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Timing of relief in case of shares subject to forfeiture | |
22 (1) Where the recipient acquires shares that are subject to forfeiture, this | |
paragraph applies in place of paragraph 10 or 17 (timing of relief). | |
(2) The relief is given for the accounting period in which— | |
(a) the shares cease to be subject to forfeiture, or | 5 |
(b) the recipient disposes of the shares, or dies, without the shares | |
having ceased to be subject to forfeiture. | |
Part 5 | |
Supplementary provisions | |
Transfer of business within a group | 10 |
23 (1) This paragraph applies where— | |
(a) between the time when an award of shares, or the grant of an option | |
to acquire shares, is made and the time of the relief-triggering event | |
for those shares, there is a transfer of the whole, or substantially the | |
whole, of the business for the purposes of which the award or grant | 15 |
was made (“the relevant business”), | |
(b) the transfer, or each of them if there is more than one, is a qualifying | |
transfer, and | |
(c) as a result of the transfer or transfers, the whole or substantially the | |
whole of the relevant business is carried on at the time of the relief- | 20 |
triggering event by a different company (“the successor company”) | |
or by different companies (“the successor companies”) from the one | |
by which it was carried on at the time of the award or grant. | |
(2) For the purposes of sub-paragraph (1)— | |
(a) the “relief-triggering event” for shares is the event that, in accordance | 25 |
with paragraph 10, 17 or 22, determines the accounting period for | |
which relief under this Schedule is given in respect of them; | |
(b) there is a “qualifying transfer” of a business (or a part of one) where | |
the business (or part) is transferred from one company to another | |
company that is, or to two or more companies that are, members of | 30 |
the same group. | |
(3) Where this paragraph applies— | |
(a) relief under this Schedule in respect of the shares is given to the | |
successor company or, as the case may be, to whichever one of the | |
successor companies is jointly nominated by them, and | 35 |
(b) the reference in paragraph 1(1)(a) or (b) to “that company” shall be | |
read as a reference to the company by which the relevant business | |
was carried on at the time of the award or grant. | |
Relationship between relief and other deductions: priority of deductions under SIP code | |
24 (1) Deductions available under any of the following provisions of Schedule | 40 |
4AA to the Taxes Act 1988 (share incentive plans) are to be given in priority | |
to relief under this Schedule— | |
(a) paragraph 2 (deduction for providing free or matching shares); | |
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(b) paragraph 3 (deduction for expenses in providing partnership | |
shares); | |
(c) paragraph 9 or 10(3) (deduction for contribution to plan trust). | |
(2) No relief is available under this Schedule in respect of shares in relation to | |
which a deduction is allowable, or has been made, under any of those | 5 |
provisions. | |
Relationship between relief and other deductions: exclusion of other deductions | |
25 (1) Where relief under this Schedule is available for any accounting period, no | |
other deduction is allowed for any corporation tax purposes (whether for | |
that or any other period) in respect of the cost of providing the shares. | 10 |
This applies to any deduction, whether by the employing company or any | |
other company, in computing chargeable profits for the purposes of | |
corporation tax. | |
(2) For this purpose the cost of providing the shares— | |
(a) means expenses directly related to the provision of the shares, and | 15 |
(b) includes, in a case where the shares are acquired under an employee | |
share scheme, any amount paid or payable by the employing | |
company in respect of the participation of the employee in that | |
scheme. | |
(3) The following are not regarded as part of the cost of providing the shares— | 20 |
(a) expenses incurred in establishing the employee share scheme under | |
which the recipient acquires the shares; | |
(b) expenses incurred in meeting, or contributing to, the costs of | |
administering the scheme; | |
(c) the costs of borrowing for the purposes of the scheme; | 25 |
(d) fees, commission, stamp duty and similar incidental expenses of | |
acquiring the shares. | |
(4) In this paragraph “employee share scheme” means any scheme or | |
arrangement for enabling shares to be acquired by reason of employees’ | |
employment. | 30 |
Meaning of “employment” | |
26 For the purposes of this Schedule— | |
(a) references to employment by a company include holding an office | |
with that company, and related expressions have a corresponding | |
meaning, and | 35 |
(b) members of a company whose affairs are managed by the members | |
themselves are treated as holding an office with the company. | |
Exercise of option after death of employee or recipient | |
27 (1) Where an option to acquire shares obtained by reason of the employee’s | |
employment is exercised by the recipient after the employee’s death, the | 40 |
condition in paragraph 14 (income tax position of the employee) is treated as | |
met if it would be met were the employee still alive. | |
(2) Where an option to acquire shares obtained by reason of the employee’s | |
employment is exercised after the death of the recipient, paragraph 1(1)(b) | |
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and Part 3 of this Schedule, and sub-paragraph (1) above, apply as if the | |
recipient were still alive and the option were exercised by him. | |
Meaning of “group company” and “parent company” | |
28 For the purposes of this Schedule— | |
(a) a company is a “group company”, in relation to another company, if | 5 |
they are members of the same group, | |
(b) two companies are members of the same group if, and only if, one is | |
a 51% subsidiary of the other or both are 51% subsidiaries of a third | |
company, and | |
(c) a company is a “parent company” in relation to another company if | 10 |
that other is its 51% subsidiary. | |
Meaning of “consortium” and “commercial association of companies” | |
29 (1) For the purposes of this Schedule a company is a member of a consortium | |
owning another company if it is one of five or fewer companies— | |
(a) that between them beneficially own not less than 75% of the other | 15 |
company’s ordinary share capital, and | |
(b) each of which beneficially owns not less than 10% of that capital. | |
For this purpose the shareholdings of members of a group of companies | |
shall be treated as held by a single company. | |
(2) In this Schedule a “commercial association of companies” means a company | 20 |
together with such of its associated companies as carry on businesses that | |
are of such a nature that the businesses of the company and the associated | |
companies, taken together, may be reasonably considered to make up a | |
single composite undertaking. | |
“Associated company” here has the meaning given by section 416 of the | 25 |
Taxes Act 1988. | |
Minor definitions | |
30 In this Schedule— | |
“the Contributions and Benefits Act” means— | |
(a) the Social Security Contributions and Benefits Act 1992 (c. 4), | 30 |
or | |
(b) the Social Security Contributions and Benefits (Northern | |
Ireland) Act 1992 (c. 7); | |
“control” has the meaning given by section 840 of the Taxes Act 1988; | |
“insurance company” and “life assurance business” have the meanings | 35 |
given by section 431(2) of that Act; | |
“investment company” has the meaning given by section 130 of that | |
Act; | |
“market value” has the same meaning as in the Taxation of Chargeable | |
Gains Act 1992 (c. 12) (see sections 272 and 273 of that Act); | 40 |
“option” includes any right to acquire shares; | |
“ordinary shares”, in relation to a company, means shares forming part | |
of the company’s ordinary share capital; | |
“shares” includes— | |
(a) an interest in shares, and | 45 |
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Transitional provisions | |
33 (1) Relief is not available under this Schedule in respect of shares to the extent | |
that a deduction is available or has been made in respect of relevant | |
expenses in computing the chargeable profits of the employing company or | |
any other company for the purposes of corporation tax for an accounting | 5 |
period beginning before 1st January 2003. | |
(2) In sub-paragraph (1) “relevant expenses” means any expenses referable, | |
directly or indirectly, to the provision of the shares in question. | |
(3) In relation to any time before the coming into force of the Income Tax | |
(Earnings and Pensions) Act 2003 (c. 1) (“ITEPA”), this Schedule has effect as | 10 |
if— | |
(a) the references to a charge to income tax under ITEPA were to a | |
charge to income tax under section 19 of the Taxes Act 1988; | |
(b) the reference in paragraph 14(1)(a)(ii) to section 476 or 477 of ITEPA | |
were to section 135 of the Taxes Act 1988; | 15 |
(c) the reference in paragraph 14(2)(a) to section 519, 520, 524 or 525 of | |
ITEPA were to section 185(3)(a) of the Taxes Act 1988; | |
(d) the reference in paragraph 14(2)(b) to section 530 of ITEPA were to | |
paragraph 44 of Schedule 14 to the Finance Act 2000 (c. 17); | |
(e) the reference in paragraph 20(2)(a) to section 427 of ITEPA were to | 20 |
section 140A of the Taxes Act 1988; | |
(f) the references in paragraph 24(1) to paragraphs 2, 3, 9 and 10(3) of | |
Schedule 4AA to the Taxes Act 1988 were to paragraphs 106, 107, | |
112A and 112B(3) respectively of Schedule 8 to the Finance Act 2000. | |
Schedule 24 | 25 |
Section 142 | |
Restriction of deductions for employee benefit contributions | |
Restriction of deductions | |
1 (1) This Schedule applies where— | |
(a) a calculation is required to be made for tax purposes of a person’s | |
profits for any period, and | 30 |
(b) a deduction would (but for this Schedule) be allowed for that period | |
in respect of employee benefit contributions made, or to be made, by | |
that person (“the employer”). | |
But it does not apply to a deduction of a kind mentioned in paragraph 8. | |
(2) For the purposes of this Schedule an employer makes an “employee benefit | 35 |
contribution” if— | |
(a) he pays money or transfers an asset to another person (“the third | |
party”), and | |
(b) the third party is entitled or required, under the terms of an | |
employee benefit scheme, to hold or use the money or asset for or in | 40 |
connection with the provision of benefits to employees of the | |
employer. | |
(3) The deduction in respect of employee benefit contributions mentioned in | |
sub-paragraph (1) is allowed only to the extent that— | |
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(a) during the period in question or within nine months from the end of | |
it— | |
(i) qualifying benefits are provided out of the contributions, or | |
(ii) qualifying expenses are paid out of the contributions, | |
or | 5 |
(b) where the making of the contributions is itself the provision of | |
qualifying benefits, the contributions are made during that period or | |
within those nine months. | |
(4) An amount disallowed under sub-paragraph (3) is allowed as a deduction | |
for a subsequent period to the extent that— | 10 |
(a) qualifying benefits are provided out of the employee benefit | |
contributions in question before the end of that subsequent period, | |
or | |
(b) where the making of the contributions is itself the provision of | |
qualifying benefits, the contributions are made before the end of that | 15 |
subsequent period. | |
“Provision of qualifying benefits” | |
2 (1) For the purposes of this Schedule qualifying benefits are provided where | |
there is a payment of money or transfer of assets, otherwise than by way of | |
loan, that— | 20 |
(a) gives rise both to an employment income tax charge and to an NIC | |
charge, or would do if the conditions in sub-paragraph (3) were met, | |
or | |
(b) is made in connection with the termination of the recipient’s | |
employment with the employer. | 25 |
(2) In sub-paragraph (1)(a)— | |
“employment income tax charge” means a charge to tax under the | |
Income Tax (Earnings and Pensions) Act 2003 (c. 1) (whether on the | |
recipient or on someone else); | |
“NIC charge” means a liability to pay national insurance contributions | 30 |
under section 6 (Class 1 contributions), 10 (Class 1A contributions) | |
or 10A (Class 1B contributions) of the Contributions and Benefits | |
Act. | |
(3) The conditions mentioned in sub-paragraph (1)(a) are— | |
(a) that the duties of the employment in respect of which the payment | 35 |
or transfer was made were performed in the United Kingdom, and | |
(b) that the person in respect of whose employment the payment or | |
transfer was made fulfilled at all relevant times the conditions as to | |
residence or presence in Great Britain or Northern Ireland prescribed | |
under section 1(6)(a) of the Contributions and Benefits Act. | 40 |
(4) In this paragraph “the Contributions and Benefits Act” means— | |
(a) the Social Security Contributions and Benefits Act 1992 (c. 4), or | |
(b) the Social Security Contributions and Benefits (Northern Ireland) | |
Act 1992 (c. 7). | |
(5) Where the provision of a qualifying benefit takes the form of the payment of | 45 |
money, the benefit is treated for the purposes of this Schedule as provided | |
at the time when the money is treated as received for the purposes of | |
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Chapter 4 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003, | |
applying the rules in section 18 of that Act (receipt of money earnings). | |
“Qualifying expenses” | |
3 In this Schedule “qualifying expenses”— | |
(a) does not include expenses that, if incurred by the employer, would | 5 |
not be deductible in calculating for tax purposes the employer’s | |
profits for any period, but | |
(b) subject to that, includes any expenses of the third party (other than | |
the provision of benefits to employees of the employer) in operating | |
the employee benefit scheme in question. | 10 |
Payment “out of” employee benefit contributions | |
4 (1) For the purposes of paragraph 1(3)(a) any qualifying benefits provided or | |
qualifying expenses paid by the third party after the receipt by him of | |
employee benefit contributions are regarded as being provided or paid out | |
of those contributions, up to the total amount of the contributions as reduced | 15 |
by the amount of any benefits or expenses previously provided or paid as | |
mentioned in paragraph 1(3)(a). | |
(2) For the purposes of paragraph 1(4)(a) any qualifying benefits provided by | |
the third party after the receipt by him of employee benefit contributions are | |
regarded as being provided out of those contributions, up to the total | 20 |
amount of the contributions as reduced by the amount of any benefits or | |
expenses previously provided or paid as mentioned in paragraph 1(3)(a) or | |
(4)(a). | |
(3) In applying sub-paragraphs (1) and (2) above no account shall be taken of | |
any other amount received or paid by the third party. | 25 |
Transfer of asset to employee | |
5 (1) This paragraph applies where the provision of a qualifying benefit takes the | |
form of the transfer of an asset. | |
(2) The amount provided shall be taken for the purposes of this Schedule to be | |
the total of— | 30 |
(a) the amount (if any) expended on the asset by the third party, and | |
(b) in a case where the asset was transferred to the third party by the | |
employer, the amount of the deduction that would be allowed as | |
mentioned in paragraph 1(1) in respect of the transfer. | |
(3) But where the amount given by sub-paragraph (2) above is more than the | 35 |
amount that is charged to tax under the Income Tax (Earnings and Pensions) | |
Act 2003 (c. 1) in respect of the transfer, or would be so charged if the | |
condition in paragraph 2(3)(a) were met, the deduction allowable under | |
paragraph 1(3) or (4) is limited to that lower amount. | |
Provisional calculation of profits | 40 |
6 Where the calculation referred to in paragraph 1(1) is made before the end | |
of the nine-month period mentioned in paragraph 1(3)— | |
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