Income Tax (Earnings and Pensions) Bill

House of Commons

Session 2002 - 03
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Income Tax (Earnings and Pensions) Bill

Income Tax (Earnings and Pensions) Bill
Schedule 3 — Approved SAYE option schemes
Part 9 — Supplementary provisions
    420

              (b)             a constituent company in a particular group scheme if another
company within that sub-paragraph is a constituent company in a
different group scheme.
          (5)      In this paragraph a “jointly owned company” means a company which
(apart from sub-paragraph (2)) is not controlled by any one person and—
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              (a)             of which 50% of the issued share capital is owned by one person and
50% by another, or
              (b)             which is otherwise controlled by two persons taken together.
          (6)      In this paragraph “joint owner” means one of the persons mentioned in sub-
paragraph (5)(a) or (b).
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Meaning of “associated company”
  47      (1)      For the purposes of the SAYE code, except in paragraph 35(3) (time when
“scheme-related employment” ends), one company is an “associated
company” of another company at a given time if, at that time or at any other
time within one year previously—
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              (a)             one has control of the other, or
              (b)             both are under the control of the same person or persons.
          (2)      For the purposes of sub-paragraph (1) the question whether a person
controls a company is to be determined in accordance with section 416(2) to
(6) of ICTA.
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Minor definitions
  48      (1)      In the SAYE code—
               “certified contractual savings scheme” has the meaning given in
section 326(2) to (6) of ICTA;
               “company” means a body corporate;
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               “market value” has the same meaning as it has for the purposes of
TCGA 1992 by virtue of Part 8 of that Act.
          (2)      For the purposes of the SAYE code a company is a member of a consortium
owning another company if it is one of a number of companies—
              (a)             which between them beneficially own not less than 75% of the other
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company’s ordinary share capital, and
              (b)             each of which beneficially owns not less than 5% of that capital.
Index of defined expressions
  49       In the SAYE code the following expressions are defined or otherwise
explained by the provisions indicated below:
35

approved
section 516(4) (and see

paragraph 42(3))

associated company
paragraph 47(1)

the bonus date
paragraph 30(3)

Income Tax (Earnings and Pensions) Bill
Schedule 3 — Approved SAYE option schemes
Part 9 — Supplementary provisions
    421

certified contractual savings scheme (CCS scheme)
paragraph 48(1)

child
section 832(5) of ICTA,

(and see section 721(6)

of this Act)

close company
section 832(1) of ICTA,

5

(and see paragraph

11(4))

company
paragraph 48(1)

connected person
section 718

constituent company
paragraph 3(3)

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control
section 719 (and see

paragraphs 35(4) and

47(2))

distribution
section 832(1) of ICTA

earnings
section 62 and see

15

section 721(7)

eligible shares (in Part 4 of this Schedule)
paragraph 17(2)

employee and employment
section 4

group scheme
paragraph 3(2) (and

see paragraph 46)

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interest
section 832(1) of ICTA

the Inland Revenue
section 720(1)

member of a consortium
paragraph 48(2)

market value
paragraph 48(1)

notice
section 832(1) of ICTA

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the options (in relation to a participant)
paragraph 2(2)

ordinary share capital
section 832(1) of ICTA

participant
paragraph 2(2)

participate
paragraph 2(2)

personal representatives
section 721(1)

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recognised stock exchange
section 841 of ICTA

the SAYE code
section 516(3)

SAYE option scheme
section 516(4)

the scheme organiser
paragraph 2(2)

share option
section 516(4)

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Income Tax (Earnings and Pensions) Bill
Schedule 4 — Approved CSOP schemes
Part 1 — Introduction
    422

shares
section 516(4)

Special Commissioners
section 4 of TMA 1970

specified age
paragraph 31

tax
section 832(3) of ICTA

United Kingdom
section 830 of ICTA

5

Schedule 4
Section 521

Approved CSOP schemes
Part 1
Introduction
Approval of CSOP schemes
10
  1       (1)      This Schedule makes provision for the approval of CSOP schemes by the
Inland Revenue.
          (2)      Parts 2 to 6 of this Schedule contain requirements that have to be met in
order for schemes to be approved under this Schedule.
          (3)      The requirements consist of general requirements (see Part 2) and
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requirements as to—
               the eligibility of individuals to participate in a scheme (see Part 3),
               the shares to which a scheme can apply (see Part 4),
               the share options which may be granted under a scheme (see Part 5),
and
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               the exchange of share options (see Part 6).
          (4)      Part 7 of this Schedule deals with the approval of schemes and the
withdrawal of approval.
CSOP schemes
  2       (1)      In the CSOP code a “CSOP scheme” means (in accordance with section
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521(4)) a scheme which—
              (a)             is established by a company,
              (b)             provides for share options to be granted to employees and directors,
and
              (c)             is not an SAYE option scheme (within the meaning of the SAYE code:
30
see section 516(4)).
          (2)      In the CSOP code, in relation to a CSOP scheme—
               “participant” means an individual who has been granted (but has not
yet exercised) share options under the scheme (“the options”);
               “participate” means obtain and exercise share options under the
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scheme;

Income Tax (Earnings and Pensions) Bill
Schedule 4 — Approved CSOP schemes
Part 2 — General requirements for approval
    423

               “the scheme organiser” means the company which has established the
scheme.
Group schemes
  3       (1)      A CSOP scheme established by a company that controls one or more other
companies (a “parent scheme company”) may extend to all or any of those
5
other companies.
          (2)      In the CSOP code a CSOP scheme established by a parent scheme company
which so extends is called a “group scheme”.
          (3)      In relation to a group scheme a “constituent company” means—
              (a)             the parent scheme company, or
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              (b)             any other company to which for the time being the scheme is
expressed to extend.
          (4)      Paragraph 34 deals with jointly owned companies and companies controlled
by them.
Part 2
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General requirements for approval
General requirements for approval: introduction
  4        A CSOP scheme must meet the requirements of—
                    paragraph 5 (general restriction on contents of scheme), and
                    paragraph 6 (limit on value of shares subject to options).
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General restriction on contents of scheme
  5        The scheme must not contain features which are neither essential nor
reasonably incidental to the purpose of providing benefits for employees
and directors in the nature of share options.
Limit on value of shares subject to options
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  6       (1)      The scheme must provide that an individual may not be granted share
options under it which would at the time when they are granted cause the
aggregate market value of the shares which the individual may acquire by
exercising share options granted under—
              (a)             the scheme, or
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              (b)             any other approved CSOP scheme established by the scheme
organiser or an associated company of the scheme organiser,
                   to exceed or further exceed £30,000.
          (2)      For the purposes of sub-paragraph (1) share options that have already been
exercised are to be left out of account.
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          (3)      For the purposes of sub-paragraph (1) the market value of shares is to be
calculated as at—
              (a)             the time when the options relating to them were granted, or
              (b)             if an agreement relating to them has been made under paragraph 22
(requirements as to price for acquisition of shares) the earlier time or
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times stated in the agreement.

Income Tax (Earnings and Pensions) Bill
Schedule 4 — Approved CSOP schemes
Part 3 — Eligibility of individuals to participate in scheme
    424

Part 3
Eligibility of individuals to participate in scheme
Requirements relating to the eligibility of individuals: introduction
  7        A CSOP scheme must meet the requirements of—
                    paragraph 8 (the employment requirement), and
5
                    paragraph 9 (the “no material interest” requirement).
The employment requirement
  8       (1)      The scheme must ensure that an individual is not eligible to be granted share
options under the scheme at a particular time unless the individual is then a
full-time director or a qualifying employee of—
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              (a)             the scheme organiser, or
              (b)             in the case of a group scheme, a constituent company.
          (2)      A “qualifying employee”, in relation to a company, means an employee of
the company other than one who is a director of—
              (a)             the company, or
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              (b)             in the case of a group scheme, a constituent company.
The “no material interest” requirement
  9       (1)      The scheme must ensure that an individual is not eligible to participate in
the scheme on any date if the individual has on that date, or has had within
the 12 months preceding that date, a material interest in a close company—
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              (a)             whose shares may be acquired as a result of exercising share options
granted under the scheme, or
              (b)             which has control of a company whose shares may be acquired as a
result of exercising share options granted under the scheme, or
              (c)             which is a member of a consortium which owns a company within
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paragraph (b).
          (2)      For the purposes of this paragraph an individual is to be regarded as having
a material interest in a company if—
              (a)             the individual, or
              (b)             the individual together with one or more of the individual’s
30
associates, or
              (c)             any such associate, with or without any other such associates,
                   has a material interest in the company.
          (3)      This paragraph is supplemented—
              (a)             as regards the meaning of “material interest”, by paragraphs 10 and
35
11, and
              (b)             as regards the meaning of “associate”, by paragraph 12 (read with
paragraphs 13 and 14).
          (4)      In this paragraph and paragraph 10 “close company” includes a company
that would be a close company but for—
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              (a)             section 414(1)(a) of ICTA (exclusion of companies not resident in the
United Kingdom), or
              (b)             section 415 of ICTA (exclusion of certain quoted companies).

Income Tax (Earnings and Pensions) Bill
Schedule 4 — Approved CSOP schemes
Part 3 — Eligibility of individuals to participate in scheme
    425

Meaning of “material interest”
  10      (1)      In paragraph 9 (the “no material interest” requirement) references to a
“material interest” in a company are to—
              (a)             a material interest in the share capital of the company, or
              (b)             a material interest in its assets.
5
          (2)      A material interest in the share capital of a company means—
              (a)             beneficial ownership of, or
              (b)             the ability to control (directly or through the medium of other
companies or by any other indirect means),
                   more than 10% of the ordinary share capital of the company.
10
          (3)      A material interest in the assets of a company means—
              (a)             possession of, or
              (b)             an entitlement to acquire,
                   such rights as would, in the event of the winding up of the company or in
any other circumstances, give an entitlement to receive more than 10% of the
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assets that would then be available for distribution among the participators.
          (4)      In this paragraph “participator” has the meaning given by section 417(1) of
ICTA.
          (5)      This paragraph is supplemented by paragraph 11 (material interest: options
etc).
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Material interest: options and interests in SIPs
  11      (1)      For the purposes of paragraph 10 (meaning of “material interest”) a right to
acquire shares (however arising) is to be treated as a right to control them.
          (2)      Sub-paragraph (3) also applies for the purposes of paragraph 10 in a case
where—
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              (a)             the shares to be attributed to an individual consist of or include
shares which the individual or another person has a right to acquire,
and
              (b)             the circumstances are such that, if that right were to be exercised, the
shares acquired would be shares which were previously unissued
30
and which the company would be contractually bound to issue in the
event of the exercise of the right.
          (3)      In determining at any time prior to the exercise of the right whether the
number of shares to be attributed to the individual exceeds 10% of the
ordinary share capital of the company, that ordinary share capital is to be
35
treated as increased by the number of unissued shares referred to in sub-
paragraph (2)(b).
          (4)      The references in sub-paragraphs (2) and (3) to the shares to be attributed to
an individual are to the shares which—
              (a)             for the purposes of paragraph 10(2) (material interest in share
40
capital), and
              (b)             in accordance with paragraph 9(2) (material interest can consist of or
include that of individual’s associates),
                   fall to be brought into account in the individual’s case so that it can be
determined whether their number exceeds 10% of the company’s ordinary
45
share capital.

Income Tax (Earnings and Pensions) Bill
Schedule 4 — Approved CSOP schemes
Part 3 — Eligibility of individuals to participate in scheme
    426

          (5)      In applying paragraph 10 the following are to be disregarded—
              (a)             the interest of the trustees of any approved SIP (within the meaning
of the SIP code: see section 488(4)) in any shares which are held by
them in accordance with the plan but which have not been
appropriated to, or acquired on behalf of, an individual, and
5
              (b)             any rights exercisable by the trustees as a result of that interest.
Meaning of “associate”
  12      (1)      In paragraph 9(2) (the “no material interest” requirement) “associate”, in
relation to an individual, means—
              (a)             any relative or partner of that individual,
10
              (b)             the trustee or trustees of any settlement in relation to which that
individual, or any of the individual’s relatives (living or dead), is or
was a settlor, or
              (c)             where that individual is interested in any shares or obligations of the
company mentioned in paragraph 9(2) which are subject to any trust
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or are part of the estate of a deceased person—
                    (i)                   the trustee or trustees of the settlement concerned, or
                    (ii)                  the personal representatives of the deceased,
                              as the case may be.
          (2)      Sub-paragraph (1)(c) needs to be read with paragraphs 13 and 14 (which
20
relate to employee benefit trusts and discretionary trusts).
          (3)      In this paragraph—
               “relative” means—
                     (a)                    spouse,
                     (b)                    parent, child or remoter relation in the direct line, or
25
                     (c)                    brother or sister;
               “settlor” and “settlement” have the same meaning as in Chapter 1A of
Part 15 of ICTA (see section 660G(1) and (2)).
Meaning of “associate”: trustees of employee benefit trust
  13      (1)      This paragraph applies for the purposes of paragraph 12(1)(c) (meaning of
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“associate”: trustees of settlement) where the individual is interested as a
beneficiary of an employee benefit trust in shares or obligations of the
company mentioned in paragraph 9(2).
          (2)      The trustees of the employee benefit trust are not to be regarded as associates
of the individual as a result only of the individual’s being so interested if
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neither—
              (a)             the individual, nor
              (b)             the individual together with one or more of the individual’s
associates, nor
              (c)             any such associate, with or without any other such associates,
40
                   has at any time after 13th March 1989 been the beneficial owner of, or been
able (directly or through the medium of other companies or by any other
indirect means) to control, more than 10% of the ordinary share capital of the
company.
          (3)      In sub-paragraph (2)(b) and (c) “associate” has the meaning given by
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paragraph 12(1), but does not include the trustees of an employee benefit



© Parliamentary copyright 2002	Revised 4 December 2002