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(2) The amount may be retained by the trustees and carried forward to be added | |
to the amount of the next cash dividend to be reinvested. | |
(3) If so retained, the trustees must hold the amount so as to be separately | |
identifiable for the purposes of sub-paragraphs (4) and (5). | |
(4) An amount retained under this paragraph must be paid over to the | 5 |
participant— | |
(a) if or to the extent that it is not reinvested within the period of 3 years | |
beginning with the date on which the dividend was paid, or | |
(b) if during that period the participant ceases to be in relevant | |
employment (see paragraph 95), or | 10 |
(c) if during that period a plan termination notice is issued in respect of | |
the plan (see paragraph 90). | |
(5) An amount required to be paid over to the participant under sub-paragraph | |
(4) must be paid over as soon as practicable. | |
(6) For the purposes of this paragraph an amount carried forward under this | 15 |
paragraph derived from an earlier cash dividend is to be treated as | |
reinvested before an amount derived from a later cash dividend. | |
Cash dividends where no requirement to reinvest | |
69 (1) The plan must require any distributable cash dividends in respect of plan | |
shares held on behalf of a participant to be paid over to the participant as | 20 |
soon as practicable. | |
(2) “Distributable cash dividends” means cash dividends which are not | |
required to be reinvested under the plan. | |
Part 9 | |
Trustees | 25 |
Requirements etc. relating to trustees: introduction | |
70 (1) A SIP must meet the plan requirements contained in— | |
paragraph 71(1) and (2) (establishment of trustees), and | |
paragraph 79 (meeting by trustees of PAYE obligations). | |
(2) The following provisions also relate to the trustees— | 30 |
paragraph 71(3) to (6) (the trust instrument and classes of trustees) | |
paragraph 72 (duty to act in accordance with participant’s directions), | |
paragraph 73 (duty not to dispose of plan shares), | |
paragraph 74 (duty to make payments to participants), | |
paragraph 75 (duty to give notice of award of shares etc.), | 35 |
paragraph 76 (power to borrow). | |
paragraph 77 (power to raise funds to subscribe for rights issue), | |
paragraph 78 (acquisition of shares from employee share ownership | |
trust), and | |
paragraph 80 (other duties in relation to tax liabilities). | 40 |
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Establishment of trustees | |
71 (1) The plan must provide for the establishment of a body of trustees consisting | |
of persons resident in the United Kingdom (“the trustees”). | |
(2) The plan must provide that the trustees are required— | |
(a) in the case of free or matching shares, to acquire shares and | 5 |
appropriate them to employees in accordance with the plan, | |
(b) in the case of partnership shares, to apply partnership share money | |
in acquiring shares on behalf of employees in accordance with the | |
plan, and | |
(c) in the case of dividend shares, to apply cash dividends in acquiring | 10 |
shares on behalf of participants in accordance with the plan. | |
(3) The functions of the trustees with respect to shares held by them must be | |
regulated by a trust (“the plan trust”)— | |
(a) which is constituted under the law of a part of the United Kingdom, | |
and | 15 |
(b) the terms of which are embodied in an instrument which complies | |
with the requirements of this Part of this Schedule (“the trust | |
instrument”). | |
(4) The trust instrument must not contain any terms which are neither essential | |
nor reasonably incidental to complying with the requirements of this Part of | 20 |
this Schedule. | |
(5) The trust instrument may contain terms that— | |
(a) define who is a professional trustee and who is a non-professional | |
trustee; | |
(b) require the trustees to include at least one person who is a | 25 |
professional trustee and at least two who are non-professional | |
trustees; | |
(c) require at least half of the non-professional trustees to have been, | |
before being appointed as trustees, selected in accordance with a | |
specified process of selection; | 30 |
(d) require the trustees so selected to be persons who are employees of | |
the company or, in the case of a group plan, of a participating | |
company. | |
(6) The terms mentioned in sub-paragraph (5) are to be regarded as reasonably | |
incidental to complying with the requirements of this Part of this Schedule | 35 |
for the purposes of sub-paragraph (4). | |
Duty to act in accordance with participant’s directions | |
72 (1) The trust instrument must require the trustees— | |
(a) to dispose of a participant’s plan shares, and | |
(b) to deal with any right conferred in respect of any of a participant’s | 40 |
plan shares to be allotted other shares, securities or rights of any | |
description, | |
only in accordance with a direction given by or on behalf of the participant. | |
(2) Sub-paragraph (1) is subject to— | |
(a) paragraph 73 (duty not to dispose of plan shares), and | 45 |
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(b) any provision in the plan made in accordance with paragraph 79 | |
(meeting by trustees of PAYE obligations). | |
(3) The plan may provide for participants to give such general directions, to | |
such effect and in such terms, as are specified in the plan. | |
Duty not to dispose of plan shares | 5 |
73 (1) This paragraph applies to a participant’s plan shares that are free, matching | |
or dividend shares. | |
(2) The trust instrument must prohibit the trustees from disposing of any of | |
those shares (to the participant or otherwise) at any time during the holding | |
period, unless the participant has at that time ceased to be in relevant | 10 |
employment. | |
(3) Sub-paragraph (2) is subject to— | |
(a) paragraph 37 (holding period: power to direct trustees to accept | |
general offers etc.), | |
(b) paragraph 77 (power of trustees to raise funds to subscribe for rights | 15 |
issue), | |
(c) paragraph 79 (meeting by trustees of PAYE obligations), and | |
(d) paragraph 90(5) (termination of plan: early removal of shares with | |
participant’s consent). | |
Duty to make payments to participants | 20 |
74 (1) The trust instrument must require the trustees to pay over to a participant as | |
soon as practicable— | |
(a) any money received by them in respect of, or by reference to, any of | |
the participant’s shares, or | |
(b) any money’s worth so received unless it consists of new shares | 25 |
within the meaning of paragraph 87 (company reconstructions). | |
(2) Sub-paragraph (1) is subject to— | |
(a) paragraphs 62 to 69 (cash dividends and dividend shares), | |
(b) the trustees’ obligations under sections 510 to 514 (PAYE: shares | |
ceasing to be subject to plan; capital receipts), and | 30 |
(c) the trustees’ PAYE obligations. | |
Duty to give notice of award of shares etc. | |
75 (1) The trust instrument must make the following provision regarding notices. | |
(2) It must provide that, as soon as practicable after any free or matching shares | |
have been awarded to an employee, the trustees must give the employee | 35 |
notice of the award— | |
(a) specifying the number and description of those shares, | |
(b) stating their market value on the date on which they were awarded | |
to the employee, and | |
(c) stating the holding period applicable to them. | 40 |
(3) It must provide that, as soon as practicable after any partnership shares have | |
been awarded to an employee, the trustees must give the employee notice of | |
the award— | |
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(a) specifying the number and description of those shares, | |
(b) stating the amount of partnership share money applied by the | |
trustees in acquiring the shares on behalf of the employee, and | |
(c) stating their market value on the acquisition date (as defined by | |
paragraph 50(4) or, if there is an accumulation period, by paragraph | 5 |
52(5)). | |
(4) It must provide that, as soon as practicable after any dividend shares have | |
been acquired on behalf of a participant, the trustees must give the | |
participant notice of the acquisition— | |
(a) specifying the number and description of those shares, | 10 |
(b) stating their market value on the acquisition date (as defined by | |
paragraph 66(4)), | |
(c) stating the holding period applicable to them, and | |
(d) informing the participant of any amount carried forward under | |
paragraph 68 (reinvestment: amounts to be carried forward). | 15 |
(5) It must provide that, where any foreign cash dividend is received in respect | |
of plan shares held on behalf of a participant, the trustees must give the | |
participant notice of the amount of any foreign tax deducted from the | |
dividend before it was paid. | |
(6) In sub-paragraph (5) “foreign cash dividend” means a cash dividend paid in | 20 |
respect of plan shares in a company not resident in the United Kingdom. | |
Power of trustees to borrow | |
76 The trust instrument may provide that the trustees have power to borrow— | |
(a) to acquire shares for the purposes of the plan, and | |
(b) for such other purposes as may be specified in the trust instrument. | 25 |
Power of trustees to raise funds to subscribe for rights issue | |
77 (1) The trustees may dispose of some of the rights arising under a rights issue in | |
order to be able to obtain sufficient funds to exercise other such rights. | |
(2) The power conferred by sub-paragraph (1) is subject to paragraph 72 (duty | |
to act in accordance with participant’s directions). | 30 |
Acquisition by trustees of shares from employee share ownership trust | |
78 (1) The trust instrument must provide that, where there is a qualifying transfer | |
of shares to the trustees, the shares— | |
(a) must not be awarded to participants under the plan as partnership | |
shares, and | 35 |
(b) must be included in any award of free or matching shares made after | |
the date of the transfer in priority to other shares available for | |
inclusion in that award. | |
(2) For the purposes of this paragraph there is a qualifying transfer of shares to | |
the trustees if— | 40 |
(a) relevant shares (as defined by section 69(3AC) of FA 1989) are | |
transferred to them by the trustees of an employee share ownership | |
trust, and | |
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(b) the transfer is a qualifying transfer within section 69(3AA) of that Act | |
(transfer of shares in, or shares purchased from money in, an | |
employee share ownership trust immediately before 21st March | |
2000). | |
Meeting by trustees of PAYE obligations | 5 |
79 (1) The plan must make provision to ensure that, where a PAYE obligation is | |
imposed on the trustees as a result of any of a participant’s plan shares | |
ceasing to be subject to the plan, the trustees are able to meet that | |
obligation— | |
(a) by disposing of any of those shares, or | 10 |
(b) if there are any remaining plan shares of the participant, by | |
disposing of any of those shares, or | |
(c) by the participant paying to the trustees a sum equal to the amount | |
required to discharge the obligation. | |
(2) A “PAYE obligation” includes an obligation under any of sections 510 to 512 | 15 |
(PAYE: shares ceasing to be subject to the plan). | |
(3) For the purposes of sub-paragraph (1) any reference to the trustees | |
disposing of shares includes a reference to their acquiring the shares as | |
trustees for the purposes of the trust. | |
(4) A disposal of any of the participant’s plan shares in accordance with | 20 |
provision made under sub-paragraph (1)(b) may give rise to a charge to tax | |
under— | |
section 505 (charge on free or matching shares ceasing to be subject to | |
plan), | |
section 506 (charge on partnership shares ceasing to be subject to | 25 |
plan), or | |
section 68B(2) or 251C(1) of ICTA (charge under Case V of Schedule D | |
or Schedule F on dividend shares ceasing to be subject to plan). | |
Other duties of trustees in relation to tax liabilities | |
80 (1) The trust instrument must require the trustees to maintain such records as | 30 |
may be necessary for the purposes of— | |
(a) their own PAYE obligations, or | |
(b) the PAYE obligations of the employer company so far as they relate | |
to the plan. | |
(2) In sub-paragraph (1)— | 35 |
“PAYE obligations”, in relation to the trustees, includes obligations | |
under sections 510 to 514 (PAYE: shares ceasing to be subject to plan | |
and capital receipts); | |
“the employer company” has the same meaning as in section 513. | |
(3) The trust instrument must require the trustees, where the participant | 40 |
becomes liable to income tax under— | |
(a) this Act, or | |
(b) Case V of Schedule D or Schedule F, | |
by reason of the occurrence of any event, to inform the participant of any | |
facts relevant to determining that liability. | 45 |
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(4) Section 234A(4) to (11) of ICTA (information relating to distributions to be | |
provided by nominee) applies in relation to— | |
(a) the balance of any cash dividend paid over to the participant under | |
paragraph 64(3), | |
(b) any amount paid over to a participant under paragraph 68(4) | 5 |
(dividend retained for reinvestment and later paid out), or | |
(c) any relevant dividend (see sub-paragraph (5)), | |
as if it were a payment to which section 234A(4)(b) applied (and, in the case | |
of an amount within paragraph (b) above, as if the cash dividend had been | |
paid at the time of the payment to the participant under paragraph 68(4)). | 10 |
(5) In a case where dividend shares cease to be subject to the plan before the end | |
of the period of 3 years beginning with the date on which they were acquired | |
on a participant’s behalf, the cash dividend applied to acquire dividend | |
shares on the participant’s behalf is a “relevant dividend” for the purposes | |
of sub-paragraph (4)(c). | 15 |
Part 10 | |
Approval of plans | |
Application for approval | |
81 (1) Where— | |
(a) a SIP has been established, and | 20 |
(b) the company makes an application to the Inland Revenue for | |
approval of the plan, | |
the Inland Revenue must approve the plan if they are satisfied that it meets | |
the requirements of Parts 2 to 9 of this Schedule. | |
(2) An application for approval must— | 25 |
(a) be in writing, and | |
(b) contain such particulars, and be supported by such evidence, as the | |
Inland Revenue may require. | |
(3) Once the Inland Revenue have decided whether or not to approve the plan, | |
they must give notice of their decision to the company. | 30 |
Appeal against refusal of approval | |
82 (1) If the Inland Revenue refuse to approve the plan, the company may appeal | |
to the Special Commissioners. | |
(2) The notice of appeal must be given to the Inland Revenue within 30 days | |
after the date on which notice of their decision is given to the company. | 35 |
(3) If the Special Commissioners allow the appeal, they may direct the Inland | |
Revenue to approve the plan with effect from a date specified by the | |
Commissioners. | |
(4) The date so specified must not be earlier than that of the application for | |
approval. | 40 |
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Withdrawal of approval | |
83 (1) This paragraph applies if a disqualifying event (see paragraph 84) occurs in | |
relation to an approved SIP. | |
(2) The Inland Revenue may by a notice given to the company withdraw the | |
approval with effect from— | 5 |
(a) the time at which the disqualifying event occurred, or | |
(b) a later time specified by the Inland Revenue in the notice. | |
(3) The withdrawal of approval of a SIP does not affect the operation of the SIP | |
code in relation to shares awarded to participants in the plan before the time | |
with effect from which approval was withdrawn. | 10 |
(4) References in the SIP code to an approved SIP in relation to such shares are | |
to a plan that was approved at the time when the shares were awarded. | |
Disqualifying events for purposes of paragraph 83 | |
84 (1) The following are disqualifying events for the purposes of paragraph 83— | |
(a) a contravention in relation to the operation of the plan of any of the | 15 |
requirements of this Schedule, the plan itself or the plan trust; | |
(b) an 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; | |
(c) if the plan provides for performance allowances in accordance with | |
paragraph 42 (method two), the setting of performance targets in | 20 |
respect of an award of shares which are not consistent targets (within | |
the meaning given by paragraph 42(6)); | |
(d) an 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 | 25 |
participants’ plan shares; | |
(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; | |
(f) the trustees failing to furnish any information which they are | 30 |
required to furnish under paragraph 93 (power to require | |
information); | |
(g) the company, or (in the case of a group plan) a company which is or | |
has been a constituent company, failing to furnish any information | |
which it is required to furnish under that paragraph. | 35 |
(2) For the purposes of sub-paragraph (1)(b) the Inland Revenue may not | |
withhold their approval unless it appears to them at the time in question that | |
the plan as proposed to be altered would not then be approved on an | |
application under paragraph 81. | |
(3) Sub-paragraph (1)(e) applies, in particular, to different treatment in respect | 40 |
of— | |
(a) the dividend payable, | |
(b) repayment, | |
(c) the restrictions attaching to the shares, or | |
(d) any offer of substituted or additional shares, securities or rights of | 45 |
any description in respect of the shares. | |
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