House of Commons portcullis
House of Commons
Session 2002 - 03
Internet Publications
Other Bills before Parliament

Finance Bill


Finance Bill
Schedule 21 — Approved share plans and schemes
Part 1 — Share incentive plans

    245

 

Schedule 21

Section 138

 

Approved share plans and schemes

Part 1

Share incentive plans

Introductory

5

  1        Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 (c. 1)

(approved share incentive plans) is amended as follows.

Participation in more than one connected plan in a tax year

  2        After paragraph 18 insert—

“Participation in more than one connected SIP in a tax year

10

          18A                 (1)                  The plan must provide that, if an individual participates in an

award of shares under the plan in a tax year in which he has

already participated in an award of shares under one or more

other approved SIPs established by the company or a connected

company—

15

                      (a)                     paragraph 35 (maximum annual award of free shares),

                      (b)                     paragraph 46 (maximum amount of partnership share

money deductions), and

                      (c)                     paragraph 64 (limit on amount reinvested),

                                             apply as if the plan and the other plan or plans were a single plan.

20

                           (2)                  In this paragraph “connected company” has the same meaning as

in paragraph 18.”.

  3        In paragraph 13 (eligibility of individuals: introduction), for the entry

relating to paragraph 18 substitute—

                                     “paragraph 18 (requirement not to participate

25

simultaneously in connected SIPs),

                                     paragraph 18A (successive participation in connected SIPs),

and”.

  4        In paragraph 14(7) (eligibility to participate dependent on certain

requirements of plan being met), for paragraph (b) substitute—

30

                    “(b)                      not participating simultaneously in connected SIPs (see

paragraph 18),

                    (ba)                      successive participation in connected SIPs (see paragraph

18A), and”.

  5        In paragraph 18 (requirement not to participate in connected SIPs), omit sub-

35

paragraph (1)(a) (successive participation in connected SIPs).

 

 

Finance Bill
Schedule 21 — Approved share plans and schemes
Part 1 — Share incentive plans

    246

 

  6        After paragraph 71 insert—

“Duty to monitor participants in connected schemes

          71A                  The trust instrument must require the trustees to maintain records

of participants who have participated in one or more other

approved SIPs established by the company or a connected

5

company.”.

Partnership shares

  7       (1)      Paragraph 46 (maximum amount of partnership share money deductions) is

amended as follows.

          (2)      In sub-paragraph (1), for the words after “must not exceed” substitute

10

“£1,500 in any tax year.”.

          (3)      In sub-paragraph (2), for the words after “an employee’s salary” substitute

“for any tax year must not exceed 10% of the employee’s salary for the tax

year.”.

          (4)      After that sub-paragraph insert—

15

          “(4A)                  A limit lower than that specified in sub-paragraph (2) may be

framed—

                      (a)                     as a proposition substituting a percentage lower than that

so specified, or

                      (b)                     as a proposition that a particular description of earnings is

20

not to be regarded as forming part of an employee’s salary

for the purposes of that sub-paragraph.”.

          (5)      Sub-paragraphs (2) and (3) have effect for the year 2003-04 and subsequent

years of assessment.

  8        In paragraph 47 (minimum amount of deductions)—

25

              (a)              for “in any month” substitute “on any occasion”, and

              (b)             omit sub-paragraph (3).

Dividend shares

  9        In paragraph 67 (holding period for dividend shares), for “must be 3 years”

substitute “is the period—

30

                    (a)                       beginning with the date on which the dividend shares are

acquired, and

                    (b)                      ending with the period of 5 years starting with the date of the

award of the shares in respect of which the dividend applied

to acquire the dividend shares was paid”.

35

  10       In paragraph 80(5) (meaning of “relevant dividend” for purposes of

provisions about information to be provided)—

              (a)             for “period of 3 years beginning with the date on which they were

acquired on a participant’s behalf” substitute “holding period”, and

              (b)             for “the participant’s” substitute “a participant’s”.

40

 

 

Finance Bill
Schedule 21 — Approved share plans and schemes
Part 2 — SAYE option schemes

    247

 

  11       In paragraph 100 (index of defined expressions), in the entry relating to

“holding period”, for the words in the second column substitute

“paragraphs 36 and 67”.

  12       In section 68B(2) of the Taxes Act 1988 (charge on dividend shares ceasing to

be subject to plan: foreign cash dividends), for “period of three years

5

beginning with the date on which the shares were acquired on the

participant’s behalf” substitute “holding period”.

  13       In section 251C(1) of the Taxes Act 1988 (charge on dividend shares ceasing

to be subject to plan), for “period of three years beginning with the date on

which the shares were acquired on the participant’s behalf” substitute

10

“holding period”.

  14       In section 501(3)(b) of the Income Tax (Earnings and Pensions) Act 2003 (c. 1)

(charge on capital receipts in respect of plan shares), for the words after

“dividend shares” substitute “in respect of, or by reference to, which the

capital receipt is received before the end of the holding period.”.

15

  15       Paragraphs to 9 to 14 have effect in relation to dividend shares acquired on

or after the day on which this Act is passed.

Part 2

SAYE option schemes

Introductory

20

  16       Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003 (approved

SAYE option schemes) is amended as follows.

Minor correction

  17       In paragraph 25(3)(a) (limit on contributions under CCS schemes linked to

approved SAYE schemes), after “SAYE” insert “option”.

25

Exercise of options: scheme-related employment ends because of change of control or transfer

  18      (1)      Paragraph 34 (exercise of options: scheme-related employment ends) is

amended as follows.

          (2)      In sub-paragraph (2)(a), after “1996” insert “or ER(NI)O 1996”.

          (3)      In sub-paragraph (5)—

30

              (a)             for “provide that,” substitute “make provision about the time when

the options may be exercised”, and

              (b)             omit the words following paragraph (b).

          (4)      After that sub-paragraph insert—

                           “(5A)                  If the scheme makes provision by virtue of sub-paragraph (5), the

35

provision must be either—

                      (a)                                             that the options may be exercised within 6 months after the

termination date, or

                      (b)                     that the options may be exercised within 6 months after the

date (if any) when P ceases to hold the employment which

40

(before the termination date) was the scheme-related

 

 

Finance Bill
Schedule 21 — Approved share plans and schemes
Part 3 — CSOP schemes

    248

 

employment for a reason within sub-paragraph (2)(a) or

(b).”.

Alteration of schemes

  19      (1)      Paragraph 42 (withdrawal of approval) is amended as follows.

          (2)      In sub-paragraph (2), after “to be met;” insert—

5

                      “(aa)                        an alteration is made in a key feature of the scheme

without the approval of the Inland Revenue;”.

          (3)      After that sub-paragraph insert—

                           “(2A)                  For the purposes of sub-paragraph (2)(aa) the Inland Revenue

may not withhold their approval unless it appears to them at the

10

time in question that the scheme as proposed to be altered would

not then be approved on an application under paragraph 40.

                           (2B)                  For the purposes of that sub-paragraph a “key feature” of a scheme

is a provision of the scheme which is necessary in order to meet the

requirements of this Schedule.”.

15

          (4)      For paragraph 43 (approval ineffective after unapproved alteration and

notice of decisions) and the heading before it substitute—

“Notice of decision about alteration

          43                  Where the Inland Revenue—

                      (a)                     have been requested to approve any alteration in a SAYE

20

option scheme that has been approved, and

                      (b)                     have decided whether or not to approve the alteration,

                            they must give notice of their decision to the scheme organiser.”.

          (5)      For paragraph 44(1)(b) (appeal against decision not to approve alteration)

substitute—

25

                      “(b)                        decide to refuse approval under paragraph 42(2)(aa).”.

Part 3

CSOP schemes

Introductory

  20       The Income Tax (Earnings and Pensions) Act 2003 (c. 1) is amended as

30

follows.

Exercise of options: exclusion of income tax liability

  21      (1)      Section 524 (no charge in respect of exercise of option under CSOP scheme)

is amended as follows.

          (2)      For subsection (1)(b) substitute—

35

                    “(b)                      Condition A or B is met.”.

          (3)      For subsections (2) and (3) substitute—

              “(2)                Condition A is that the option is exercised—

 

 

Finance Bill
Schedule 21 — Approved share plans and schemes
Part 3 — CSOP schemes

    249

 

                    (a)                   on or after the third anniversary of the date on which it was

granted, but

                    (b)                   not later than the tenth anniversary of that date.

              (2A)                Condition B is that the option—

                    (a)                   is exercised before the third anniversary of the date on which

5

it was granted, and

                    (b)                   is so exercised by virtue of a provision included in the scheme

under paragraph 24 of Schedule 4 (exercise of options after

ceasing to be director or employee) in circumstances in which

subsection (2B) applies.

10

              (2B)                This subsection applies if the individual exercising the option—

                    (a)                   has ceased to be a full-time director or qualifying employee

of the scheme organiser (or, in the case of a group scheme, a

constituent company) because of injury, disability,

redundancy or retirement, and

15

                    (b)                   exercises the option within 6 months of the day on which he

ceases to be such a director or employee.

              (2C)                In subsection (2B)—

                                      “redundancy” means redundancy within the meaning of ERA

1996 or ER(NI)O 1996, and

20

                                      “retirement” means retirement on or after reaching a retirement

age specified in the scheme.”.

          (4)      For section 525(1)(b) (no charge in respect of post-acquisition benefits)

substitute—

                    “(b)                      Condition A or B (as set out in section 524(2) or (2A)) is met.”.

25

          (5)      This paragraph has effect in relation to any exercise of an option on or after

9th April 2003.

  22      (1)      Schedule 4 (approved CSOP schemes) is amended as follows.

          (2)      After paragraph 35 insert—

“Retirement age

30

          35A                                   A retirement age specified in a CSOP scheme—

                      (a)                     must be the same for men and women, and

                      (b)                     must not be less than 55.”.

Meaning of “material interest”

  23      (1)      In paragraphs 10(2) and (3), 11(3) and (4) and 13(2) (material interest), for

35

“10%” substitute “25%”.

          (2)      This paragraph has effect for the purpose of determining whether a person

is eligible to participate in a scheme on the date on which this Act is passed

or any later date (by altering what constitutes a material interest on that date

and within the 12 months preceding that date).

40

Alteration of schemes

  24      (1)      Paragraph 30 (withdrawal of approval) is amended as follows.

 

 

Finance Bill
Schedule 21 — Approved share plans and schemes
Part 3 — CSOP schemes

    250

 

          (2)      In sub-paragraph (2), after “to be met;” insert—

                      “(aa)                        an alteration is made in a key feature of the scheme

without the approval of the Inland Revenue;”.

          (3)      After that sub-paragraph insert—

                           “(3)                  For the purposes of sub-paragraph (2)(aa) the Inland Revenue

5

may not withhold their approval unless it appears to them at the

time in question that the scheme as proposed to be altered would

not then be approved on an application under paragraph 28.

                           (4)                  For the purposes of that sub-paragraph a “key feature” of a scheme

is a provision of the scheme which is necessary in order to meet the

10

requirements of this Schedule.”.

          (4)      For paragraph 31 (approval ineffective after unapproved alteration and

notice of decisions) and the heading before it substitute—

“Notice of decision about alteration

          31                  Where the Inland Revenue—

15

                      (a)                     have been requested to approve any alteration in a CSOP

scheme that has been approved, and

                      (b)                     have decided whether or not to approve the alteration,

                            they must give notice of their decision to the scheme organiser.”.

          (5)      For paragraph 32(1)(b) (appeal against decision not to approve alteration)

20

substitute—

                      “(b)                        decide to refuse approval under paragraph 30(2)(aa).”.

PAYE

  25      (1)      Section 701(2)(c) (PAYE: exclusions from meaning of “asset”) is amended as

follows.

25

          (2)      In sub-paragraph (i), omit “or 4 (approved CSOP schemes)”.

          (3)      After that sub-paragraph insert—

                           “(ia)                             any shares acquired by the employee (whether or not

as a result of the exercise of a right to acquire shares)

under a scheme approved under Schedule 4

30

(approved CSOP schemes), other than shares

acquired as a result of the exercise of the right before

the third anniversary of the date on which it was

granted or later than the tenth anniversary of that

date;”.

35

          (4)      In sub-paragraph (ii), for “such a scheme” substitute “a scheme such as is

mentioned in sub-paragraph (i) or (ia)”.

          (5)      This paragraph has effect in relation to shares acquired on or after 9th April

2003.

 

 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2003
Revised 16 April 2003