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Loan released or written off | |
188 Loan released or written off: amount treated as earnings | |
(1) If— | |
(a) the whole or part of an employment-related loan is released or written | |
off in a tax year, and | 5 |
(b) at the time when it is released or written off the employee holds the | |
employment in relation to which the loan is an employment-related | |
loan (“employment E”), | |
the amount released or written off is to be treated as earnings from the | |
employment for that year. | 10 |
(2) But if the employment has terminated or become an excluded employment and | |
there was a time when— | |
(a) the whole or part of the loan was outstanding, | |
(b) the employee held the employment, and | |
(c) it was not an excluded employment, | 15 |
subsection (1) applies as if the employment had not terminated or become an | |
excluded employment. | |
(3) Where subsection (2) applies, any loan which replaces directly or indirectly the | |
employment-related loan is to be treated as an employment-related loan in | |
relation to employment E if— | 20 |
(a) it would, if employment E had not terminated or become excluded | |
employment, have been an employment-related loan in relation to | |
employment E, and | |
(b) it is not an employment-related loan in relation to other employment. | |
(4) This section is subject to section 189 (exception where double charge). | 25 |
189 Exception where double charge | |
(1) Section 188 (loan released or written off: amount treated as earnings) does not | |
apply if, by virtue of any other provision of the Income Tax Acts, the amount | |
released or written off— | |
(a) is employment income of the employee, or | 30 |
(b) is or is treated as income of the employee (or of the employee as a | |
borrower) which is not employment income and upon which that | |
person is liable to pay income tax. | |
This is subject to subsections (2) and (3). | |
(2) If, as a result of subsection (1), Chapter 3 of Part 6 (payments and benefits on | 35 |
termination of employment etc.) would be the only provision by virtue of | |
which the amount released or written off would be income of the employee— | |
(a) section 188 does apply, and | |
(b) accordingly Chapter 3 of Part 6 does not apply. | |
(3) If— | 40 |
(a) an amount is treated as the employee’s income under section 677 of | |
ICTA (sums paid to settlor otherwise than as income) in respect of a | |
capital sum paid in relation to the release or writing-off of the loan, and | |
(b) the amount released or written off exceeds the amount so treated as | |
income, | 45 |
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section 188 does apply but only the amount of the excess is to be treated as | |
earnings from the employment for the tax year in question under that section. | |
General supplementary provisions | |
190 Exclusion of charge after death of employee | |
(1) On the employee’s death a taxable cheap loan is to be treated— | 5 |
(a) for the purposes of this Chapter as ceasing to be outstanding, and | |
(b) for the purposes of section 182 (normal method of calculating interest | |
at the official rate) as being discharged on the date of death. | |
(2) Section 188 (loan released or written off: amount treated as earnings) does not | |
apply in relation to a release or writing off which takes effect on or after the | 10 |
death of the employee. | |
191 Claim for relief to take account of event after assessment | |
(1) A claim may be made for relief in the following cases. | |
(2) The first case is where— | |
(a) the tax payable by an employee for a tax year in respect of a loan has | 15 |
been decided on the basis that, for the purposes of section 175 (benefit | |
of taxable cheap loan treated as earnings), the whole or part of the | |
interest payable on the loan for that year was not paid, and | |
(b) it is subsequently paid. | |
(3) The second case is where— | 20 |
(a) the tax payable by an employee for a tax year in respect of a loan has | |
been decided on that basis that, for the purposes of section 188 (loan | |
released or written off: amount treated as earnings), the loan has been | |
released or written off in that year, and | |
(b) the whole or part of the loan is subsequently repaid. | 25 |
(4) The third case is where— | |
(a) the tax payable by an employee for a tax year in respect of a loan has | |
been decided on the basis that— | |
(i) section 288 (limited exemption of certain bridging loans | |
connected with employment moves), and | 30 |
(ii) section 289 (relief for certain bridging loans not qualifying for | |
exemption under section 288), | |
will not apply because the condition in section 288(1)(b) (which | |
requires that the limit on the exemption under section 287(1) has not | |
been reached) will not be met, and | 35 |
(b) that condition is met. | |
(5) Where a claim is made under this section the tax payable is to be adjusted | |
accordingly. | |
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Chapter 8 | |
Taxable benefits: notional loans in respect of acquisitions of shares | |
Introduction | |
192 Application of this Chapter | |
(1) This Chapter applies where— | 5 |
(a) shares in a company are, or an interest in shares in a company is, | |
acquired by an employee or a person connected with an employee, and | |
(b) the right or opportunity to acquire the shares or interest in shares was | |
available by reason of the employment. | |
(2) The shares may be in the employer, or in another company. | 10 |
(3) A right or opportunity to acquire shares or an interest in shares which is made | |
available by the employer is to be regarded as made available by reason of the | |
employment unless— | |
(a) the employer is an individual, and | |
(b) the right or opportunity is made available in the normal course of the | 15 |
employer’s domestic, family or personal relationships. | |
(4) In this Chapter— | |
“the acquisition” means the acquisition of shares or an interest in shares | |
mentioned in subsection (1), and | |
“the employment-related shares” means the shares or interest in shares | 20 |
acquired. | |
Acquisition of shares for less than market value | |
193 Notional loan where acquisition for less than market value | |
(1) This section applies if— | |
(a) no payment is made for the employment-related shares at or before the | 25 |
time of the acquisition, or | |
(b) the payment made at or before that time is less than— | |
(i) the market value at that time of fully paid up shares of their | |
class, or | |
(ii) if the employment-related shares consist of an interest in shares, | 30 |
the proportion of the market value at that time of fully paid up | |
shares of the same class as those in which the interest subsists | |
that corresponds to the size of the interest. | |
(2) For the purposes of subsection (1), any obligation to make payment or further | |
payment at some later time is to be disregarded. | 35 |
(3) The provisions listed in subsection (4) apply as if a loan (“the notional loan”) | |
had been made to the employee by the employer at the time of the acquisition | |
which— | |
(a) is an employment-related loan as defined in section 174, and | |
(b) is interest-free. | 40 |
(4) The provisions are— | |
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section 175 (benefit of taxable cheap loan treated as earnings), | |
section 178 (exception for loans where interest qualifies for tax relief), | |
section 180 (threshold for benefit of loan to be treated as earnings), | |
section 182 (normal method of calculation: averaging), | |
section 183 (alternative method of calculation), | 5 |
section 184 (interest treated as paid), | |
section 185 (apportionment of cash equivalent in case of joint loan etc.), | |
and | |
section 187 (aggregation of loans by close company to director). | |
(5) This section is subject to— | 10 |
section 491 (approved SIPs: no charge on award of shares as taxable | |
benefit), | |
section 519 (approved SAYE option schemes: no charge in respect of | |
exercise of option), | |
section 524 (approved CSOP schemes: no charge in respect of exercise of | 15 |
option), | |
section 540 (enterprise management incentives: no charge on acquisition | |
of shares as taxable benefit), | |
section 542 (exemption: offer made to public and employees), and | |
section 544 (exemption: different offers made to public and employees). | 20 |
194 The amount of the notional loan | |
(1) The amount of the notional loan initially outstanding is—![equation: plus[times[char[M],char[V]],minus[times[char[D],char[A]]]]](missing.gif) | |
where— | |
MV is— | |
(a) the market value of fully paid up shares of the same class as the | 25 |
employment-related shares, or | |
(b) if the employment-related shares consist of an interest in shares, | |
the proportion of the market value of fully paid up shares of the | |
same class as those in which the interest subsists that | |
corresponds to the size of the interest, and | 30 |
DA is the total of any deductible amounts. | |
(2) For the purposes of subsection (1) each of the following is a “deductible | |
amount”— | |
(a) any payment made for the employment-related shares at or before the | |
time of the acquisition; | 35 |
(b) any amount that constitutes earnings from the employee’s | |
employment under Chapter 1 of this Part (earnings) in respect of the | |
acquisition; | |
(c) if the acquisition results from the exercise of a share option— | |
(i) any amount that constitutes earnings from the employment | 40 |
under Chapter 1 of this Part (earnings) in respect of the receipt | |
of the share option, | |
(ii) any amount that is treated as earnings from the employment | |
under Chapter 10 of this Part (taxable benefits: residual liability | |
to charge) in respect of its receipt, and | 45 |
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(iii) any amount that counts as employment income of the employee | |
under section 476 or 477 (charge on employee on exercise etc. of | |
option) in respect of the exercise; and | |
(d) if the acquisition results from the exercise of a share option and an | |
amount counts as employment income of the employee under section | 5 |
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 employment-related shares. | |
(3) The amount of the notional loan outstanding at any subsequent time is the | |
difference between— | 10 |
(a) the amount initially outstanding, and | |
(b) the amount of any payments or further payments made for the | |
employment-related shares after the acquisition but before that time. | |
195 Discharge of notional loan: amount treated as earnings | |
(1) The notional loan is to be treated as discharged when the following occurs— | 15 |
(a) payments or further payments for the employment-related shares | |
equal to the amount initially outstanding have been made, | |
(b) if the employment-related shares were not fully paid up at the time of | |
the acquisition, any outstanding or contingent obligation to pay for | |
them ceases to bind the employee or any person connected with the | 20 |
employee, | |
(c) the employment-related shares are disposed of so that neither the | |
employee nor any person connected with the employee any longer has | |
a beneficial interest in them, or | |
(d) the employee dies. | 25 |
(2) If— | |
(a) a notional loan is discharged as a result of an event specified in | |
subsection (1)(b) or (c), and | |
(b) at the time of that event the employee holds the employment by reason | |
of which the right or opportunity to make the acquisition was available, | 30 |
the amount of the notional loan outstanding immediately before the | |
occurrence of the event is to be treated as earnings from the employment for | |
the tax year in which the event occurs. | |
(3) But if the employment has terminated or become an excluded employment | |
before that event and there was a time when— | 35 |
(a) the whole or part of the notional loan was outstanding, | |
(b) the employee held the employment, and | |
(c) it was not an excluded employment, | |
subsection (2) applies as if the employment had not terminated or become an | |
excluded employment. | 40 |
Supplementary provisions | |
196 Effects on other income tax charges | |
Nothing in this Chapter affects any liability to income tax arising in respect of | |
the acquisition by virtue of— | |
(a) Chapter 1 of this Part (earnings), or | 45 |
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(b) section 476 or 477 (charge on employee on exercise etc. of option by | |
employee or another person). | |
197 Minor definitions | |
(1) In this Chapter— | |
“employee” includes a prospective employee; | 5 |
“interest in shares” means an interest in shares less than full beneficial | |
ownership and includes an interest in the proceeds of sale of part of the | |
shares, but not a right to acquire shares; | |
“market value” has the same meaning as it has for the purposes of TCGA | |
1992 by virtue of Part 8 of that Act; | 10 |
“shares” includes— | |
(a) stock, and | |
(b) any securities as defined in section 254(1) of ICTA. | |
(2) In this Chapter references to the acquisition of shares or an interest in shares | |
include receipt by way of allotment or assignment or in any other way. | 15 |
(3) In this Chapter references to payment for the employment-related shares | |
include giving any consideration in money or money’s worth or making any | |
subscription, whether in pursuance of a legal liability or not. | |
(4) In this Chapter— | |
“the acquisition”, and | 20 |
“the employment-related shares”, | |
have the meaning indicated in section 192(4). | |
Chapter 9 | |
Taxable benefits: disposals of shares for more than market value | |
198 Shares to which this Chapter applies | 25 |
(1) This Chapter applies to shares in a company which have, or an interest in | |
shares in a company which has, been acquired by an employee or a person | |
connected with an employee, if the right or opportunity to acquire the shares | |
or interest in shares was available by reason of the employment. | |
(2) In this Chapter, “employment-related shares” means shares, or an interest in | 30 |
shares, acquired as mentioned in subsection (1). | |
(3) The shares may be in the employer, or in another company. | |
(4) A right or opportunity to acquire shares or an interest in shares which is made | |
available by the employer is to be regarded as made available by reason of the | |
employment unless— | 35 |
(a) the employer is an individual, and | |
(b) the right or opportunity is made available in the normal course of the | |
employer’s domestic, family or personal relationships. | |
199 Disposal for more than market value: amount treated as earnings | |
(1) This section applies if— | 40 |
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(a) employment-related shares are disposed of so that neither the | |
employee nor any person connected with the employee any longer has | |
a beneficial interest in them, and | |
(b) the disposal is for a consideration which exceeds the market value of | |
the employment-related shares at the time of the disposal. | 5 |
(2) But this section does not apply if the disposal occurs after the death of the | |
employee. | |
(3) The amount given by the following formula is to be treated as earnings from | |
the employee’s employment for the tax year in which the disposal occurs— | |
where— | 10 |
CD is the amount or value of the consideration for the disposal, and | |
MV is the market value of the employment-related shares at the time of | |
the disposal. | |
(4) But if— | |
(a) the employment has terminated or become an excluded employment | 15 |
before the disposal, and | |
(b) at the time of the acquisition of the employment-related shares the | |
employee held, or was about to hold, the employment and it was not an | |
excluded employment, | |
this section applies as if the employment had not terminated or become an | 20 |
excluded employment. | |
(5) If the employment-related shares consist of an interest in shares, the references | |
in this section to the market value of the employment-related shares are to the | |
proportion corresponding to the size of the interest of the market value of the | |
shares in which the interest subsists. | 25 |
200 Minor definitions | |
(1) In this Chapter— | |
“employee” includes a prospective employee; | |
“interest in shares” means an interest in shares less than full beneficial | |
ownership and includes an interest in the proceeds of sale of part of the | 30 |
shares, but not a right to acquire shares; | |
“market value” has the same meaning as it has for the purposes of TCGA | |
1992 by virtue of Part 8 of that Act; | |
“shares” includes— | |
(a) stock, and | 35 |
(b) any securities as defined in section 254(1) of ICTA. | |
(2) In this Chapter references to the acquisition of shares or an interest in shares | |
include receipt by way of allotment or assignment or in any other way. | |
(3) In this Chapter “employment-related shares” has the meaning indicated in | |
section 198(2). | 40 |
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