | |
(1) This section applies if, by virtue of holding the shares (“the original shares”) or | |
the interest in them, the employee acquires— | |
(a) additional shares (“the additional shares”), or | |
(b) an interest in additional shares, | 35 |
whether for consideration or not. | |
(2) The additional shares are, or the interest in them is, to be treated— | |
(a) for the purposes of this Chapter, as acquired by the employee as a | |
director or employee of the employer company, and | |
(b) for the purposes only of sections 449 to 456 (charge on occurrence of | 40 |
chargeable event or increase in value of shares in dependent | |
subsidiaries), as so acquired at the same time as the original shares or | |
the interest in them. | |
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(3) For the purposes of sections 453 to 456 (charge on increase in value of shares in | |
dependent subsidiaries)— | |
(a) the additional shares and the original shares are to be treated as one | |
holding of shares, | |
(b) the value of the shares comprised in that holding at any time, and of | 5 |
interests in them, is to be determined accordingly (the value of the | |
original shares at the time of the acquisition being attributed | |
proportionately to all the shares in the holding), and | |
(c) any consideration given for the acquisition of the additional shares, or | |
the interest in them, is to be treated as an increase in the consideration | 10 |
for the original acquisition for the purposes of section 455(2)(a) | |
(amounts that may be deducted in calculating the amount of the tax | |
charge). | |
462 Company reorganisations etc. | |
(1) This section applies if— | 15 |
(a) on a person ceasing to have a beneficial interest in shares, that person | |
acquires other shares or an interest in other shares, and | |
(b) the circumstances are such that the shares in which the person ceases to | |
have a beneficial interest constitute “original shares” and the other | |
shares constitute a “new holding” for the purposes of sections 127 to | 20 |
130 of TCGA 1992 (reorganisations). | |
(2) Section 127 of TCGA 1992 (under which disposals on reorganisations are | |
disregarded and new holdings are treated as acquired as the original shares | |
were) applies for the purposes of this Chapter. | |
(3) Any consideration which— | 25 |
(a) the person gives or becomes liable to give for the new holding, and | |
(b) is not excluded by virtue of section 128(2) of TCGA 1992 from being | |
consideration for the purposes of section 128(1) of that Act, | |
is to be treated for the purposes of this Chapter as an increase in the | |
consideration for the original acquisition for the purposes of section 455(2)(a) | 30 |
above (amounts that may be deducted in calculating the amount of the tax | |
charge). | |
(4) If any consideration of the kind mentioned in section 128(3) of TCGA 1992 is | |
received for the disposal of the original shares— | |
(a) it is to be apportioned among the shares comprising the new holding, | 35 |
and | |
(b) the amount which, apart from this subsection, would at a subsequent | |
time be the value of any of those shares is to be treated as being | |
increased by the amount of the consideration apportioned to them. | |
463 Disposals of shares to connected persons etc. ignored | 40 |
(1) The employee is to be treated as continuing to have a beneficial interest in the shares for | |
the purposes of this Chapter until there is a qualifying disposal of the shares or (as the | |
case may be) of the interest in them. | |
(2) A disposal is a “qualifying disposal” if— | |
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(a) it is a disposal by a bargain at arm’s length with a person who is not connected | |
with the person making the disposal (whether that is the employee or some | |
other person), or | |
(b) it is a disposal, in accordance with the terms on which the acquisition was | |
made, to the company whose shares they are. | 5 |
464 Application to interests in shares | |
Where this Chapter applies to an interest in shares, an increase or reduction of | |
the interest is to be treated as the acquisition or disposal of a separate interest | |
proportionate to the increase or reduction. | |
465 Duty to notify acquisitions of shares or interests in shares | 10 |
(1) This section applies where a person acquires shares or an interest in shares as | |
mentioned in section 447(1). | |
(2) The cases where it applies accordingly include the case where an employee is | |
treated as acquiring shares, or an interest in them, by virtue of section 461 or | |
462. | 15 |
(3) Each of the following— | |
(a) the employer company, and | |
(b) if different, the company whose shares they are, | |
must provide the Inland Revenue with particulars in writing of the acquisition. | |
(4) The particulars must be provided before 7th July in the tax year following that | 20 |
in which the acquisition is made. | |
(5) However, no particulars of any acquisition need be provided by a company | |
under this section if the company has already given particulars of it under— | |
section 432 (conditional interest in shares), or | |
section 486 (shares allotted or transferred on exercise of share option). | 25 |
466 Duty to notify chargeable events and chargeable benefits | |
(1) This section applies where— | |
(a) a chargeable event (within the meaning given by section 450) occurs in | |
relation to shares in a company, or | |
(b) a person receives a chargeable benefit (within the meaning given by | 30 |
section 458) in respect of shares, or an interest in shares, in a company. | |
(2) Each of the following— | |
(a) the employer company, and | |
(b) if different, the company whose shares they are, | |
must provide the Inland Revenue with particulars in writing of the chargeable | 35 |
event or chargeable benefit and of the shares concerned. | |
(3) The particulars must be provided within 92 days after the date on which the | |
event occurs or the benefit is received. | |
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