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421C Associated persons | |
(1) For the purposes of this Chapter and Chapters 2 to 4 the following | |
are “associated persons” in relation to employment-related | |
securities— | |
(a) the person who acquired the employment-related securities | 5 |
on the acquisition, | |
(b) (if different) the employee, and | |
(c) any relevant linked person. | |
(2) A person is a relevant linked person if— | |
(a) that person (on the one hand), and | 10 |
(b) either the person who acquired the employment-related | |
securities on the acquisition or the employee (on the other), | |
are connected or, although not connected, are members of the same | |
household. | |
(3) But a company which would otherwise be a relevant linked person | 15 |
is not if it is— | |
(a) the employer, | |
(b) the person from whom the employment-related securities | |
were acquired, | |
(c) the person by whom the right or opportunity to acquire the | 20 |
employment-related securities was made available, or | |
(d) the person by whom the employment-related securities (or | |
the securities in which they are an interest) were issued. | |
421D Replacement and additional securities and changes in interests | |
(1) Subsections (2) and (3) apply where an associated person is entitled | 25 |
to employment-related securities (the “original securities”) and | |
either— | |
(a) as a result of the conversion of the original securities (or the | |
securities in which they are an interest), or of any other | |
transaction or series of transactions, that person ceases to be | 30 |
entitled to the original securities but that person or another | |
associated person acquires securities or an interest in | |
securities (the “replacement securities”), or | |
(b) by virtue of that person being entitled to the original | |
securities, that person or another associated person acquires | 35 |
other securities or an interest in other securities (the | |
“additional securities”). | |
(2) The replacement securities or the additional securities are to be | |
regarded for the purposes of section 421B(1) (securities acquired | |
pursuant to a right or opportunity available by reason of an | 40 |
employment) as acquired pursuant to the same right or opportunity | |
as the original securities. | |
(3) Where the market value of the original securities is reduced by | |
reason of the issue of, or of securities including, the replacement | |
securities or the additional securities (or the securities in which they | 45 |
are an interest), the amount of that reduction is to be treated for the | |
purposes of Chapters 2 and 3 as consideration or additional | |
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consideration given for the acquisition of the replacement securities | |
or the additional securities. | |
(4) Subsections (2) and (3) apply whether or not the replacement | |
securities, or the additional securities, were acquired for | |
consideration. | 5 |
(5) Where Chapters 2 to 4 apply to an interest in securities, an increase | |
of that interest is to be treated for the purposes of section 421B(1) | |
(securities acquired pursuant to a right or opportunity available by | |
reason of an employment) as a separate interest acquired pursuant to | |
the same right or opportunity as the original interest. | 10 |
(6) Where Chapters 2 to 4 apply to an interest in securities, a reduction | |
of that interest (otherwise than by a disposal to an associated person) | |
is to be treated for the purposes of those Chapters as the disposal | |
otherwise than to an associated person of a separate interest | |
proportionate to the reduction. | 15 |
421E Exclusions: residence etc | |
(1) Chapters 2, 3 and 4 do not apply in relation to employment-related | |
securities if, at the time of the acquisition, the earnings from the | |
employment were not (or would not have been if there had been any) | |
general earnings to which section 15 or 21 applies (earnings for year | 20 |
when employee resident and ordinarily resident in the UK). | |
(2) Chapters 3A to 3D do not apply in relation to employment-related | |
securities if, at the time of the acquisition, the earnings from the | |
employment were not (or would not have been if there had been any) | |
general earnings to which any of the charging provisions of Chapter | 25 |
4 or 5 of Part 2 apply. | |
(3) Chapters 2 to 4 do not apply in the case of a former employment if | |
they would not apply if the acquisition had taken place in the last tax | |
year in which the employment was held. | |
(4) Chapters 2 to 4 do not apply in the case of a prospective employment | 30 |
if they would not apply if the acquisition had taken place in the first | |
tax year in which the employment is held. | |
(5) Where the employment-related securities are replacement securities | |
or additional securities (within the meaning of section 421D), the | |
references in this section to the acquisition are to the acquisition of | 35 |
the original securities (within the meaning of that section). | |
421F Exclusions: public offers | |
(1) Chapters 2 to 4 do not apply in relation to employment-related | |
securities that are shares acquired under the terms of an offer to the | |
public or an interest in shares so acquired. | 40 |
(2) In a case within subsection (1) of section 544 (exemption for priority | |
share allocations where offer to employees separate from public | |
offer), any acquisition made under the terms of either the public offer | |
or the employee offer within the meaning of that subsection is to be | |
treated for the purposes of this section as made under the terms of an | 45 |
offer to the public. | |
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(3) Subsection (2) applies whether or not there is any benefit within | |
section 544(2) (benefit derived from entitlement to priority allocation | |
exempt from income tax). | |
421G Exclusions: approved plan or scheme securities | |
Chapters 2 to 4 do not apply to— | 5 |
(a) shares awarded or acquired under an approved share | |
incentive plan (within the meaning of Chapter 6 of | |
this Part), | |
(b) shares acquired by the exercise of a share option | |
granted under an approved SAYE option scheme | 10 |
(within the meaning of Chapter 7 of this Part), or | |
(c) shares acquired by the exercise of a share option | |
granted under an approved CSOP scheme (within the | |
meaning of Chapter 8 of this Part). | |
421H Meaning of “employee-controlled” etc | 15 |
(1) For the purposes of Chapters 2 to 4 a company is “employee- | |
controlled” by virtue of shares of a class if— | |
(a) the majority of the company’s shares of that class (other than | |
any held by or for the benefit of an associated company) are | |
held by or for the benefit of employees of the company or a | 20 |
company controlled by the company, and | |
(b) those employees are together able as holders of the shares to | |
control the company. | |
In this subsection “employee” includes a person who is to be or has | |
been an employee. | 25 |
(2) In this section and Chapters 2 to 4 “associated company” has the | |
same meaning as, by virtue of section 416 of ICTA, it has for the | |
purposes of Part 11 of ICTA. | |
421I Consideration for acquisition of employment-related securities | |
(1) This section applies for determining for the purposes of Chapters 2 | 30 |
to 3A the amount of the consideration given for the acquisition of | |
employment-related securities. | |
(2) References to consideration given for the acquisition of the | |
employment-related securities are to consideration given by— | |
(a) the employee, or | 35 |
(b) (if not the employee) the person by whom the employment- | |
related securities were acquired. | |
(3) The amount of the consideration given by a person for the | |
acquisition of the employment-related securities includes the | |
amount of any consideration given for a right to acquire the | 40 |
employment-related securities. | |
(4) If the right to acquire the employment-related securities (“the new | |
option”) is the whole or part of the consideration for the assignment | |
or release of another right to acquire them (“the old option”), the | |
amount of the consideration given for the new option is to be treated | 45 |
as being the sum of— | |
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(a) the amount by which the amount of the consideration given | |
for the old option exceeds the amount of any consideration | |
for the assignment or release of the old option, apart from the | |
new option, and | |
(b) any valuable consideration given for the new option, apart | 5 |
from the old option. | |
(5) Two or more transactions are to be treated for the purposes of | |
subsection (4) as a single transaction by which a right to acquire the | |
employment-related securities is assigned for a consideration which | |
consists of or includes another right to acquire the employment- | 10 |
related securities if— | |
(a) the transactions result in a person ceasing to hold a right to | |
acquire the employment-related securities and that person or | |
a connected person coming to hold another right to acquire | |
them, and | 15 |
(b) one or more of the transactions is effected under | |
arrangements to which two or more persons who hold rights | |
to acquire the employment-related securities, in respect of | |
which there may be a liability to tax under Chapter 5 of this | |
Part (securities options), are parties. | 20 |
(6) Subsection (5) applies regardless of the order in which the | |
assignment and the acquisition occur. | |
(7) In this section “release”, in relation to a right to acquire the | |
employment-related securities, includes agreeing to the restriction of | |
the exercise of the right. | 25 |
Information | |
421J Duty to provide information | |
(1) This section applies in relation to reportable events. | |
(2) Section 421K explains what are reportable events for the purposes of | |
this section. | 30 |
(3) Each person who is a responsible person in relation to a reportable | |
event must provide the Inland Revenue with particulars in writing | |
of the reportable event before 7th July in the tax year following that | |
in which the reportable event takes place. | |
(4) The Inland Revenue may by notice require any person to provide | 35 |
them with such particulars of any reportable events— | |
(a) which take place in a period specified in the notice, and | |
(b) in relation to which that person is a responsible person, | |
as are required by the notice or, if no reportable event in relation to | |
which that person is a responsible person has taken place in that | 40 |
period, to state that fact. | |
(5) A notice under subsection (4) must specify a date by which it must | |
be complied with. | |
(6) That date must not be less than 30 days after the date when the notice | |
is given. | 45 |
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(7) Once one person complies with the duty imposed by subsection (3) | |
in relation to a reportable event, that subsection ceases to impose a | |
duty on any other person in relation to the reportable event. | |
(8) Once a person complies with the duty imposed by a notice under | |
subsection (4) by providing the required particulars of a reportable | 5 |
event, subsection (3) ceases to impose a duty on that person or any | |
other person in relation to that reportable event. | |
(9) Section 421L explains who are the responsible persons in relation to | |
a reportable event. | |
(10) The particulars required by, or by a notice under, this section must | 10 |
be provided in a form specified by the Board of Inland Revenue. | |
(11) A person need not provide particulars required by, or by a notice | |
under, this section if they have been given in a notice under | |
paragraph 44 of Schedule 5 (enterprise management incentives: | |
notice of option to be given to Inland Revenue). | 15 |
In other respects the obligations imposed by, or by a notice under, | |
this section and by that paragraph are independent of each other. | |
(12) Paragraph 52 of that Schedule contains a duty to deliver annual | |
returns where a company’s shares are subject to a qualifying option | |
within the meaning of that Schedule. | 20 |
421K Reportable events | |
(1) This section applies for the purposes of section 421J (duty to provide | |
information). | |
(2) Each of the events mentioned in subsection (3) is a reportable event. | |
(3) The events are— | 25 |
(a) an acquisition (or an event treated as an acquisition) of | |
securities, an interest in securities or a securities option | |
pursuant to a right or opportunity available by reason of the | |
employment of the person who acquires the securities, | |
interest in securities or securities option or of any other | 30 |
person, | |
(b) an event which is a chargeable event in relation to securities, | |
or an interest in securities, for the purposes of section 426 | |
(chargeable events in relation to restricted securities and | |
restricted interests in securities), | 35 |
(c) an event which is a chargeable event in relation to securities, | |
or an interest in securities, for the purposes of section 438 | |
(chargeable events in relation to convertible securities and | |
interests in convertible securities), | |
(d) the doing of anything which gives rise to a taxable amount | 40 |
counting as employment income under section 446L | |
(artificial enhancement of market value of securities), | |
(e) an event which discharges a notional loan relating to | |
securities, or an interest in securities, under section 446U | |
(securities and interests in securities acquired for less than | 45 |
market value), | |
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(f) a disposal of securities, or an interest in securities, by virtue | |
of which Chapter 3D of this Part applies (securities and | |
interests in securities disposed of for more than market | |
value), | |
(g) the receipt of a benefit which gives rise to a taxable amount | 5 |
counting as employment income under section 447 (charge | |
on benefit from securities or interest in securities), | |
(h) the assignment or release of a securities option acquired | |
pursuant to a right or opportunity available by reason of the | |
employment of the person who acquires the securities option | 10 |
or any other person, and | |
(i) the receipt of a benefit in money or money’s worth which is | |
(or by virtue of section 477(6) is to be regarded as being) | |
received in connection with such a securities option. | |
421L Persons to whom section 421J applies | 15 |
(1) This section applies for the purposes of section 421J (duty to provide | |
information). | |
(2) Each of the following persons is a responsible person in relation to a | |
reportable event. | |
(3) The persons are— | 20 |
(a) the employer in question, | |
(b) any host employer of the employee in question, | |
(c) the person from whom the securities in question were, or | |
interest or option in question was, acquired, and | |
(d) in relation to a reportable event concerning securities or an | 25 |
interest in securities which are not excluded securities, the | |
person by whom the securities were issued. | |
(4) In subsection (3)(b) “host employer” means a person other than the | |
employer in question— | |
(a) for whom the employee in question works at the time of the | 30 |
reportable event, and | |
(b) who would, by virtue of subsection (2) of section 689 | |
(employees of non-UK employers working for a person other | |
than the employer), be treated for the purposes of PAYE | |
regulations as making a payment of PAYE income of the | 35 |
employee in question if a payment to which subsection (5) | |
would apply were made by the employer in question in | |
respect of the period during which the employee works for | |
the other person. | |
(5) For the purposes of subsection (4)(b) this subsection would apply to | 40 |
a payment if— | |
(a) it were a payment of PAYE income of the employee, and | |
(b) the conditions in subsection (1)(c) and (d) of section 689 were | |
satisfied in relation to the payment. | |
(6) For the purposes of subsection (3)(d) securities are excluded | 45 |
securities in relation to a reportable event if they are— | |
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(a) loan stock, bonds or other instruments creating or | |
acknowledging indebtedness issued by or on behalf of any | |
national or regional government or local authority (in the | |
United Kingdom or elsewhere) or any body whose members | |
consists of states, national or regional governments or local | 5 |
authorities, or | |
(b) securities which are issued by a person who, at the time of the | |
reportable event, is not connected with the employer in | |
question and which are listed or dealt in on a recognised | |
stock exchange.”. | 10 |
(2) So far as relating to— | |
(a) each of the new Chapters substituted or inserted in Part 7 by the | |
following paragraphs, and | |
(b) each of the Chapters of that Part as originally enacted for which new | |
Chapters are substituted by the following paragraphs, | 15 |
sub-paragraph (1) has effect in accordance with the provision made by the | |
following paragraphs for the taking effect of the substitution or insertion. | |
3 (1) For Chapter 2 of Part 7 substitute— | |
“Chapter 2 | |
Restricted securities | 20 |
Introduction | |
422 Application of this Chapter | |
This Chapter applies to employment-related securities if they are— | |
(a) restricted securities, or | |
(b) a restricted interest in securities, | 25 |
at the time of the acquisition. | |
423 “Restricted securities” and “restricted interest in securities” | |
(1) For the purposes of this Chapter employment-related securities are | |
restricted securities or a restricted interest in securities if— | |
(a) there is any contract, agreement, arrangement or condition | 30 |
which makes provision to which any of subsections (2) to (4) | |
applies, and | |
(b) the market value of the employment-related securities is less | |
than it would be but for that provision. | |
(2) This subsection applies to provision under which— | 35 |
(a) there will be a transfer, reversion or forfeiture of the | |
employment-related securities, or (if the employment-related | |
securities are an interest in securities) of the interest or the | |
securities, if certain circumstances arise or do not arise, | |
(b) as a result of the transfer, reversion or forfeiture the person by | 40 |
whom the employment-related securities are held will cease | |
to be entitled to any beneficial interest in the securities, and | |
(c) that person will not be entitled on the transfer, reversion or | |
forfeiture to receive in respect of the employment-related | |
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