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481 Deductible amount in respect of secondary Class 1 contributions met | |
by employee | |
(1) The amount calculated under subsection (2) is a deductible amount | |
if— | |
(a) an agreement having effect under paragraph 3A of Schedule | 5 |
1 to the Contributions and Benefits Act has been entered into | |
allowing the 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 | 10 |
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 of the gain. | |
(2) The amount is the sum of— | |
(a) any amount that under the agreement referred to in | 15 |
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 gain is realised, 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 | 20 |
become the employee’s liability. | |
(3) If notice of withdrawal of approval of the election is given, the | |
amount of any 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 gain is realised. | 25 |
(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 Social Security Contributions (Share Options) Act 2001 | |
(liability to pay Class 1 contributions in respect of gains replaced by | |
liability to pay special contribution). | 30 |
(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 and Benefits Act, and | |
“secondary contributor” has the same meaning as in that Act | 35 |
(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 if conditions A to D are met. | |
(2) Condition A is that a notice in respect the employment-related | 40 |
securities option was given to the Board of Inland Revenue in | |
accordance with section 1 of the Social Security Contributions (Share | |
Options) Act 2001 before 11th August 2001. | |
(3) Condition B is that the person, or one of the persons, who gave that | |
notice is a person who (apart from that Act) was liable, or would | 45 |
have become liable, by virtue of an election under paragraph 3B of | |
Schedule 1 to the Contributions and Benefits Act, to pay secondary | |
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Class 1 contributions in respect of an event which is a chargeable | |
event for the purposes of section 476. | |
(4) Condition C is that that person became liable to pay a special | |
contribution under section 2 of the Social Security Contributions | |
(Share Options) Act 2001 in respect of the employment-related | 5 |
securities 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. | |
Supplementary provisions | 10 |
483 Application of this Chapter where option exchanged for another | |
(1) This section applies if— | |
(a) the employment-related securities option (the “old option”) | |
is assigned or released, and | |
(b) the whole or part of the consideration for the assignment or | 15 |
release consists of or includes another securities option (the | |
“new option”). | |
(2) For the purposes of section 479(5) (amount of gain realised by | |
assigning or releasing option) the new option is not to be treated as | |
consideration given for the assignment or release of the old option. | 20 |
(3) This Chapter applies to the new option as it applies to the old option. | |
(4) For the purposes of section 480(2) (consideration for acquisition of | |
option) the amount of the consideration given for the acquisition of | |
the new option is to be treated as being the sum of— | |
(a) the amount by which the amount of the consideration given | 25 |
for the acquisition of the old option exceeds the amount of | |
any consideration given for the assignment or release of the | |
old option, apart from the new option, and | |
(b) any valuable consideration given for the acquisition of the | |
new option, apart from the old option. | 30 |
(5) Two or more transactions are to be treated for the purposes of | |
subsection (1) as a single transaction by which one option is assigned | |
for a consideration which consists of or includes another option if— | |
(a) the transactions result in— | |
(i) a person ceasing to hold an option, and | 35 |
(ii) that person or a connected person coming to hold | |
another option, and | |
(b) one or more of the transactions is effected under | |
arrangements to which two or more persons holding options, | |
in respect of which there may be liability to tax under this | 40 |
Chapter, are parties. | |
(6) Subsection (5) applies regardless of the order in which the | |
assignments and the acquisition occur. | |
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484 Definitions | |
(1) In this Chapter— | |
“securities”, and | |
“securities option”, | |
have the meaning indicated in section 420. | 5 |
(2) In this Chapter “market value” has the meaning indicated in section | |
421(1). | |
(3) For the purposes of this Chapter sections 421(2) and 421A apply for | |
determining the amount of consideration given for anything. | |
(4) In this Chapter “employment-related securities” has the same | 10 |
meaning as in Chapter 1 of this Part (see section 421B(8)). | |
(5) In this Chapter— | |
“the acquisition”, | |
“the employee”, | |
“the employer”, | 15 |
“the employment”, and | |
“employment-related securities option”, | |
have the meaning indicated in section 471(5). | |
(6) In this Chapter “associated person” has the meaning indicated in | |
section 472. | 20 |
(7) In this Chapter— | |
“secondary Class 1 contributions” has the same meaning as in | |
the Contributions and Benefits Act (see section 1), and | |
“the Contributions and Benefits Act” means SSCBA 1992 or | |
SSCB(NI)A 1992.”. | 25 |
(2) Sub-paragraph (1) has effect— | |
(a) on and after 16th April 2003 in relation to employment-related | |
securities options which are not share options, and | |
(b) on and after the day appointed under paragraph 3(2) in relation to | |
employment-related securities options which are share options; | 30 |
and for this purpose “share options” means rights to acquire shares in a | |
company or securities as defined in section 254(1) of the Taxes Act 1988 | |
issued by a company. | |
PAYE | |
11 (1) Section 509 (modification of section 696 where charge on shares ceasing to | 35 |
be subject to plan) is amended as follows. | |
(2) In subsection (4), for “subsection (5)” substitute “subsections (5) and (6)”. | |
(3) After subsection (5) insert— | |
“(6) In determining for the purposes of this section (and of section 696 in | |
its application in accordance with this section) whether the shares are | 40 |
readily convertible assets, section 702 has effect with the omission of | |
subsections (5A) to (5D).”. | |
12 (1) For sections 698 and 699 (PAYE: conditional interests in shares and | |
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convertible shares) substitute— | |
“698 PAYE: special charges on employment-related securities | |
(1) This section applies where by reason of the operation of— | |
(a) section 426 (chargeable events in relation to restricted | |
securities and restricted interests in securities), | 5 |
(b) section 438 (chargeable events in relation to convertible | |
securities and interests in convertible securities), | |
(c) section 446B (charge on acquisition where market value of | |
securities or interest artificially depressed), | |
(d) section 446L (charge where market value of securities | 10 |
artificially enhanced), | |
(e) section 446U (securities or interest acquired for less than | |
market value: charge on discharge of notional loan), | |
(f) section 446Y (charge where securities or interest disposed of | |
for more than market value), or | 15 |
(g) section 447 (chargeable benefit from securities or interest,) | |
in relation to employment-related securities, an amount counts as | |
employment income of an employee. | |
(2) Sections 684 to 691 and 696 have effect as if— | |
(a) the employee were provided with PAYE income in the form | 20 |
of the employment-related securities by the employer on the | |
relevant date, and | |
(b) the reference in subsection (2) of section 696 to the amount of | |
income likely to be PAYE income in respect of the provision | |
of the asset were to the amount likely to count as employment | 25 |
income. | |
(3) In a case in which the employment-related securities are not readily | |
convertible assets, if— | |
(a) the amount counts as income by virtue of section 427(3)(c), | |
439(3)(b), (c) or (d), 446Y or 447, and | 30 |
(b) the whole or any part of the consideration or benefit | |
concerned takes the form of a payment or consists in the | |
provision of an asset, | |
subsection (4) applies. | |
(4) Sections 684 to 691 and 696 have effect — | 35 |
(a) to the extent that the consideration or benefit takes the form | |
of a payment, as if it were a payment of PAYE income of the | |
employee by the employer, and | |
(b) to the extent that the consideration or benefit consists in the | |
provision of an asset, as if the provision of the asset were the | 40 |
provision of PAYE income in the form of the asset by the | |
employer on the relevant date. | |
(5) Section 696 as applied by subsection (4)(b) has effect as if the | |
reference in subsection (2) of that section to the amount of income | |
likely to be PAYE income were to the same proportion of the amount | 45 |
likely to count as employment income as so much of the | |
consideration or benefit as consists in the provision of the asset bears | |
to the whole of the consideration or benefit. | |
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(6) In this section “the relevant date” means— | |
(a) in relation to an amount counting as employment income | |
under section 426 or 438, the date on which the chargeable | |
event in question occurs, | |
(b) in relation to an amount counting as employment income | 5 |
under section 446B, the date of the acquisition of the | |
securities or interest in securities in question, | |
(c) in relation to an amount counting as employment income | |
under section 446L, the valuation date in question, | |
(d) in relation to an amount counting as employment income | 10 |
under section 446U, the date on which the notional loan in | |
question is treated as discharged, | |
(e) in relation to an amount counting as employment income | |
under section 446Y, the date of the disposal of the securities | |
or interest in securities in question, and | 15 |
(f) in relation to an amount counting as employment income | |
under section 447, the date on which the benefit in question | |
is received. | |
(7) In this section “employment-related securities” has the same | |
meaning as in Chapters 1 to 4 of Part 7.”. | 20 |
(2) Sub-paragraph (1) has effect on and after the day appointed under | |
paragraph 3(2) but does not affect any securities, or interests in securities, | |
acquired before 16th April 2003. | |
13 (1) For section 700 (PAYE: gains from share options) substitute— | |
“700 PAYE: gains from securities options | 25 |
(1) This section applies where by reason of the operation of section 476 | |
(acquisition of securities pursuant to securities option etc) in relation | |
to an employment-related securities option an amount counts as | |
employment income of an employee. | |
(2) In a case where the amount counts as employment income by virtue | 30 |
of section 477(3)(a) (acquisition of securities), sections 684 to 691 and | |
696 have effect as if— | |
(a) the employee were provided with PAYE income in the form | |
of the securities by the employer on the relevant date, and | |
(b) the reference in subsection (2) of section 696 to the amount of | 35 |
income likely to be PAYE income in respect of the provision | |
of the asset were to the amount likely to count as employment | |
income. | |
(3) In a case where the amount counts as income by virtue of section | |
477(3)(b) or (c) (assignment or release for consideration or receipt of | 40 |
benefit), sections 684 to 691 and 696 have effect — | |
(a) to the extent that the consideration or benefit takes the form | |
of a payment, as if it were a payment of PAYE income of the | |
employee by the employer, and | |
(b) to the extent that the consideration or benefit consists in the | 45 |
provision of an asset, as if the provision of the asset were the | |
provision of PAYE income in the form of the asset by the | |
employer on the relevant date. | |
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(4) Section 696 as applied by subsection (3)(b) has effect as if the | |
reference in subsection (2) of that section to the amount of income | |
likely to be PAYE income were to the same proportion of the amount | |
likely to count as employment income as so much of the | |
consideration or benefit as consists in the provision of the asset bears | 5 |
to the whole of the consideration or benefit. | |
(5) In this section “the relevant date” means the date on which the | |
chargeable event in question occurs. | |
(6) In this section— | |
“employment-related securities option”, and | 10 |
“securities”, | |
have the same meaning as in Chapter 5 of Part 7.”. | |
(2) Sub-paragraph (1) has effect on and after the day appointed under | |
paragraph 3(2). | |
14 (1) In section 701(2)(b) (“asset” not to include vouchers or credit-tokens), omit | 15 |
“subject to section 700(6),”. | |
(2) Sub-paragraph (1) has effect on and after the day appointed under | |
paragraph 3(2). | |
15 (1) Section 702 (meaning of “readily convertible asset”) is amended as follows. | |
(2) After subsection (5) insert— | 20 |
“(5A) An asset consisting in securities which is not a readily convertible | |
asset apart from this subsection is to be treated as a readily | |
convertible asset unless the securities are shares that are corporation | |
tax deductible. | |
(5B) For the purposes of subsection (5A) shares are corporation tax | 25 |
deductible if they are acquired by a person— | |
(a) by reason of that, or another person’s, employment with a | |
company, or | |
(b) pursuant to an option granted by reason of that, or another | |
person’s, employment with a company, | 30 |
and the company is entitled to corporation tax relief in respect of the | |
shares under Schedule 23 to the Finance Act 2003 (corporation tax | |
relief for employee share acquisition). | |
(5C) If a person acquires additional shares by virtue of holding shares that | |
are corporation tax deductible, the additional shares are to be treated | 35 |
for the purposes of subsection (5A) as if they were corporation tax | |
deductible. | |
(5D) If— | |
(a) on a person ceasing to have a beneficial interest in shares that | |
are corporation tax deductible, that person acquires other | 40 |
shares, and | |
(b) the circumstances are such that the shares in which the | |
person ceases to have a beneficial interest constitute “original | |
shares” and the other shares constitute a “new holding” for | |
the purposes of sections 127 to 130 of TCGA 1992, | 45 |
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the shares that constitute the new holding are to be treated for the | |
purposes of subsection (5A) as if they were corporation tax | |
deductible.”. | |
(3) In subsection (6), after the definition of “money debt” insert— | |
““securities” has the same meaning as in Chapters 1 to 5 of Part | 5 |
7 (employment income from securities) (see section 420), | |
“shares” includes— | |
(a) an interest in shares, and | |
(b) stock or an interest in stock,”. | |
(4) For the purposes of section 702, shares are to be treated as corporation tax | 10 |
deductible during an accounting period which began before 1st January | |
2003 if they would have been corporation tax deductible had the accounting | |
period begun on or after that date. | |
Consequential amendments | |
16 (1) In section 3(1) (structure of employment income Parts), in the entry relating | 15 |
to Part 7, for “share-related income and exemptions” substitute “income and | |
exemptions relating to securities and securities options acquired in | |
connection with an employment”. | |
(2) Sub-paragraph (1) has effect on and after 16th April 2003. | |
17 (1) In section 7(6)(b) (employment income), for “(share-related income and | 20 |
exemptions)” substitute “(income and exemptions relating to securities and | |
securities options)”. | |
(2) Sub-paragraph (1) has effect on and after 16th April 2003. | |
18 (1) In section 19(2) (year in which earnings treated as received), omit the entries | |
relating to Chapters 8 and 9 of Part 3. | 25 |
(2) Sub-paragraph (1) has effect— | |
(a) so far as relating to Chapter 8 of Part 3, in accordance with the | |
provision made for the repeal of that Chapter, and | |
(b) so far as relating to Chapter 9 of Part 3, in accordance with the | |
provision made for the repeal of that Chapter. | 30 |
19 (1) In section 32(2) (receipt of non-money earnings), omit the entries relating to | |
Chapters 8 and 9 of Part 3. | |
(2) Sub-paragraph (1) has effect— | |
(a) so far as relating to Chapter 8 of Part 3, in accordance with the | |
provision made for the repeal of that Chapter, and | 35 |
(b) so far as relating to Chapter 9 of Part 3, in accordance with the | |
provision made for the repeal of that Chapter. | |
20 (1) In section 63(1) (the benefits code), omit the entries relating to Chapters 8 | |
and 9 of Part 3. | |
(2) Sub-paragraph (1) has effect— | 40 |
(a) so far as relating to Chapter 8 of Part 3, in accordance with the | |
provision made for the repeal of that Chapter, and | |
(b) so far as relating to Chapter 9 of Part 3, in accordance with the | |
provision made for the repeal of that Chapter. | |
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