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(b) subject to subsection (3), any amount that is treated as earnings from | |
the employee’s employment under Chapter 10 of Part 3 (taxable | |
benefits: residual liability to charge) in respect of the receipt of the share | |
option, and | |
(c) any amount that is a deductible amount by virtue of section 481 or 482 | 5 |
(deductible amounts in respect of secondary Class 1 contributions or | |
special contribution met by the employee). | |
(3) If— | |
(a) the taxable amount is being determined for the purposes of section 477, | |
and | 10 |
(b) section 476 or that section has already applied to the share option by | |
virtue of an earlier event, | |
so much of the amounts in subsection (2)(a) or (b) as was deducted in | |
calculating the taxable amount on that occasion is not a deductible amount. | |
479 Amount of gain realised by exercising option | 15 |
(1) The amount of the gain realised by exercising the share option is—![equation: plus[times[char[M],char[V]],minus[times[char[D],char[C]]]]](missing.gif) | |
where— | |
MV is the amount that a person might reasonably expect to obtain from a | |
sale of the shares acquired in the open market at the time the option is | |
exercised, and | 20 |
DC is the total of any deductible costs. | |
(2) For the purposes of subsection (1) each of the following is a “deductible cost”— | |
(a) subject to subsection (3), the amount or value of any consideration | |
given for the grant of the share option; | |
(b) the amount or value of any consideration given for the shares acquired; | 25 |
(c) in a case within section 477(1)(b) or (c), the amount of any gain realised | |
by a previous holder on an assignment of the option; and | |
(d) if an amount counts as employment income of the employee under | |
section 526 (approved CSOP schemes: charge where option granted at | |
a discount) in respect of the share option, so much of that amount as is | 30 |
attributable to the shares in question. | |
(3) If section 476 or 477 has already applied to the share option by virtue of an | |
earlier event, so much of the consideration given for the grant of the share | |
option as was deducted in calculating the amount of the gain on that occasion | |
is not a deductible cost. | 35 |
(4) The amount of the gain is calculated in accordance with section 531 (enterprise | |
management incentives: limitation of charge on exercise of option to acquire | |
shares below market value) or 532 (enterprise management incentives: | |
modified tax consequences following disqualifying events) if— | |
(a) it is being calculated for the purposes of section 476 (charge on exercise | 40 |
etc. of option by employee), and | |
(b) section 531 or 532, as the case may be, applies. | |
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480 Amount of gain realised by assigning or releasing option | |
(1) The amount of the gain realised by assigning or releasing the share option is— | |
where— | |
C is the amount or value of the consideration for the assignment or | |
release, and | 5 |
DC is the total of any deductible costs. | |
(2) For the purposes of subsection (1) each of the following is a “deductible cost”— | |
(a) subject to subsection (3), the amount or value of any consideration | |
given for the grant of the share option; | |
(b) in a case within section 477(1)(b) or (c), the amount of any gain realised | 10 |
by a previous holder on an assignment of the share option; and | |
(c) if an amount counts as employment income of the employee under | |
section 526 (approved CSOP schemes: charge where option granted at | |
a discount) in respect of the share option, so much of that amount as is | |
attributable to the shares in question. | 15 |
(3) If section 476 or 477 has already applied to the share option by virtue of an | |
earlier event, so much of the consideration given for the grant of the share | |
option as was deducted in calculating the amount of the gain on that occasion | |
is not a deductible cost. | |
481 Deductible amount in respect of secondary Class 1 contributions met by | 20 |
employee | |
(1) The amount calculated under subsection (2) is a deductible amount for the | |
purposes of section 478(1) if— | |
(a) an agreement having effect under paragraph 3A of Schedule 1 to the | |
Contributions and Benefits Act has been entered into allowing the | 25 |
secondary contributor to recover from the employee the whole or part | |
of any secondary Class 1 contributions in respect of the gain, or | |
(b) an election having effect under paragraph 3B of Schedule 1 to that Act | |
is in force which has the effect of transferring to the employee the whole | |
or part of the liability to pay secondary Class 1 contributions in respect | 30 |
of the gain. | |
(2) The amount is the sum of— | |
(a) any amount that under the agreement referred to in subsection (1)(a) is | |
recovered in respect of the gain by the secondary contributor before 5th | |
June in the tax year following that in which the exercise, assignment or | 35 |
release of the share option occurred, and | |
(b) the amount of any liability in respect of the gain that, by virtue of the | |
election referred to in subsection (1)(b), has become the employee’s | |
liability. | |
(3) If notice of withdrawal of approval of the election is given, the amount of any | 40 |
liability in respect of the gain for the purposes of subsection (2)(b) is limited to | |
the amount of the liability met before 5th June in the tax year following that in | |
which the exercise, assignment or release of the share option occurred. | |
(4) Subsection (1) does not apply in respect of a liability to pay Class 1 | |
contributions which is prevented from arising by virtue of section 2(1)(a) of the | 45 |
Social Security Contributions (Share Options) Act 2001 (c. 20) (liability to pay | |
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(4) Class 1 contributions in respect of gain replaced by liability to pay special | |
contribution). | |
(5) In this section— | |
“approval”, in relation to an election, means approval by the Board of | |
Inland Revenue under paragraph 3B of Schedule 1 to the Contributions | 5 |
and Benefits Act; and | |
“secondary contributor” has the same meaning as in that Act (see section | |
7). | |
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 | 10 |
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 | 15 |
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 | 20 |
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. | 25 |
Supplementary provisions | |
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 | 30 |
(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 | 35 |
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. | 40 |
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(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 | 5 |
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 | 10 |
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. | 15 |
(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 | |
sum of— | |
(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 | 20 |
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 | 25 |
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 | 30 |
option, and | |
(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 | 35 |
acquisition occur. | |
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, | 40 |
(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, | |
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(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. | 5 |
(2) The company must provide the Inland Revenue with particulars in writing of | |
the matter. | |
(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 | 10 |
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 | 15 |
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 (enterprise | |
management incentives: notice of option to be given to Inland Revenue). | |
In other respects the obligations imposed by subsection (1) and by that | 20 |
paragraph are independent of each other. | |
487 Minor definitions | |
(1) In this Chapter— | |
“company” means a body corporate; | |
“director”— | 25 |
(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 | |
similar body, | |
(b) in the case of a company whose affairs are managed by a single | |
director or similar person, means that director or person, | 30 |
(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; | |
“employee” includes— | |
(a) in relation to a company, a person taking part in the | 35 |
management of the affairs of the company who is not a director, | |
and | |
(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); | 40 |
“shares” includes— | |
(a) stock, and | |
(b) any securities as defined in section 254(1) of ICTA issued by a | |
company; | |
“the Contributions and Benefits Act” means SSCBA 1992 or SSCB(NI)A | 45 |
1992. | |
(2) In this Chapter— | |
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“share option”, | |
“the employee”, and | |
“the share option”, | |
have the meaning indicated in section 471(4). | |
Chapter 6 | 5 |
Approved share incentive plans | |
Introduction | |
488 Approved share incentive plans (SIPs) | |
(1) This Chapter provides— | |
(a) for the approval of share incentive plans (“SIPs”) by the Inland | 10 |
Revenue, | |
(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 | 15 |
(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. | 20 |
(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), | 25 |
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; | 30 |
a “share incentive plan” (or “SIP” for short) means a plan established by a | |
company providing— | |
(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 | 35 |
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. | |
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