“approval”, in relation to an election, means approval by the Board of
Inland Revenue under paragraph 3B of Schedule 1 to the Contributions
and Benefits Act; and
“secondary contributor” has the same meaning as in that Act (see section
482 Deductible amount in respect of special contribution met by employee
(1) The amount of the liability referred to in subsection (4) is a deductible amount
for the purposes of section 478(1), if conditions A to D are met.
(2) Condition A is that a notice in respect of the share option was given to the
Board of Inland Revenue in accordance with section 1 of the Social Security
Contributions (Share Options) Act 2001 (c. 20) before 11th August 2001.
(3) Condition B is that the person or one of the persons who gave that notice is a
person who (apart from that Act) was liable, or would have become liable, by
virtue of an election under paragraph 3B(1) of Schedule 1 to the Contributions
and Benefits Act, to pay secondary Class 1 contributions in respect of a gain
arising on the exercise, assignment or release of the share option.
(4) Condition C is that that person became liable to pay a special contribution
under section 2 of the Social Security Contributions (Share Options) Act 2001
in respect of the share option.
(5) Condition D is that that person met that liability before 11th August 2001 or
before the end of such further period as the Board of Inland Revenue directed
under section 2(5) of that Act.
483 Extended meaning of “assign” and “release”
(1) For the purposes of this Chapter, a person who receives a benefit in money or
money’s worth in consideration for, or otherwise in connection with—
(a) failing or undertaking not to exercise a share option, or
(b) granting or undertaking to grant to another person a right to acquire
shares which are subject to a share option or any interest in them,
is to be treated as realising a gain by assigning or releasing the share option for
a consideration equal to the amount or value of the benefit.
(2) References in this Chapter to the release of a share option include agreeing to
the restriction of the exercise of the option.
484 Amount or value of consideration given for grant of share option
(1) This section applies for the purposes of sections 479 and 480 (amount of gain)
in determining the amount or value of any consideration given for the grant of
the share option.
(2) If any consideration is given partly in respect of the grant and partly in respect
of something else, the amount given in respect of the different things is to be
determined on a just and reasonable apportionment.
(3) The consideration given wholly or partly for the grant does not include the
performance of any duties of, or in connection with, the office or employment
by reason of which the share option was granted.
485 Application of this Chapter where share option exchanged for another
(1) This section applies if—
(a) a share option (“the old option”) is assigned or released, and
(b) the whole or part of the consideration for the assignment or release
consists of or includes another share option (“the new option”).
(2) For the purposes of section 480 (amount of gain realised by assigning or
releasing option) the new option is not to be treated as consideration for the
assignment or release of the old option.
(3) This Chapter applies to the new option as it applies to the old option.
(4) For the purposes of sections 479 and 480 (amount of gain) the amount or value
of the consideration for the grant of the new option is to be treated as being the
(a) the amount by which the amount or value of the consideration given
for the grant of the old option exceeds the amount or value of any
consideration for the assignment or release of the old option, apart from
the new option, and
(b) any valuable consideration given for the grant of the new option, apart
from the old option.
(5) Two or more transactions are to be treated for the purposes of subsection (1) as
a single transaction by which one share option is assigned for a consideration
which consists of or includes another share option if—
(a) the transactions result in—
(i) a person ceasing to hold a share option, and
(ii) that person or a connected person coming to hold another share
(b) one or more of the transactions is effected under arrangements to which
two or more persons holding share options, in respect of which there
may be liability to tax under this Chapter, are parties.
(6) Subsection (5) applies regardless of the order in which the assignment and the
486 Duty to notify matters relating to share options
(1) Subsection (2) applies if in a tax year a company—
(a) grants a share option,
(b) allots or transfers shares on the exercise of a share option,
(c) receives notice of the assignment of a share option, or
(d) provides a benefit in money or money’s worth—
(i) for the assignment of a share option,
(ii) for the release in whole or in part of a share option,
(iii) for or in connection with a failure, or undertaking not, to
exercise a share option, or
(iv) for or in connection with the grant of, or an undertaking to
grant, a right to acquire shares or an interest in shares to which
a share option relates.
(2) The company must provide the Inland Revenue with particulars in writing of
(3) The particulars must be provided before 7th July in the tax year following that
in which the matter occurred.
(4) The particulars of any matter must include particulars of any secondary Class
1 contributions payable in connection with the matter which are—
(a) recovered as mentioned in section 481(2)(a) (agreement for secondary
contributor to recover secondary Class 1 contributions in respect of
gain from the employee), or
(b) met as mentioned in section 481(3) (liability for secondary Class 1
contributions in respect of gain transferred to the employee).
(5) A company need not deliver particulars under subsection (1) if it has already
given them in a notice under paragraph 44 of Schedule 5 (EMIs: notice of
option to be given to Inland Revenue).
In other respects the obligations imposed by subsection (1) and by that
paragraph are independent of each other.
487 Minor definitions
(1) In this Chapter—
“company” means a body corporate;
(a) in the case of a company whose affairs are managed by a board
of directors or similar body, means a member of that board or
(b) in the case of a company whose affairs are managed by a single
director or similar person, means that director or person,
(c) in the case of a company whose affairs are managed by its
members, means a member,
and includes a person who is to be or has been a director;
(a) in relation to a company, a person taking part in the
management of the affairs of the company who is not a director,
(b) a person who is to be or has been an employee;
“secondary Class 1 contributions” has the same meaning as in the
Contributions and Benefits Act (see section 1);
(a) stock, and
(b) any securities as defined in section 254(1) of ICTA issued by a
“the Contributions and Benefits Act” means SSCBA 1992 or SSCB(NI)A
(2) In this Chapter—
“the employee”, and
“the share option”,
have the meaning indicated in section 471(4).
Approved share incentive plans
488 Approved share incentive plans (SIPs)
(1) This Chapter provides—
(a) for the approval of share incentive plans (“SIPs”) by the Inland
(b) for exemptions from income tax in connection with shares obtained
under those plans,
(c) for amounts to count as employment income in certain circumstances
in connection with such plans, and
(d) for the making of PAYE deductions in connection with such amounts.
(2) Schedule 2 contains the requirements that have to be met for a SIP to be
approved, together with—
(a) the approval procedure, and
(b) provisions relating to the administration and operation of a SIP.
(3) The provisions of—
(a) this and the following sections of this Chapter,
(b) Schedule 2, and
(c) the provisions mentioned in section 515 (tax advantages and charges
under other Acts),
together constitute “the SIP code”.
(4) In the SIP code—
“approved” means approved by the Inland Revenue under Schedule 2,
and “approval” has a corresponding meaning;
“PAYE deduction” means a deduction required by PAYE regulations;
a “share incentive plan” (or “SIP” for short) means a plan established by a
(a) for shares to be appropriated to employees without payment
(“free shares”), or
(b) for shares to be acquired on behalf of employees out of sums
deducted from their salary (“partnership shares”);
(5) Other expressions used in the SIP code and contained in the index at the end of
Schedule 2 have the meaning indicated by the index.