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



                                      “redundancy” means redundancy within the meaning of ERA

1996 or ER(NI)O 1996, and

                                      “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)



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

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

9th April 2003.

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


          (2)      After paragraph 35 insert—

“Retirement age

          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”

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

“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).

Alteration of schemes

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

          (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

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

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—

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


scheme that has been approved, and



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Schedule 22 — Employee securities and options



                      (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)


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



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


          (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

(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


          (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


Schedule 22

Section 139


Employee securities and options



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




Finance Bill
Schedule 22 — Employee securities and options



Main provisions

  2       (1)      For Chapter 1 of Part 7 (and the heading of that Part) substitute—

Employment income: income and exemptions relating to securities

Chapter 1




       417            Scope of Part 7

              (1)             This Part contains special rules about cases where securities,

interests in securities or securities options are acquired in connection

with an employment.


              (2)             The rules are contained in—

                                      Chapter 2 (restricted securities),

                                      Chapter 3 (convertible securities),

                                      Chapter 3A (securities with artificially depressed market



                                      Chapter 3B (securities with artificially enhanced market value),

                                      Chapter 3C (securities acquired for less than market value),

                                      Chapter 3D (securities disposed of for more than market value),

                                      Chapter 4 (post-acquisition benefits from securities),

                                      Chapter 5 (securities options),


                                      Chapter 6 (approved share incentive plans),

                                      Chapter 7 (approved SAYE option schemes),

                                      Chapter 8 (approved CSOP schemes),

                                      Chapter 9 (enterprise management incentives), and

                                      Chapter 10 (priority share allocations).


              (3)             The following make provision for amounts to count as employment


                                      Chapters 2 to 6, and

                                      Chapter 8.

              (4)             The following make provision for exemptions and reliefs from


income tax—

                                      Chapters 2 and 3, and

                                      Chapters 5 to 10.

              (5)             Chapter 11 contains supplementary provisions relating to employee

benefit trusts.


              (6)             Section 5(1) (application of employment income Parts to office-

holders generally) does not apply to Chapters 6 to 10; and section

549(5) makes provision about its application to Chapter 11.

       418            Other related provisions

              (1)             In Part 3—




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                                      Chapter 1 (earnings), and

                                      Chapter 10 (taxable benefits: residual liability to charge),

                              may also have effect in relation to securities and interests in

securities (but not securities options).

              (2)             Part 7 of Schedule 7 (transitional provisions relating to securities and


securities options) may also be relevant.

              (3)             In view of section 49 of FA 2000 (phasing out of APS schemes) the

following are not rewritten in this Act and continue in force

unaffected by the repeals made by this Act—

                                      section 186 of ICTA (APS schemes) and section 187 of that Act


(interpretation) so far as relating to APS schemes, and

                                      Schedule 9 to ICTA (approval of share schemes) so far as

relating to APS schemes and Schedule 10 to that Act (further

provisions about APS schemes).

            “APS schemes” means profit sharing schemes approved under


Schedule 9 to ICTA.

              (4)             Sections 138 to 140 of ICTA (share acquisitions by directors and

employees) continue to apply in relation to shares or interests in

shares acquired before 26th October 1987 (see paragraph 57 of

Schedule 7).


       419            Negative amounts treated as nil

If the result given by any formula under any provision of this Part

would otherwise be a negative amount, the result is to be taken to be

nil instead.

Interpretation of Chapters 1 to 5


       420            Meaning of “securities” etc

              (1)             Subject to subsections (5) and (6), for the purposes of this Chapter

and Chapters 2 to 5 the following are “securities”—

                    (a)                   shares in any body corporate (wherever incorporated) or in

any unincorporated body constituted under the law of a


country or territory outside the United Kingdom,

                    (b)                   debentures, debenture stock, loan stock, bonds, certificates of

deposit and other instruments creating or acknowledging


                    (c)                   warrants and other instruments entitling their holders to


subscribe for securities (whether or not in existence or


                    (d)                   certificates and other instruments conferring rights in respect

of securities held by persons other than the persons on whom

the rights are conferred and the transfer of which may be


effected without the consent of those persons,

                    (e)                   units in a collective investment scheme,

                    (f)                   futures, and

                    (g)                   rights under contracts for differences or contracts similar to

contracts for differences.




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              (2)             In subsection (1)(e) “collective investment scheme” means


                    (a)                   which are made with respect to property of any description,

including money, and

                    (b)                   the purpose or effect of which is to enable persons taking part


in the arrangements (whether by becoming owners of the

property or any part of it or otherwise) to participate in or

receive profits or income arising from the acquisition,

holding, management or disposal of the property or sums

paid out of such profits or income.


              (3)             In subsection (1)(f) “futures” means rights under a contract for the

sale of a commodity or other property under which delivery is to be

made at a future date at a price agreed when the contract is made;

and for this purpose a price is to be taken to be agreed when the

contract is made—


                    (a)                   if it is left to be determined by reference to the price at which

a contract is to be entered into on a market or exchange or

could be entered into at a time and place specified in the

contract, and

                    (b)                   in a case where the contract is expressed to be by reference to


a standard lot and quality, even if provision is made for a

variation in the price to take account of any variation in

quantity or quality on delivery.

              (4)             For the purposes of subsection (1)(g) a contract similar to a contract

for differences is a contract—


                    (a)                   which is not a contract for differences, but

                    (b)                   the purpose or pretended purpose of which is to secure a

profit or avoid a loss by reference to fluctuations in the value

or price of property or an index or other factor designated in

the contract.


              (5)             The following are not “securities” for the purposes of this Chapter or

Chapters 2 to 5—

                    (a)                   cheques and other bills of exchange, bankers’ drafts and

letters of credit (other than bills of exchange accepted by a



                    (b)                   money and statements showing balances on a current,

deposit or savings account,

                    (c)                   leases and other dispositions of property and heritable


                    (d)                   rights under contracts of insurance (within the meaning of


the Financial Services and Markets Act 2000 (Regulated

Activities) Order 2001), and

                    (e)                   options.

              (6)             The Treasury may by order amend subsections (1) to (5).

              (7)             An order under subsection (6) may include any appropriate


consequential provision (including provision amending any


              (8)             In this Chapter and Chapters 2 to 5—



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Schedule 22 — Employee securities and options



                                      “interest”, in relation to securities (or shares), means an interest

in them less than full beneficial ownership and includes an

interest in proceeds of their sale, but does not include a right

to acquire them,

                                      “securities option” means a right to acquire securities, and


                                      “shares” includes stock.

       421            Meaning of “market value” etc

              (1)             In this Chapter and Chapters 2 to 5 “market value” has the same

meaning as it has for the purposes of TCGA 1992 by virtue of Part 8

of that Act.


              (2)             Where consideration for anything is given in the form of an asset (as

opposed to a payment), any reference in this Chapter or any of

Chapters 2 to 5 to the amount of the consideration is to the market

value of the asset.

       421A            Meaning of “consideration”


              (1)             This section applies for determining for the purposes of Chapters 2

to 5 the amount of the consideration given for anything.

              (2)             If any consideration is given partly in respect of one thing and partly

in respect of another, the amount given in respect of the different

things is to determined on a just and reasonable apportionment.


              (3)             The consideration which is taken to be given wholly or partly for

anything does not include the performance of any duties of, or in

connection with, an employment.

              (4)             No amount is to be counted more than once in calculating the

amount of any consideration.


Application of Chapters 2 to 4

       421B            Application of Chapters 2 to 4

              (1)             Subject as follows (and to any provision contained in Chapters 2 to

4) those Chapters apply to securities, or an interest in securities,

acquired by a person where the right or opportunity to acquire the


securities or interest is available by reason of an employment of that

person or any other person.

              (2)             For the purposes of subsection (1)—

                    (a)                   securities are, or an interest in securities is, acquired at the

time when the person acquiring the securities or interest


becomes beneficially entitled to those securities or that

interest (and not, if different, the time when the securities are,

or interest is, conveyed or transferred), and

                    (b)                   “employment” includes a former or prospective



              (3)             A right or opportunity to acquire securities or an interest in securities

made available by a person’s employer, or by a person connected

with a person’s employer, is to be regarded for the purposes of



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Schedule 22 — Employee securities and options



subsection (1) as available by reason of an employment of that

person unless—

                    (a)                   the person by whom the right or opportunity is made

available is an individual, and

                    (b)                   the right or opportunity is made available in the normal


course of the domestic, family or personal relationships of

that person.

              (4)             Chapters 2 to 4 cease to apply to securities, or an interest in securities,

when subsection (5), (6) or (7) is satisfied.

              (5)             This subsection is satisfied immediately after the securities are, or the


interest in securities is, disposed of otherwise than to an associated


              (6)             This subsection is satisfied immediately before the death of the


              (7)             This subsection is satisfied 7 years after the first date after the


acquisition on which the employee is an employee of none of the


                    (a)                   the employer,

                    (b)                   (if the securities are, or the interest in securities is an interest

in, securities issued by a company) the company by which


they are issued, or

                    (c)                   a person connected with a person within paragraph (a) or (b).

              (8)             In this Chapter and Chapters 2 to 4—

                                      “the acquisition”, in relation to employment-related securities,

means the acquisition of the employment-related securities


pursuant to the right or opportunity available by reason of

the employment,

                                      “the employment”, in relation to employment-related

securities, means the employment by reason of which the

right or opportunity to acquire the employment-related


securities is available (“the employee” and “the employer”

being construed accordingly unless otherwise indicated),


                                      “employment-related securities” means securities or an interest

in securities to which Chapters 2 to 4 apply (ignoring any


provision of any of those Chapters which limits the

application of the Chapter to a particular description or

descriptions of employment-related securities).

       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


                    (a)                   the person who acquired the employment-related securities

on the acquisition,

                    (b)                   (if different) the employee, and


                    (c)                   any relevant linked person.

              (2)             A person is a relevant linked person if—



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