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Withdrawal of approval | |
30 (1) If any disqualifying event occurs in connection with an approved CSOP | |
scheme, the Inland Revenue may by a notice given to the scheme organiser | |
withdraw the approval with effect from— | |
(a) the time at which the disqualifying event occurred, or | 5 |
(b) a later time specified by the Inland Revenue in the notice. | |
(2) A “disqualifying event” occurs in connection with a scheme if— | |
(a) any of the requirements of Parts 2 to 6 of this Schedule ceases to be | |
met; or | |
(b) the scheme organiser fails to provide information requested by the | 10 |
Inland Revenue under paragraph 33. | |
Approval ineffective after unapproved alteration | |
31 (1) If— | |
(a) an alteration is made in a CSOP scheme that has been approved, and | |
(b) the alteration has not been approved by the Inland Revenue, | 15 |
the approval of the scheme is ineffective after the date of the alteration. | |
(2) Where the Inland Revenue— | |
(a) have been requested to approve any alteration in such a scheme, and | |
(b) have decided whether or not to approve the alteration, | |
they must give notice of their decision to the scheme organiser. | 20 |
Appeal against withdrawal of approval etc | |
32 (1) This paragraph applies if an CSOP scheme has been approved by the Inland | |
Revenue and they— | |
(a) decide to withdraw approval of the scheme under paragraph 30, or | |
(b) decide not to approve an alteration in the scheme under paragraph | 25 |
31. | |
(2) The scheme organiser may appeal against the decision to the Special | |
Commissioners. | |
(3) The notice of appeal must be given to the Inland Revenue within 30 days | |
after the date on which notice of their decision was given to the scheme | 30 |
organiser. | |
Part 8 | |
Supplementary provisions | |
Power to require information | |
33 (1) The Inland Revenue may by notice require any person to provide them with | 35 |
any information— | |
(a) which they reasonably require for the performance of their functions | |
under the CSOP code, and | |
(b) which the person to whom the notice is addressed has or can | |
reasonably obtain. | 40 |
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(2) The power conferred by this paragraph extends, in particular, to— | |
(a) information to enable the Inland Revenue— | |
(i) to decide whether to approve a CSOP scheme or to withdraw | |
an approval already given, or | |
(ii) to determine the liability to tax, including capital gains tax, of | 5 |
any person who has participated in a scheme, and | |
(b) information about the administration of a scheme and any alteration | |
of the terms of a scheme. | |
(3) The notice must require the information to be provided within a specified | |
time, which must not end earlier than 3 months after the date when the | 10 |
notice is given. | |
Jointly owned companies | |
34 (1) This paragraph applies for the purposes of the provisions of the CSOP code | |
relating to group schemes. | |
(2) Each joint owner of a jointly owned company is to be treated as controlling | 15 |
every company within sub-paragraph (3). | |
(3) The companies within this sub-paragraph are— | |
(a) the jointly owned company, and | |
(b) any company controlled by that company. | |
(4) However, no company within sub-paragraph (3) may be— | 20 |
(a) a constituent company in more than one group scheme, or | |
(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 | 25 |
(apart from sub-paragraph (2)) is not controlled by any one person and— | |
(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- | 30 |
paragraph (5)(a) or (b). | |
Meaning of “associated company” | |
35 (1) For the purposes of the CSOP code 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— | 35 |
(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. | 40 |
Minor definitions | |
36 (1) In the CSOP code— | |
“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 CSOP 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 | 5 |
company’s ordinary share capital, and | |
(b) each of which beneficially owns not less than 5% of that capital. | |
Index of defined expressions | |
37 In the CSOP code the following expressions are defined or otherwise | |
explained by the provisions indicated below: | 10 |
| | approved | section 521(4) | | | | | associated company | paragraph 35(1) | | | | | child | section 832(5) of ICTA, | | | | | | (and see section 721(6) | | | | | | of this Act) | | 15 | | | close company | section 832(1) of ICTA, | | | | | | (and see paragraph | | | | | | 9(4)) | | | | | company | paragraph 36(1) | | | | | connected person | section 718 | | 20 | | | CSOP scheme | section 521(4) | | | | | constituent company | paragraph 3(3) | | | | | control | section 719 (and see | | | | | | paragraph 35(2)) | | | | | the CSOP code | section 521(3) | | 25 | | | distribution | section 832(1) of ICTA | | | | | employee and employment | section 4 | | | | | eligible shares (in Part 4 of this Schedule) | paragraph 15(2) | | | | | group scheme | paragraph 3(2) (and | | | | | | see paragraph 34) | | 30 | | | the Inland Revenue | section 720(1) | | | | | market value | paragraph 36(1) | | | | | member of a consortium | paragraph 36(2) | | | | | notice | section 832(1) of ICTA | | | | | the options (in relation to a participant) | paragraph 2(2) | | 35 | | | ordinary share capital | section 832(1) of ICTA | | |
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| | participant | paragraph 2(2) | | | | | participate | paragraph 2(2) | | | | | personal representatives | section 721(1) | | | | | recognised stock exchange | section 841 of ICTA | | | | | the scheme organiser | paragraph 2(2) | | 5 | | | share option | section 521(4) | | | | | shares | section 521(4) | | | | | Special Commissioners | section 4 of TMA 1970 | | | | | United Kingdom | section 830 of ICTA | | |
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Schedule 5 | 10 |
Section 527. | |
Enterprise management incentives | |
Part 1 | |
Introduction | |
Enterprise management incentives: qualifying options | |
1 (1) This Schedule makes provision for establishing what is a qualifying option | 15 |
for the purposes of the EMI code. | |
(2) In the EMI code a “qualifying option” means (in accordance with section | |
527(4)) a share option— | |
(a) in relation to which the requirements of this Schedule are met at the | |
time when the option is granted, and | 20 |
(b) which is notified to the Inland Revenue in accordance with Part 7. | |
(3) The requirements of this Schedule are— | |
(a) the general requirements in Part 2, | |
(b) that the company whose shares are the subject of the option (“the | |
relevant company”) is a qualifying company (see Part 3), | 25 |
(c) that the individual to whom it is granted is an eligible employee in | |
relation to that company (see Part 4), | |
(d) that the option is granted to the employee by reason of the | |
employee’s employment— | |
(i) with that company, or | 30 |
(ii) if that company is a parent company, with that company or | |
another member of the group, and | |
(e) the requirements of Part 5 as to the terms of the option, the types of | |
shares that may be subject to it, and other matters. | |
(4) In the EMI code, as it applies to a share option, “the appropriate time” means | 35 |
the time when the option is granted. | |
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Meaning of “the relevant company” and “the employer company” | |
2 In the EMI code, in relation to a share option— | |
“the relevant company” means (in accordance with paragraph 1(3)(b)) | |
the company whose shares are subject to the option; | |
“the employer company” means the company by reference to which the | 5 |
requirement in paragraph 1(3)(d) (the employment requirement) is | |
met. | |
Part 2 | |
General requirements | |
General requirements: introduction | 10 |
3 A share option is not a qualifying option unless the requirements of this Part | |
of this Schedule as to the following are met at the appropriate time— | |
the purpose for which the option is granted (see paragraph 4), | |
the maximum entitlement of an employee (see paragraphs 5 and 6), | |
the maximum value of the relevant company’s shares in respect of | 15 |
which unexercised options can exist (see paragraph 7). | |
Purpose of granting the option | |
4 To be a qualifying option a share option must be granted for commercial | |
reasons in order to recruit or retain an employee in a company, and not as | |
part of a scheme or arrangement the main purpose (or one of the main | 20 |
purposes) of which is the avoidance of tax. | |
Maximum entitlement of employee: financial limit on unexercised options | |
5 (1) An employee may not hold unexercised qualifying options which— | |
(a) are in respect of shares with a total value of more than £100,000, and | |
(b) were granted by reason of the employee’s employment— | 25 |
(i) with one company, or | |
(ii) with two or more companies which are members of the same | |
group of companies. | |
(2) A share option cannot be a qualifying option if the limit in sub-paragraph (1) | |
is already exceeded at the time when it is granted. | 30 |
(3) If the grant of a share option causes that limit to be exceeded, the option | |
cannot be a qualifying option so far as it relates to the excess. | |
(4) Where, at the time when a share option is granted to an employee (“E”), E | |
holds unexercised CSOP options granted by reason of E’s employment— | |
(a) with the employer company, or | 35 |
(b) if it is a member of a group of companies, with any member of that | |
group, | |
those options are to be treated for the purposes of this paragraph as if they | |
were unexercised qualifying options. | |
(5) A “CSOP option” is an option to acquire shares under a scheme approved | 40 |
under Schedule 4 (CSOP schemes). | |
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(6) For the purposes of this paragraph— | |
(a) “the value” of shares in respect of which a particular share option is | |
or has been granted means the market value, at the time when the | |
option is or was granted, of issued shares of the same class as those | |
that may be acquired by exercise of the option; and | 5 |
(b) a share option is to be treated as granted in respect of the maximum | |
number of shares that may be acquired under it. | |
(7) For the purposes of this paragraph the market value of shares subject to | |
restrictions or risk of forfeiture is to be determined as if there were no such | |
restriction or risk. | 10 |
(8) Shares are “subject to risk of forfeiture” if the interest that may be acquired | |
is only conditional within the meaning of section 424 (conditional interests | |
in shares). | |
Maximum entitlement of employee: further limit of 3 years | |
6 (1) Sub-paragraph (2) applies if an employee (“E”) has already been granted, by | 15 |
reason of E’s employment with one company, qualifying options in respect | |
of shares with a total value of £100,000. | |
(2) Any further option granted by reason of E’s employment— | |
(a) with that company, or | |
(b) if it is a member of a group of companies, with any member of that | 20 |
group, | |
within the 3-year restriction period cannot be a qualifying option. | |
(3) Sub-paragraph (4) applies if an employee (“E”) has already been granted, by | |
reason of E’s employment with two or more companies which are members | |
of the same group of companies, qualifying options in respect of shares with | 25 |
a total value of £100,000. | |
(4) Any further option granted, by reason of E’s employment with any member | |
of that group, within the 3-year restriction period cannot be a qualifying | |
option. | |
(5) Sub-paragraph (2) or (4) applies whether or not the qualifying options | 30 |
already granted have been exercised or released. | |
(6) In those sub-paragraphs “the 3-year restriction period” means the period of | |
three years after the date of the grant of the last qualifying option. | |
(7) Paragraph 5(6) to (8) (determination of value of shares) apply for the | |
purposes of this paragraph as they apply for the purposes of paragraph 5. | 35 |
Maximum value of options in respect of relevant company’s shares | |
7 (1) The total value of shares in the relevant company in respect of which | |
unexercised qualifying options exist must not exceed £3 million. | |
(2) A share option cannot be a qualifying option if the limit in sub-paragraph (1) | |
is already exceeded at the time when it is granted. | 40 |
(3) If the grant of a share option causes that limit to be exceeded, the option | |
cannot be a qualifying option so far as it relates to the excess. | |
(4) If the grant of two or more options at the same time causes that limit to be | |
exceeded, sub-paragraph (5) applies. | |
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(5) For the purpose of determining which part of each option relates to the | |
excess, the amount of the excess is to be divided pro rata among the options | |
according to the value of the shares in respect of which each option was | |
granted. | |
(6) Paragraph 5(6) to (8) (determination of value of shares) apply for the | 5 |
purposes of this paragraph as they apply for the purposes of paragraph 5. | |
Part 3 | |
Qualifying companies | |
Qualifying companies: introduction | |
8 A “qualifying company” is a company in relation to which the requirements | 10 |
of this Part of this Schedule as to the following are met at the appropriate | |
time— | |
independence (see paragraph 9), | |
having only qualifying subsidiaries (see paragraphs 10 and 11), | |
gross assets (see paragraph 12), and | 15 |
trading activities (see paragraphs 13 and 14, read with paragraphs 15 to | |
23). | |
The independence requirement | |
9 (1) The independence requirement consists of two conditions. | |
(2) The first condition is that the company is not— | 20 |
(a) a 51% subsidiary of another company, or | |
(b) a company which is under the control of— | |
(i) another company, or | |
(ii) another company and any other person connected with that | |
other company, | 25 |
without being a 51% subsidiary of that other company. | |
(3) The second condition is that no arrangements are in existence by virtue of | |
which the company could become such a subsidiary or fall under such | |
control. | |
(4) Arrangements with a view to a qualifying exchange of shares (see paragraph | 30 |
40) do not count for the purposes of the second condition. | |
The qualifying subsidiaries requirement | |
10 (1) A company that has one or more subsidiaries is not a qualifying company | |
unless every subsidiary of the company is a qualifying subsidiary (see | |
paragraph 11). | 35 |
(2) For this purpose— | |
(a) “subsidiary” means any company which the company controls, | |
either on its own or together with any person connected with it, and | |
(b) the question whether a person controls a company is to be | |
determined in accordance with section 416(2) to (6) of ICTA | 40 |
(“control” in the context of close companies). | |
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