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10 (1) For Chapter 5 of Part 7 substitute— | |
“Chapter 5 | |
Securities options | |
Introduction | |
471 Options to which this Chapter applies | 5 |
(1) This Chapter applies to a securities option acquired by a person | |
where the right or opportunity to acquire the securities option is | |
available by reason of an employment of that person or any other | |
person. | |
(2) For the purposes of subsection (1) “employment” includes a former | 10 |
or prospective employment. | |
(3) A right or opportunity to acquire a securities option made available | |
by a person’s employer, or a person connected with a person’s | |
employer, is to be regarded for the purposes of subsection (1) as | |
available by reason of an employment of that person unless— | 15 |
(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. | 20 |
(4) A right or opportunity to acquire a securities option available by | |
reason of holding employment-related securities is to be regarded | |
for the purposes of subsection (1) as available by reason of the same | |
employment as that by reason of which the right or opportunity to | |
acquire the employment-related securities was available. | 25 |
(5) In this Chapter— | |
“the acquisition”, in relation to an employment-related | |
securities option, means the acquisition of the employment- | |
related securities option pursuant to the right or opportunity | |
available by reason of the employment, | 30 |
“the employment” means the employment by reason of which | |
the right or opportunity to acquire the employment-related | |
securities option is available (“the employee” and “the | |
employer” being construed accordingly), and | |
“employment-related securities option” means a securities | 35 |
option to which this Chapter applies. | |
472 Associated persons | |
(1) For the purposes of this Chapter the following are “associated | |
persons” in relation to an employment-related securities option— | |
(a) the person who acquired the employment-related securities | 40 |
option on the acquisition, | |
(b) (if different) the employee, and | |
(c) any relevant linked person. | |
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(2) A person is a relevant linked person if— | |
(a) that person (on the one hand), and | |
(b) either the person who acquired the employment-related | |
securities option on the acquisition or the employee (on the | |
other), | 5 |
are connected or, although not connected, are members of the same | |
household. | |
(3) But a company which would otherwise be a relevant linked person | |
is not if it is— | |
(a) the employer, | 10 |
(b) the person from whom the employment-related securities | |
option was acquired, or | |
(c) the person by whom the right or opportunity to acquire the | |
employment-related securities option was made available. | |
473 Introduction to taxation of securities options | 15 |
(1) The starting-point is that section 475 contains an exemption from the | |
liability to tax that might otherwise arise under— | |
(a) Chapter 1 of Part 3 (earnings), or | |
(b) Chapter 10 of that Part (taxable benefits: residual liability to | |
charge), | 20 |
when an employment-related securities option is acquired. | |
(2) Liability to tax may arise, when securities are acquired pursuant to | |
the employment-related securities option, under— | |
(a) section 446B (charge on acquisition where market value of | |
securities or interest artificially depressed), | 25 |
(b) Chapter 3C of this Part (acquisition of securities for less than | |
market value), or | |
(c) section 476 (acquisition of securities pursuant to securities | |
option). | |
(3) Liability to tax may also arise by virtue of section 476 when— | 30 |
(a) the employment-related securities option is assigned or | |
released, or | |
(b) a benefit is received in connection with the employment- | |
related securities option. | |
(4) There are special rules relating to share options acquired under— | 35 |
(a) approved SAYE option schemes (see Chapter 7 of this Part), | |
(b) approved CSOP schemes (see Chapter 8 of this Part), or | |
(c) enterprise management incentives (see Chapter 9 of this | |
Part). | |
474 Cases where this Chapter does not apply | 40 |
(1) This Chapter (apart from sections 473 and 483) does not apply in | |
relation to an employment-related securities option 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 when employee | 45 |
resident and ordinarily resident in the UK). | |
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(2) This Chapter (apart from sections 473 and 483) does not apply in the | |
case of a former employment if it would not apply if the acquisition | |
had taken place in the last tax year in which the employment was | |
held. | |
(3) This Chapter (apart from sections 473 and 483) does not apply in the | 5 |
case of a prospective employment if it would not apply if the | |
acquisition had taken place in the first tax year in which the | |
employment is held. | |
(4) Where the employment-related securities option is a new option | |
(within the meaning of section 483), the references in this section to | 10 |
the acquisition are to the acquisition of the old option (within the | |
meaning of that section). | |
Tax relief on acquisition of option | |
475 No charge in respect of acquisition of option | |
(1) No liability to income tax arises in respect of the acquisition of an | 15 |
employment-related securities option. | |
(2) Subsection (1) is subject to section 526 (approved CSOP schemes: | |
charge where share option granted at a discount). | |
Tax charge on post-acquisition chargeable events | |
476 Charge on occurrence of chargeable event | 20 |
(1) This section applies if a chargeable event occurs in relation to an | |
employment-related securities option. | |
(2) The taxable amount determined under section 478 counts as | |
employment income of the employee for the relevant tax year (but | |
subject to subsection (5)). | 25 |
(3) The “relevant tax year” is the tax year in which the chargeable event | |
occurs. | |
(4) Section 477 explains what are chargeable events for the purposes of | |
this section. | |
(5) If the employee has been divested of the employment-related | 30 |
securities option by operation of law, the person who is the relevant | |
person in relation to the chargeable event (see section 477(7)) is | |
chargeable to tax under Case VI of Schedule D on the amount | |
determined under section 478. | |
(6) This section is subject to— | 35 |
section 519 (approved SAYE option schemes: no charge in | |
respect of exercise of share option by employee), | |
section 524 (approved CSOP schemes: no charge in respect of | |
exercise of share option by employee), and | |
section 530 (enterprise management incentives: no charge on | 40 |
exercise by employee of option to acquire shares at market | |
value). | |
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477 Chargeable events | |
(1) This section applies for the purposes of section 476 (charge on | |
occurrence of chargeable event). | |
(2) Any of the events mentioned in subsection (3) is a “chargeable event” | |
in relation to the employment-related securities option unless it | 5 |
occurs on or after the death of the employee. | |
(3) The events are— | |
(a) the acquisition of securities pursuant to the employment- | |
related securities option by an associated person, | |
(b) the assignment for consideration of the employment-related | 10 |
securities option by an associated person otherwise than to | |
another associated person or the release for consideration of | |
the employment-related securities option by an associated | |
person, or | |
(c) the receipt by an associated person of a benefit in money or | 15 |
money’s worth in connection with the employment-related | |
securities option (other than securities acquired pursuant to | |
the employment-related securities option or consideration | |
for its assignment or release). | |
(4) For the purposes of subsection (3)(a) securities are acquired at the | 20 |
time when a beneficial interest is acquired (and not, if different, the | |
time when the securities are conveyed or transferred). | |
(5) A benefit received on account of any disability (within the meaning | |
of the Disability Discrimination Act 1995) of the employee is to be | |
disregarded for the purposes of subsection (3)(c). | 25 |
(6) A benefit in money or money’s worth received in consideration for | |
or otherwise in connection with— | |
(a) failing or undertaking not to acquire securities pursuant to | |
the employment-related securities option, or | |
(b) granting or undertaking to grant to another person a right to | 30 |
acquire securities which are subject to the employment- | |
related securities option or any interest in them, | |
is to be regarded for the purposes of subsection (3)(c) as received in | |
connection with the employment-related securities option. | |
(7) For the purposes of section 476(5) (charge under Case VI of Schedule | 35 |
D) the relevant person in relation to a chargeable event is— | |
(a) in the case of an event that is a chargeable event by virtue of | |
subsection (3)(a), the person by whom the securities are | |
acquired, and | |
(b) in the case of an event that is a chargeable event by virtue of | 40 |
subsection (3)(b) or (c), the person by whom the | |
consideration or benefit is received. | |
478 Amount of charge | |
(1) The taxable amount for the purposes of section 476 (charge on | |
occurrence of chargeable event) is—![equation: plus[times[char[A],char[G]],minus[times[char[D],char[A]]]]](missing.gif) | 45 |
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where— | |
AG is the amount of any gain realised on the occurrence of the | |
chargeable event, and | |
DA is the total of any deductible amounts. | |
(2) Section 479 explains what is the amount of any gain realised on the | 5 |
occurrence of a chargeable event. | |
(3) Section 480 specifies what are deductible amounts. | |
479 Amount of gain realised on occurrence of chargeable event | |
(1) This section applies for the purposes of section 478 (amount of | |
charge on occurrence of chargeable event). | 10 |
(2) The amount of the gain realised on the occurrence of an event that is | |
a chargeable event by virtue of section 477(3)(a) (acquisition of | |
securities) is (subject to subsection (4))—![equation: plus[times[char[M],char[V]],minus[char[C]]]](missing.gif) | |
(3) In subsection (2)— | |
MV is the market value of the securities that are acquired at the | 15 |
time when they are acquired, and | |
C is the amount of any consideration given for the securities | |
that are acquired. | |
(4) But the amount of the gain realised on the occurrence of an event that | |
is a chargeable event by virtue of section 477(3)(a) (acquisition of | 20 |
securities) is calculated— | |
(a) if section 531 (enterprise management incentives: limitation | |
of charge on exercise of option to acquire shares below | |
market value) applies, in accordance with that section, and | |
(b) if section 532 (enterprise management incentives: modified | 25 |
tax consequences following disqualifying events) applies, in | |
accordance with that section. | |
(5) The amount of the gain realised on the occurrence of an event that is | |
a chargeable event by virtue of section 477(3)(b) (assignment or | |
release of option) is the amount of the consideration given for the | 30 |
assignment or release. | |
(6) The amount of the gain realised on the occurrence of an event that is | |
a chargeable event by virtue of section 477(3)(c) (receipt of benefit in | |
connection with option) is the amount or market value of the benefit. | |
(7) But if— | 35 |
(a) the consideration mentioned in subsection (5), or | |
(b) the benefit mentioned in subsection (6), | |
consists (in whole or in part) in the provision of securities or an | |
interest in securities the market value of which has been reduced by | |
at least 10% as a result of things done otherwise than for genuine | 40 |
commercial purposes within the period of 7 years ending with the | |
receipt of the consideration or benefit, its market value is to be taken | |
to be what it would be but for the reduction. | |
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(8) The following are among the things that are, for the purposes of | |
subsection (7), done otherwise than for genuine commercial | |
purposes— | |
(a) anything done as part of a scheme or arrangement the main | |
purpose, or one of the main purposes, of which is the | 5 |
avoidance of tax or national insurance contributions, and | |
(b) any transaction between companies which are members of | |
the same group on terms which are not such as might be | |
expected to be agreed between persons acting at arm’s length | |
(other than a payment for group relief). | 10 |
(9) In subsection (8)(b)— | |
(a) “group” means a company and its 51% subsidiaries, and | |
(b) “group relief” has the same meaning as in section 402(6) of | |
ICTA. | |
480 Deductible amounts | 15 |
(1) This section applies for the purposes of section 478 (amount of | |
charge on occurrence of chargeable event). | |
(2) The amount of— | |
(a) any consideration given for the acquisition of the | |
employment-related securities option, and | 20 |
(b) the amount of any expenses incurred in connection with the | |
acquisition of securities, assignment, release or receipt which | |
constitutes the chargeable event, | |
is a deductible amount. | |
(3) Where in consequence of— | 25 |
(a) the acquisition of the employment-related securities option, | |
(b) the acquisition of securities pursuant to the employment- | |
related securities option, or | |
(c) a transaction of which the acquisition of the employment- | |
related securities option or the acquisition of securities | 30 |
pursuant to the employment-related securities option forms | |
part, | |
there is a reduction in the market value of any employment-related | |
securities to which an associated person is beneficially entitled, the | |
amount of the reduction is to be treated for the purposes of | 35 |
subsection (2) as consideration (or additional consideration) given | |
for the acquisition of the employment-related securities option. | |
(4) If an amount counts as employment income of the employee under | |
section 526 (approved CSOP schemes: charge where option granted | |
at a discount) in respect of the employment-related securities option, | 40 |
so much of that amount as is attributable to the shares in question is | |
a deductible amount. | |
(5) The following are also deductible amounts— | |
(a) any amount that constituted earnings from the employment | |
under Chapter 1 of Part 3 (earnings) in respect of the | 45 |
acquisition of the employment-related securities option, | |
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(b) any amount that was treated as earnings from the | |
employment under Chapter 10 of that Part (taxable benefits: | |
residual liability to charge) in respect of the acquisition of the | |
employment-related securities option, and | |
(c) the amount of any gain by a previous holder on an | 5 |
assignment of the employment-related securities option | |
which would have been a deductible cost by virtue of | |
subsection (2)(c) of section 479 (as originally enacted) on an | |
exercise of the option at a time when that section was in force. | |
(6) If there has been a previous chargeable event in relation to the | 10 |
employment-related securities option (or if section 476 or 477 as | |
originally enacted applied to the option by virtue of an earlier event), | |
so much of any deductible amount as was deducted in calculating | |
the taxable amount on the occasion of that event is to be regarded as | |
not being a deductible amount. | 15 |
(7) Sections 481 and 482 (deductible amounts in respect of secondary | |
Class 1 contributions or special contribution met by the employee) | |
specify further deductible amounts. | |
481 Deductible amount in respect of secondary Class 1 contributions met | |
by employee | 20 |
(1) The amount calculated under subsection (2) is a deductible amount | |
if— | |
(a) an agreement having effect under paragraph 3A of Schedule | |
1 to the Contributions and Benefits Act has been entered into | |
allowing the secondary contributor to recover from the | 25 |
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 | |
that Act is in force which has the effect of transferring to the | |
employee the whole or part of the liability to pay secondary | 30 |
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 | |
subsection (1)(a) is recovered in respect of the gain by the | |
secondary contributor before 5th June in the tax year | 35 |
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 | |
become the employee’s liability. | |
(3) If notice of withdrawal of approval of the election is given, the | 40 |
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. | |
(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 | 45 |
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). | |
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