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(11) Omit paragraphs 50 to 52. | |
(12) Omit paragraph 53. | |
(13) In paragraph 54, after “Part 7” insert “, both as originally enacted and as | |
substituted by the Finance Act 2003,”. | |
(14) In paragraph 55— | 5 |
(a) after “Part 7” insert “, as originally enacted,”, and | |
(b) omit sub-paragraph (2)(a). | |
(15) In paragraph 56, after “section 449” insert “, as originally enacted,”. | |
(16) In paragraph 58(1), at end insert “, as originally enacted.” | |
(17) Omit paragraph 59. | 10 |
(18) Omit paragraphs 60 and 61. | |
(19) After paragraph 61 insert— | |
“Securities disposed of for more than market value | |
61A Chapter 3D of Part 7 does not apply in relation to securities, or an | |
interest in securities, acquired on or before 6th April 1976.”. | 15 |
(20) Omit paragraph 62. | |
(21) For paragraph 63 substitute— | |
“63 (1) This paragraph relates to the operation of section 474 (exclusions | |
from Chapter 5 of Part 7: residence) in relation to an acquisition | |
made before 6th April 2003. | 20 |
(2) Section 474(1) has effect with the substitution of “the employee | |
was not chargeable under Case I of Schedule E in respect of the | |
employment” for the words from “the earnings”.”. | |
(22) In paragraph 64— | |
(a) for “share” (in both places) substitute “securities”, | 25 |
(b) for “obtained” substitute “acquired”, and | |
(c) for “receipt” substitute “acquisition”. | |
(23) In paragraph 65— | |
(a) in sub-paragraph (1), for “479 (amount of gain realised by exercising | |
option) in relation to a share option obtained” substitute “478 in | 30 |
relation to an event that is a chargeable event by virtue of section | |
477(3)(a) or (b) (acquisition of securities pursuant to an option and | |
assignment and release of option) in the case of a share option | |
acquired”, and | |
(b) in sub-paragraph (2), for “479(1)” substitute “478(1)” and for “cost” | 35 |
substitute “amount”. | |
(24) Omit paragraph 66. | |
(25) Omit paragraph 67. | |
(26) In this paragraph— | |
(a) sub-paragraphs (2) and (19) have effect in relation to securities, and | 40 |
interests in securities, disposed of on or after 16th April 2003, | |
(b) sub-paragraphs (5) and (13) to (17) have effect on and after 16th April | |
2003, | |
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(c) sub-paragraphs (6) to (8), (10), (11), (20), (23) and (24) have effect on | |
the day appointed under paragraph 3(2), and | |
(d) sub-paragraphs (21) and (22) have effect in accordance with the | |
provision made for the substitution of Chapter 5 of Part 7. | |
Consequential amendments of other enactments | 5 |
47 (1) In section 98 of the Taxes Management Act 1970 (c. 9) (penalties for failure | |
to furnish information etc)— | |
(a) in the first column of the Table, after the entry relating to regulations | |
under Schedule 33 to the Finance Act 2002 (c. 23) insert “Section | |
421J(4) of ITEPA 2003.”, and | 10 |
(b) in the second column of the Table, for the entries relating to sections | |
432, 433, 445, 465, 466 and 486 of the Income Tax (Earnings and | |
Pensions) Act 2003 (c. 1) substitute “Section 421J(3) of ITEPA 2003.”. | |
(2) Sub-paragraph (1) has effect in accordance with the provision made for the | |
substitution of Chapter 1 of Part 7 of the Income Tax (Earnings and Pensions) | 15 |
Act 2003. | |
48 (1) In section 4(4)(a) of— | |
(a) the Social Security Contributions and Benefits Act 1992 (c. 4) | |
(payments treated as earnings), and | |
(b) the Social Security Contributions and Benefits (Northern Ireland) | 20 |
Act 1992 (c. 7) (corresponding provision for Northern Ireland), | |
for the words after “479” substitute “of ITEPA 2003 in respect of which an | |
amount counts as employment income of the earner under section 476 of | |
that Act (charge on acquisition of securities pursuant to option etc), reduced | |
by any amounts deducted under section 480(1) to (6) of that Act in arriving | 25 |
at the amount counting as such employment income;”. | |
(2) Sub-paragraph (1) has effect in accordance with the provision made for the | |
substitution of Chapter 5 of Part 7 of the Income Tax (Earnings and Pensions) | |
Act 2003. | |
49 The Taxation of Chargeable Gains Act 1992 (c. 12) is amended as follows. | 30 |
50 (1) After section 119 insert— | |
“119A Increase in expenditure by reference to tax charged in relation to | |
employment-related securities | |
(1) This section applies to a disposal of an asset consisting of | |
employment-related securities if the disposal— | 35 |
(a) is an event giving rise to a relevant income tax charge, or | |
(b) is the first disposal after an event, other than a disposal, | |
giving rise to a relevant income tax charge. | |
(2) Section 38(1)(a) applies as if the relevant amount had formed part of | |
the consideration given by the person making the disposal for his | 40 |
acquisition of the employment-related securities. | |
(3) For the purposes of this section an event gives rise to a relevant | |
income tax charge if it results in an amount counting as employment | |
income— | |
(a) under section 426 of ITEPA 2003 (restricted securities), | 45 |
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(b) under section 438 of ITEPA 2003 by virtue of section 439(3)(a) | |
of that Act (conversion of convertible securities), | |
(c) under section 446U of ITEPA 2003 (securities acquired for | |
less than market value: discharge of notional loan), or | |
(d) under section 476 of ITEPA 2003 by virtue of section 477(3)(a) | 5 |
of that Act (acquisition of securities pursuant to employment- | |
related securities option), | |
in respect of the employment-related securities. | |
(4) For the purposes of this section “the relevant amount” is the | |
aggregate of the amounts counting as employment income as | 10 |
mentioned in subsection (3) above by reason of events occurring— | |
(a) not later than the disposal, and | |
(b) where this section has applied to an earlier disposal of the | |
employment-related securities, after the last disposal to | |
which this section applied. | 15 |
(5) But where the relevant amount consists of or includes an amount | |
counting as employment income under section 476 of ITEPA 2003, it | |
is to be increased by the aggregate of any amounts deducted under | |
section 480(5)(a) or (b), 481 or 482 of that Act in arriving at the | |
amount of that employment income. | 20 |
(6) Where securities or interests in securities cease to be employment- | |
related securities— | |
(a) by reason of subsection (6) of section 421B of ITEPA 2003 in | |
circumstances in which, immediately before the employee’s | |
death, the employment-related securities are held otherwise | 25 |
than by the employee, or | |
(b) by reason of subsection (7) of that section, | |
they are to be regarded for the purposes of this section as remaining | |
employment-related securities until the next occasion on which they | |
are disposed of. | 30 |
(7) In this section— | |
“employment-related securities”, and | |
“employee”, in relation to employment-related securities, | |
have the same meaning as in Chapters 1 to 4 of Part 7 of ITEPA 2003. | |
(8) References in this section to ITEPA 2003 are to that Act as amended | 35 |
by Schedule 22 to the Finance Act 2003.”. | |
(2) Sub-paragraph (1) has effect in relation to disposals on or after 16th April | |
2003. | |
51 In section 120 (increase in expenditure by reference to tax charged in relation | |
to shares etc), after subsection (8) insert— | 40 |
“(9) References in this section to ITEPA 2003 are to that Act as originally | |
enacted.”. | |
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52 (1) After section 149A insert— | |
“149AA Restricted and convertible employment-related securities | |
(1) Where an individual has acquired an asset consisting of | |
employment-related securities which are— | |
(a) restricted securities or a restricted interest in securities, or | 5 |
(b) convertible securities or an interest in convertible securities, | |
the consideration for the acquisition shall (subject to section 119A) be | |
taken to be equal to the aggregate of the actual amount or value | |
given for the employment-related securities and any amount that | |
constituted earnings under Chapter 1 of Part 3 of ITEPA 2003 | 10 |
(earnings) in respect of the acquisition. | |
(2) Subsection (1) above applies only to the individual making the | |
acquisition and, accordingly, is to be disregarded in calculating the | |
consideration received by the person from whom the employment- | |
related securities are acquired. | 15 |
(3) This section has effect in relation to acquisitions on or after the day | |
appointed under paragraph 3(2) of Schedule 22 to the Finance Act | |
2003. | |
(4) In this section “employment-related securities” has the same | |
meaning as in Chapters 1 to 4 of Part 7 of ITEPA 2003 (as substituted | 20 |
by Schedule 22 to the Finance Act 2003). | |
(5) In this section— | |
“restricted interest in securities”, and | |
“restricted securities”, | |
have the same meaning as in Chapter 2 of that Part of ITEPA 2003 (as | 25 |
so substituted). | |
(6) In this section “convertible securities” has the same meaning as in | |
Chapter 3 of that Part of ITEPA 2003 (as so substituted).”. | |
53 In section 149B (employee incentive schemes: conditional interests in | |
shares), after subsection (4) insert— | 30 |
“(5) This section does not apply to acquisitions on or after the day | |
appointed under paragraph 3(2) of Schedule 22 to the Finance Act | |
2003. | |
(6) References in this section to ITEPA 2003 are to that Act as originally | |
enacted.”. | 35 |
54 (1) In section 288 (interpretation), after subsection (1) insert— | |
“(1A) If any employment-related securities option would not otherwise be | |
regarded as an option for the purposes of this Act, it shall be so | |
regarded; and the acquisition of securities by an associated person | |
pursuant to an employment-related securities option is to be treated | 40 |
for the purposes of this Act as the exercise of the option. | |
Expressions used in this subsection and Chapter 5 of Part 7 of ITEPA | |
2003 have the same meaning in this subsection as in that Chapter.”. | |
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(2) Sub-paragraph (1) has effect in accordance with the provision made for the | |
substitution of Chapter 5 of Part 7 of the Income Tax (Earnings and Pensions) | |
Act 2003 (c. 1). | |
55 (1) The Social Security Contributions (Share Options) Act 2001 (c. 20) is | |
amended as follows. | 5 |
(2) The amendments of that Act have effect on and after the day appointed | |
under paragraph 3(2). | |
56 In section 2(3)(b) (effect of notice under section 1), insert at the end “(less any | |
deductible amounts under section 480(1) to (6) of that Act).”. | |
57 (1) Section 3 (special provision for roll-overs) is amended as follows. | 10 |
(2) In subsection (4)— | |
(a) in paragraph (a), for “section 485(1) to (4)” substitute “section 483(1) | |
to (4)”, and | |
(b) insert at the end of paragraph (b)(i) “(less any deductible amounts | |
under section 480(1) to (6) of that Act).”. | 15 |
(3) In subsection (6), for “485(1) to (3)” substitute “483(1) to (3)”. | |
(4) In subsection (11)(a), insert at the end “(less any deductible amounts under | |
section 480(1) to (6));”. | |
58 In section 5(2)(c) (interpretation), for “483(1)” substitute “477(6)”. | |
59 Schedule 23 to this Act (corporation tax relief for employee share | 20 |
acquisitions) is amended as follows. | |
60 (1) Paragraph 1 is amended as follows. | |
(2) In sub-paragraph (1)(b), for “in exercise of” substitute “pursuant to”. | |
(3) For sub-paragraph (2) substitute— | |
“(2) Part 4 of this Schedule makes further provision for cases where the | 25 |
shares acquired are restricted shares. | |
(2A) Part 4A of this Schedule makes further provision for cases where | |
the shares acquired are convertible shares.”. | |
(4) Sub-paragraph (2) has effect on and after the day appointed under | |
paragraph 3(2). | 30 |
(5) Sub-paragraph (3) has effect in accordance with the provision made for the | |
substitution of Part 4 of, and the insertion of Part 4A in, Schedule 23. | |
61 (1) For paragraph 5(2) substitute— | |
“(2) Where the shares acquired are restricted shares, the provisions of | |
this Part have effect subject to the provisions of Part 4 of this | 35 |
Schedule. | |
(3) Where the shares acquired are convertible shares, the provisions | |
of this Part have effect subject to the provisions of Part 4A of this | |
Schedule.”. | |
(2) Sub-paragraph (1) has effect in accordance with the provision made for the | 40 |
substitution of Part 4 of, and the insertion of Part 4A in, Schedule 23. | |
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62 (1) For paragraph 11(2) substitute— | |
“(2) Where the shares acquired pursuant to the option are restricted | |
shares, the provisions of this Part have effect subject to the | |
provisions of Part 4 of this Schedule. | |
(3) Where the shares acquired pursuant to the option are convertible | 5 |
shares, the provisions of this Part have effect subject to the | |
provisions of Part 4A of this Schedule.”. | |
(2) Sub-paragraph (1) has effect in accordance with the provision made for the | |
substitution of Part 4 of, and the insertion of Part 4A in, Schedule 23. | |
63 (1) In paragraph 12, for “in exercise of” substitute “pursuant to”. | 10 |
(2) Sub-paragraph (1) has effect on and after the day appointed under | |
paragraph 3(2). | |
64 (1) Paragraph 13 is amended as follows. | |
(2) In sub-paragraph (2)(b), for “in exercise of” (in both places) substitute | |
“pursuant to”. | 15 |
(3) For sub-paragraph (2)(c) substitute— | |
“(c) in determining the amount of relief— | |
(i) any consideration given in respect of the grant of | |
the new option is treated as if it had been given in | |
respect of the grant of the old option, and | 20 |
(ii) any consideration given in respect of the | |
acquisition of shares pursuant to the new option is | |
treated as if it had been given in respect of the | |
acquisition of shares pursuant to the old option.”. | |
(4) In sub-paragraph (3)(b), for “its exercise” substitute “the shares acquired | 25 |
pursuant to it”. | |
(5) This paragraph has effect on and after the day appointed under paragraph | |
3(2). | |
65 (1) For paragraph 14 substitute— | |
“Income tax position of the employee | 30 |
14 (1) It must be the case that the acquisition of shares pursuant to the | |
option— | |
(a) is a chargeable event in relation to the employee for the | |
purposes of section 476 of the Income Tax (Earnings and | |
Pensions) Act 2003 (whether or not an amount counts as | 35 |
employment income by virtue of that event), or | |
(b) would be such a chargeable event in relation to the | |
employee if the conditions specified in sub-paragraph (2) | |
were met. | |
(2) The conditions mentioned in sub-paragraph (1)(b) are— | 40 |
(a) that the employee was resident and ordinarily resident in | |
the United Kingdom at all material times, and | |
(b) that the duties of the employment by reason of which the | |
option was granted were performed in the United | |
Kingdom at all material times.”. | 45 |
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(2) Sub-paragraph (1) has effect on and after the day appointed under | |
paragraph 3(2). | |
66 (1) Paragraph 15 is amended as follows. | |
(2) In sub-paragraph (1)— | |
(a) for “the option is exercised” substitute “they are acquired pursuant | 5 |
to the option”, and | |
(b) for “or exercise of” substitute “of the option or the acquisition of the | |
shares pursuant to”. | |
(3) In sub-paragraph (3), for “or exercise of” substitute “of the option or the | |
acquisition of the shares pursuant to”. | 10 |
(4) This paragraph has effect on and after the day appointed under paragraph | |
3(2). | |
67 (1) In paragraph 17(1), for “in exercise of” substitute “pursuant to”. | |
(2) Sub-paragraph (1) has effect on and after the day appointed under | |
paragraph 3(2). | 15 |
68 (1) For Part 4 substitute— | |
“Part 4 | |
Provisions applying in case of restricted shares | |
Introduction | |
18 In the case of— | 20 |
(a) an award of restricted shares, or | |
(b) the acquisition pursuant to an option of restricted shares, | |
the provisions of Part 2 or 3 have effect subject to the provisions of | |
this Part of this Schedule. | |
Meaning of “restricted shares” | 25 |
19 Shares are “restricted shares” for the purposes of this Schedule if | |
they are restricted securities, or a restricted interest in securities, | |
for the purposes of Chapter 2 of Part 7 of the Income Tax (Earnings | |
and Pensions) Act 2003 (see sections 423 and 424 of that Act). | |
Income tax position of employee in case of restricted shares | 30 |
20 (1) Where the recipient acquires restricted shares, this paragraph | |
applies in place of paragraph 7 (income tax position of the | |
employee). | |
(2) It must be the case that the employee — | |
(a) either— | 35 |
(i) is subject to a charge to income tax under Chapter | |
1 of Part 3 of the Income Tax (Earnings and | |
Pensions) Act 2003 in respect of the award, or | |
(ii) is not subject to such a charge but will be subject to | |
a charge to income tax under the Income Tax | 40 |
(Earnings and Pensions) Act 2003 by virtue of | |
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