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513 Capital receipts: payments by trustees to employer company | |
(1) This section applies if the trustees receive a sum of money which constitutes (or | |
forms part of) a capital receipt which, by virtue of the SIP code, counts as | |
employment income of a participant when it is received by the participant. | |
(2) Out of that sum of money the trustees must pay to the employer company an | 5 |
amount equal to the amount of employment income. | |
(3) The employer company must then pay over that amount to the participant, but | |
when doing so must make a PAYE deduction. | |
(4) This section is subject to section 514 (capital receipts: deductions to be made by | |
trustees). | 10 |
(5) In this section “the employer company” means— | |
(a) the company which employs the participant in relevant employment at | |
the time when the trustees receive the sum mentioned in subsection (1), | |
or | |
(b) if the participant is not then employed in relevant employment, the | 15 |
company which last employed the participant in relevant employment | |
before that time, | |
so long as that company is one to which PAYE regulations apply at that time. | |
514 Capital receipts: PAYE deductions to be made by trustees | |
(1) This section applies if— | 20 |
(a) the trustees receive a sum of money which constitutes (or forms part of) | |
a capital receipt which, by virtue of the SIP code, counts as employment | |
income of a participant when it is received by the participant, and | |
(b) either condition A or B is met. | |
(2) Condition A is that the Inland Revenue— | 25 |
(a) are of the opinion that it is impracticable for the employer company | |
(within the meaning of section 513) to make a PAYE deduction, and | |
(b) accordingly direct that this section is to apply. | |
(3) Condition B is that there is no company that qualifies as the employer company | |
(within the meaning of that section). | 30 |
(4) If this section applies, the trustees must, when paying the capital receipt over | |
to the participant, make a PAYE deduction in respect of the taxable equivalent | |
as if the participant were a former employee of the trustees. | |
(5) The “taxable equivalent” means an amount equal to the amount which counts | |
as employment income as mentioned in subsection (1)(a). | 35 |
(6) If this section applies, section 689 (employee of non-UK employer) does not | |
apply. | |
Other tax consequences | |
515 Tax advantages and charges under other Acts | |
(1) The following provisions of ICTA relate to SIPs— | 40 |
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(a) sections 68A to 68C and 251A to 251D (which provide for amounts to | |
be charged to income tax under Schedule D Case V or Schedule F | |
where— | |
(i) dividends are paid out to participants under an approved SIP, | |
or | 5 |
(ii) dividend shares cease to be subject to the plan in certain | |
circumstances), | |
(b) sections 686B and 686C (which provide for section 686 of that Act | |
(accumulation and discretionary trusts: special rates of tax) not to apply | |
to income of the trustees of an approved SIP in certain circumstances), | 10 |
and | |
(c) Schedule 4AA (which makes provision about deductions allowed in | |
calculating trade profits for corporation tax purposes in respect of | |
certain of a company’s expenses relating to— | |
(i) providing shares for the purposes of an approved SIP, or | 15 |
(ii) the establishment or operation of the plan). | |
(2) SIPs are also dealt with in— | |
(a) Part 1 of Schedule 7D to TCGA 1992 (which provides for relief from | |
capital gains tax for the trustees and for participants in relation to an | |
approved SIP in certain circumstances, including where shares cease to | 20 |
be subject to the plan), and | |
(b) section 95 of FA 2001 (which contains relief from stamp duty and stamp | |
duty reserve tax for transfers of partnership or dividend shares). | |
(3) The references in this section to ICTA, TCGA 1992 and FA 2001 are to those | |
Acts as amended by Schedule 6 to this Act. | 25 |
Chapter 7 | |
Approved SAYE option schemes | |
Introduction | |
516 Approved SAYE option schemes | |
(1) This Chapter provides— | 30 |
(a) for the approval of SAYE option schemes by the Inland Revenue, and | |
(b) for exemptions from income tax in connection with share options | |
granted under those schemes. | |
(2) Schedule 3 contains the requirements that have to be met for an SAYE option | |
scheme to be approved, together with the approval procedure. | 35 |
(3) The provisions of— | |
(a) this and the following sections of this Chapter, | |
(b) Schedule 3, and | |
(c) Part 2 of Schedule 7D to TCGA 1992 (approved SAYE option schemes: | |
amount of consideration on exercise of option), | 40 |
together constitute “the SAYE code”. | |
(4) In the SAYE code— | |
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“approved” means approved by the Inland Revenue under Schedule 3 | |
(see paragraph 1 of the Schedule); | |
“SAYE option scheme” means a scheme (commonly referred to as an | |
SAYE share option scheme) which is established by a company and | |
provides— | 5 |
(a) for share options to be granted to employees and directors, and | |
(b) for the shares acquired by the exercise of the share options to be | |
paid for in the way mentioned in paragraph 24 of Schedule 3 | |
(payments for shares to be linked to approved savings | |
schemes); | 10 |
“share option” means a right to acquire shares in a company; | |
“shares” includes stock. | |
(5) Other expressions used in the SAYE code and contained in the index at the end | |
of Schedule 3 have the meaning indicated by the index. | |
517 Share options to which this Chapter applies | 15 |
(1) This Chapter applies to a share option granted to an individual— | |
(a) in accordance with the provisions of an approved SAYE option scheme, | |
and | |
(b) by reason of the individual’s office or employment as a director or | |
employee of a company. | 20 |
(2) The individual may be a director or employee of the company whose shares are | |
the subject of the share option, or of some other company. | |
Tax advantages | |
518 No charge in respect of receipt of option | |
No liability to income tax arises in respect of the receipt of the share option. | 25 |
519 No charge in respect of exercise of option | |
(1) No liability to income tax arises in respect of the exercise of the share option | |
if— | |
(a) the individual exercises it in accordance with the provisions of the | |
SAYE option scheme at a time when the scheme is approved, and | 30 |
(b) Condition A or B is met. | |
(2) Condition A is that the option is exercised on or after the third anniversary of | |
the date on which it was granted. | |
(3) Condition B is that the option— | |
(a) is exercised before the third anniversary of the date on which it was | 35 |
granted, and | |
(b) is so exercised otherwise than by virtue of a provision included in the | |
scheme under— | |
paragraph 34(5) of Schedule 3 (exercise of option where scheme- | |
related employment ends), or | 40 |
paragraph 37 of that Schedule (exercise of option where certain | |
company events occur). | |
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(4) This section does not affect the operation of section 477(4) (no charge on | |
exercise of option by personal representatives etc.). | |
(5) In Schedule 3— | |
(a) paragraph 32 provides for the exercise of an option where the holder | |
has died, and | 5 |
(b) paragraph 42(3) provides for an SAYE option scheme to be treated as | |
approved at the time when an option is exercised even though | |
approval of the scheme has been previously withdrawn. | |
520 No charge in respect of post-acquisition benefits | |
(1) This section applies if— | 10 |
(a) the individual exercises the share option in accordance with the | |
provisions of the SAYE option scheme at a time when the scheme is | |
approved, and | |
(b) Condition A or B (as set out in section 519(2) or (3)) is met. | |
(2) No liability to income tax arises by virtue of— | 15 |
section 449 (charge where restrictions or rights varied after acquisition), or | |
section 453 (charge on increase in value of shares in dependent | |
subsidiaries), | |
in respect of shares acquired by the exercise of the share option. | |
(3) Paragraph 42(3) of Schedule 3 provides for an SAYE option scheme to be | 20 |
treated as approved at the time when an option is exercised even though | |
approval of the scheme has been previously withdrawn. | |
Chapter 8 | |
Approved CSOP schemes | |
Introduction | 25 |
521 Approved CSOP schemes | |
(1) This Chapter provides— | |
(a) for the approval of CSOP schemes by the Inland Revenue, | |
(b) for exemptions from income tax in connection with share options | |
granted under those schemes, and | 30 |
(c) for amounts to count as employment income in certain circumstances | |
in connection with such options. | |
(2) Schedule 4 contains the requirements that have to be met for a CSOP scheme | |
to be approved, together with the approval procedure. | |
(3) The provisions of— | 35 |
(a) this and the following sections of this Chapter, | |
(b) Schedule 4, and | |
(c) Part 3 of Schedule 7D to TCGA 1992 (approved CSOP schemes: amount | |
of consideration on exercise of option), | |
together constitute “the CSOP code”. | 40 |
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(4) In the CSOP code— | |
“approved” means approved by the Inland Revenue under Schedule 4 | |
(see paragraph 1 of the Schedule); | |
“CSOP scheme” means a scheme (commonly referred to as a company | |
share option plan) which— | 5 |
(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: see section 516(4)); | 10 |
“share option” means a right to acquire shares in a company; | |
“shares” includes stock. | |
(5) Other expressions used in the CSOP code and contained in the index at the end | |
of Schedule 4 have the meaning indicated by the index. | |
522 Share options to which this Chapter applies | 15 |
(1) This Chapter applies to a share option granted to an individual— | |
(a) in accordance with the provisions of an approved CSOP scheme, and | |
(b) by reason of the individual’s office or employment as a director or | |
employee of a company. | |
(2) The individual may be a director or employee of the company whose shares are | 20 |
the subject of the share option, or of some other company. | |
Tax advantages | |
523 No charge in respect of receipt of option | |
(1) No liability to income tax arises in respect of the receipt of the share option. | |
(2) But this is subject to section 526 (charge where option granted at a discount). | 25 |
524 No charge in respect of exercise of option | |
(1) No liability to income tax arises in respect of the exercise of the share option | |
if— | |
(a) the individual exercises it in accordance with the provisions of the | |
CSOP scheme at a time when the scheme is approved, and | 30 |
(b) the condition in subsection (2) is met. | |
(2) The condition is that— | |
(a) the option (“the current option”) is exercised— | |
(i) on or after the third anniversary of the date on which it was | |
granted, but | 35 |
(ii) not later than the tenth anniversary of that date, and | |
(b) the individual has not made an exempt exercise of another option | |
within the period of 3 years ending with the date on which the current | |
option is exercised. | |
(3) For the purposes of subsection (2)— | 40 |
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(a) an individual has made an exempt exercise of another option if the | |
individual has exercised a share option granted under the scheme, or | |
under any other approved CSOP scheme, in circumstances in which | |
subsection (1) applied to its exercise, and | |
(b) an option exercised on the same day as the current option is to be | 5 |
disregarded. | |
(4) This section does not affect the operation of section 477(4) (no charge on | |
exercise of option by personal representatives etc.). | |
(5) Paragraph 25 of Schedule 4 provides for the exercise of an option where the | |
holder has died. | 10 |
525 No charge in respect of post-acquisition benefits | |
(1) This section applies if— | |
(a) the individual exercises the share option in accordance with the | |
provisions of the CSOP scheme at a time when the scheme is approved, | |
and | 15 |
(b) the condition set out in section 524(2) is met. | |
(2) No liability to income tax arises by virtue of— | |
section 449 (charge where restrictions or rights varied after acquisition), or | |
section 453 (charge on increase in value of shares in dependent | |
subsidiaries), | 20 |
in respect of shares acquired by the exercise of the option. | |
Tax charge | |
526 Charge where option granted at a discount | |
(1) This section applies if, at the time when the share option is granted to the | |
individual, the aggregate of— | 25 |
(a) the amount or value of any consideration given by the individual for | |
the grant of the option, and | |
(b) the amount payable by the individual, on exercising the option, in | |
order to acquire the maximum number of shares that may be acquired | |
under it, | 30 |
is less than the market value of the same quantity of issued shares of the same | |
class. | |
(2) The amount of the difference counts as employment income of the individual | |
for the relevant tax year. | |
(3) The “relevant tax year” is the tax year in which the option is granted to the | 35 |
individual. | |
(4) The following provisions, namely— | |
(a) section 194 (amount of notional loan in respect of acquisition of shares | |
for less than market value), and | |
(b) sections 479 and 480 (amount of gain realised by exercising, assigning | 40 |
or releasing option), | |
provide for deductions to be made to take account of amounts that count as | |
employment income under this section. | |
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Chapter 9 | |
Enterprise management incentives | |
Introduction | |
527 Enterprise management incentives: qualifying options | |
(1) This Chapter provides— | 5 |
(a) for share options notified to the Inland Revenue to be qualifying | |
options for the purposes of the EMI code, and | |
(b) for exemptions and reliefs from income tax in connection with | |
qualifying options. | |
(2) Schedule 5 contains the requirements that have to be met for a share option to | 10 |
be a qualifying option, together with the notification procedure. | |
(3) The provisions of— | |
(a) this and the following sections of this Chapter, | |
(b) Schedule 5, and | |
(c) Part 4 of Schedule 7D to TCGA 1992 (enterprise management | 15 |
incentives: capital gains tax consequences of exercise of qualifying | |
option), | |
together constitute “the EMI code”. | |
(4) In the EMI code— | |
“qualifying option” means a share option— | 20 |
(a) in relation to which the requirements of Schedule 5 are met at | |
the time when the option is granted, and | |
(b) which is notified to the Inland Revenue in accordance with Part | |
7 of that Schedule; | |
“replacement option” means an option within paragraph 41(4) of that | 25 |
Schedule (grant of replacement option in connection with company | |
reorganisations); | |
“share option” means a right to acquire shares in a company; | |
and any reference to the requirements of Schedule 5 is to the requirements set | |
out in paragraph 1(3) of that Schedule. | 30 |
(5) Other expressions used in the EMI code and contained in the index at the end | |
of Schedule 5 have the meaning indicated by the index. | |
Tax advantages: receipt of option | |
528 No charge on receipt of qualifying option | |
No liability to income tax arises in respect of the receipt of a qualifying option. | 35 |
Tax advantages: exercise of option | |
529 Scope of tax advantages: option must be exercised within 10 years | |
(1) Sections 530 to 540 apply in connection with the exercise of a qualifying option. | |
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