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section 426 of that Act on the occurrence of an event | |
in relation to the shares that is a chargeable event | |
for the purposes of that section, or | |
(b) would be within paragraph (a) if the conditions specified | |
in sub-paragraph (4) were met. | 5 |
(3) Where but for the death of the employee sub-paragraph (2)(a)(ii) | |
would apply in relation to restricted shares acquired under an | |
award of shares, it is to be treated as applying in relation to the | |
restricted shares. | |
(4) The conditions mentioned in sub-paragraph (2)(b) are— | 10 |
(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 | |
award was made or the option was granted were | |
performed in the United Kingdom at all material times. | 15 |
Amount of relief in case of restricted shares | |
21 (1) Where the recipient acquires restricted shares, this paragraph | |
applies in place of paragraph 8 or 15 (amount of relief). | |
(2) Relief is available— | |
(a) on the award of the shares or, where they are acquired | 20 |
pursuant to an option, on that acquisition, | |
(b) on any event that is a chargeable event in relation to the | |
shares for the purposes of section 426 of the Income Tax | |
(Earnings and Pensions) Act 2003, | |
(c) on the death of the employee. | 25 |
(3) The amount of the relief on the award of the shares is equal to the | |
amount that constitutes earnings from the employee’s | |
employment under Chapter 1 of Part 3 of the Income Tax | |
(Earnings and Pensions) Act 2003 in respect of the award. | |
(4) The amount of the relief on the acquisition of the shares pursuant | 30 |
to the option is equal to the amount that counts as employment | |
income of the employee under section 476 of the Income Tax | |
(Earnings and Pensions) Act 2003 in respect of the acquisition, | |
increased by any amounts deducted under sections 481 and 482 of | |
that Act. | 35 |
(5) Where restricted shares acquired as mentioned in sub-paragraph | |
(3) or (4) are also convertible shares, the total amount of the relief | |
in respect of the acquisition is whichever is the greater of— | |
(a) in the case of an award of shares, the amounts mentioned | |
in sub-paragraph (3) and paragraph 22C(3), and | 40 |
(b) in the case of an acquisition of shares pursuant to an | |
option, the amounts mentioned in sub-paragraph (4) and | |
paragraph 22C(4). | |
(6) The amount of the relief on an event that is a chargeable event for | |
the purposes of section 426 of the Income Tax (Earnings and | 45 |
Pensions) Act 2003 is equal to the amount that counts as | |
employment income of the employee under that section in respect | |
of that event. | |
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(7) The amount of the relief on the death of the employee is equal to | |
the amount that (disregarding section 428(3) and (6) of the Income | |
Tax (Earnings and Pensions) Act 2003) would count as | |
employment income of the employee if there were a chargeable | |
event within section 427(3)(c) of that Act immediately before the | 5 |
restricted shares ceased to be employment-related securities by | |
virtue of the employee’s death. | |
(8) Section 446E(3) of the Income Tax (Earnings and Pensions) Act | |
2003 is to be disregarded in determining the amounts of the reliefs | |
given by sub-paragraphs (6) and (7). | 10 |
(9) The amount of any non-commercial increase in the market value | |
of the restricted shares since the time of the acquisition is to be | |
disregarded for the purpose of determining the amounts of the | |
reliefs given by sub-paragraphs (6) and (7). | |
“Non-commercial increase” has the same meaning as in Chapter | 15 |
3B of Part 7 of the Income Tax (Earnings and Pensions) Act 2003. | |
(10) If the award or grant was made partly for the purposes of a | |
business meeting the requirements of paragraph 3 (business must | |
be within the charge to corporation tax) and partly for the | |
purposes of a business in relation to which those requirements are | 20 |
not met, the amount of the relief shall be reduced to such extent as | |
is just and reasonable. | |
(11) Where the employee— | |
(a) is not subject to a charge to income tax mentioned in sub- | |
paragraph (3), (4) or (6), or would not be subject to the | 25 |
charge to income tax mentioned in sub-paragraph (7), but | |
(b) would be subject to such a charge if the conditions | |
specified in paragraph 20(4) were met, | |
the amount of the relief is to be taken to be the amount that would | |
be the amount of the relief if those conditions were met. | 30 |
Timing of relief in case of restricted shares | |
22 (1) Where the recipient acquires restricted shares, this paragraph | |
applies in place of paragraph 10 or 17 (timing of relief). | |
(2) The relief mentioned in paragraph 21(3) is given for the | |
accounting period in which the recipient acquires the restricted | 35 |
shares pursuant to the award. | |
(3) The relief mentioned in paragraph 21(4) is given for the | |
accounting period in which the recipient acquires the restricted | |
shares pursuant to the option. | |
(4) The time when the shares are acquired is when the recipient | 40 |
acquires a beneficial interest in the shares and not, if different, the | |
time the shares are conveyed or transferred. | |
(5) The relief mentioned in paragraph 21(6) is given for the | |
accounting period in which the chargeable event takes place. | |
(6) The relief mentioned in paragraph 21(7) is given for the | 45 |
accounting period in which the employee dies.”. | |
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(2) Sub-paragraph (1) has effect on and after the day appointed under | |
paragraph 3(2) but does not affect any restricted shares acquired before 16th | |
April 2003. | |
69 (1) After Part 4 insert— | |
“Part 4A | 5 |
Provisions applying in case of convertible shares | |
Introduction | |
22A In the case of— | |
(a) an award of convertible shares, or | |
(b) the acquisition pursuant to an option of convertible shares, | 10 |
the provisions of Part 2 or 3 have effect subject to the provisions of | |
this Part of this Schedule. | |
Meaning of “convertible shares” | |
22B (1) Shares are “convertible shares” for the purposes of this Schedule if | |
they are convertible securities, or an interest in convertible | 15 |
securities. | |
(2) But convertible securities which are not shares, or an interest in | |
convertible securities which are not shares, are to be taken to be | |
convertible shares for the purposes of this Schedule as it applies in | |
relation to the reliefs given by paragraph 22C(6) and (7). | 20 |
(3) In this paragraph “convertible securities” has the same meaning as | |
in Chapter 3 of Part 7 of the Income Tax (Earnings and Pensions) | |
Act 2003 (see section 436 of that Act). | |
Amount of relief in case of convertible shares | |
22C (1) Where the recipient acquires convertible shares, this paragraph | 25 |
applies in place of paragraph 8 or 15 (amount of relief). | |
(2) Relief is available— | |
(a) on the award of the shares or, where they are acquired | |
pursuant to an option, on that acquisition, | |
(b) on any event that is a chargeable event in relation to the | 30 |
convertible shares, | |
(c) on the death of the employee. | |
(3) The amount of the relief on the award of the shares is equal to the | |
amount that constitutes earnings from the employee’s | |
employment under Chapter 1 of Part 3 of the Income Tax | 35 |
(Earnings and Pensions) Act 2003 (as modified by section 437 of | |
that Act) in respect of the award. | |
(4) The amount of the relief on the acquisition of the shares pursuant | |
to an option is equal to the amount that counts as employment | |
income of the employee under section 476 of the Income Tax | 40 |
(Earnings and Pensions) Act 2003 (as modified by section 437 of | |
that Act) in respect of the acquisition, increased by any amounts | |
deducted under sections 481 and 482 of that Act. | |
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(5) Where convertible shares acquired as mentioned in sub- | |
paragraph (3) or (4) are also restricted shares, the total amount of | |
the relief in respect of the acquisition is whichever is the greater | |
of— | |
(a) in the case of an award of shares, the amounts mentioned | 5 |
in sub-paragraph (3) and paragraph 21(3), and | |
(b) in the case of an acquisition of shares pursuant to an | |
option, the amounts mentioned in sub-paragraph (4) and | |
paragraph 21(4). | |
(6) The amount of the relief on an event that is a chargeable event in | 10 |
relation to the convertible shares is equal to the amount that | |
counts as employment income of the employee in respect of that | |
event. | |
(7) The amount of the relief on the death of the employee is equal to | |
the amount that would have counted as employment income of | 15 |
the employee in relation to the first event following the | |
employee’s death which would have been a chargeable event | |
were the employee still alive. | |
(8) Sections 446G and 446H of the Income Tax (Earnings and | |
Pensions) Act 2003 are to be disregarded in determining the | 20 |
amounts of the reliefs given by sub-paragraphs (6) and (7). | |
(9) If the award or grant was made partly for the purposes of a | |
business meeting the requirements of paragraph 3 (business must | |
be within the charge to corporation tax) and partly for the | |
purposes of a business in relation to which those requirements are | 25 |
not met, the amount of the relief shall be reduced to such extent as | |
is just and reasonable. | |
(10) Where the employee— | |
(a) is not subject to a charge to income tax mentioned in sub- | |
paragraph (3), (4) or (6), or would not be subject to the | 30 |
charge to income tax mentioned in sub-paragraph (7), but | |
(b) would be subject to such a charge if the conditions | |
specified in paragraph 7(2) or 14(2) were met, | |
the amount of the relief is to be taken to be the amount that would | |
be the amount of the relief if those conditions were met. | 35 |
(11) In this paragraph and paragraph 22D “chargeable event” means | |
an event that is a chargeable event in relation to the convertible | |
shares within section 439(3)(a) of the Income Tax (Employment | |
and Pensions) Act 2003; but a conversion of the convertible shares | |
into anything other than shares which— | 40 |
(a) meet the requirements of paragraph 4, and | |
(b) would meet the requirements of paragraph 6 if they had | |
been acquired by an award of shares, | |
is not a chargeable event for the purposes of this paragraph. | |
Timing of relief in case of convertible shares | 45 |
22D (1) Where the recipient acquires convertible shares, this paragraph | |
applies in place of paragraph 10 or 17 (timing of relief). | |
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(2) The relief mentioned in paragraph 22C(3) is given for the | |
accounting period in which the recipient acquires the convertible | |
shares under the award. | |
(3) The relief mentioned in paragraph 22C(4) is given for the | |
accounting period in which the recipient acquires the convertible | 5 |
shares pursuant to the option. | |
(4) The time when shares are acquired is when the recipient acquires | |
a beneficial interest in the shares and not, if different, the time the | |
shares are conveyed or transferred. | |
(5) The relief mentioned in paragraph 22C(6) is given for the | 10 |
accounting period in which the chargeable event takes place. | |
(6) The relief mentioned in paragraph 22C(7) is given for the | |
accounting period in which the event takes place which would | |
have been a chargeable event but for the death of the employee.”. | |
(2) Sub-paragraph (1) has effect on and after the day appointed under | 15 |
paragraph 3(2) (so that, apart from paragraph 22C(2)(a) and (3) to (5) and | |
paragraph 22D(2) to (4), the provisions of Part 4A of Schedule 23 as inserted | |
by that sub-paragraph apply on and after that day in relation to convertible | |
shares irrespective of the time of the acquisition). | |
70 (1) In paragraph 23(2)(a), for “or 22” substitute “, 22 or 22D”. | 20 |
(2) Sub-paragraph (1) has effect on and after the day appointed under | |
paragraph 3(2). | |
71 (1) In paragraph 26 before paragraph (a) insert— | |
“(za) “employment” includes a former or prospective | |
employment,”. | 25 |
(2) Sub-paragraph (1) has effect on and after 16th April 2003. | |
72 (1) For paragraph 27 substitute— | |
“Acquisition of shares pursuant to option after death of employee or recipient | |
27 (1) Where after the employee’s death shares are acquired by the | |
recipient pursuant to an option obtained by reason of the | 30 |
employee’s employment, the 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 after the death of the recipient shares are acquired | |
pursuant to an option obtained by reason of the employee’s | 35 |
employment, paragraph 1(1)(b) and Parts 3, 4 and 4A of this | |
Schedule, and sub-paragraph (1) above, apply as if the recipient | |
were still alive and the shares were acquired by him.”. | |
(2) Sub-paragraph (1) has effect on and after the day appointed under | |
paragraph 3(2). | 40 |
73 (1) Paragraph 31 is amended as follows. | |
(2) Omit the entry relating to “subject to forfeiture”. | |
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(3) At the appropriate places insert— | |
| | “restricted shares | paragraph 19”, | | | | | “convertible shares | paragraph 22B”. | | |
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(4) This paragraph has effect in accordance with the provision made for the | |
substitution of Part 4 of, and the insertion of Part 4A in, Schedule 23. | 5 |
Schedule 23 | |
Section 140 | |
Corporation tax relief for employee share acquisition | |
Part 1 | |
General provisions | |
Introduction | 10 |
1 (1) This Schedule provides for corporation tax relief for a company where a | |
person— | |
(a) acquires shares by reason of his, or another person’s, employment | |
with that company (an “award of shares”: see Part 2 of this Schedule), | |
or | 15 |
(b) obtains by reason of his, or another person’s, employment with that | |
company an option to acquire shares and acquires shares in exercise | |
of that option (the “grant of an option”: see Part 3 of this Schedule). | |
(2) Part 4 of this Schedule makes further provision for cases where the shares | |
acquired are subject to forfeiture. | 20 |
(3) In this Schedule— | |
“the employing company” means the company mentioned in sub- | |
paragraph (1); | |
“the recipient” means the person acquiring the shares or obtaining the | |
option; and | 25 |
“the employee” means the person by reason of whose employment the | |
shares are acquired or the option is granted. | |
Requirements for relief | |
2 Relief under this Schedule is available only if the requirements of this | |
Schedule are met as to— | 30 |
(a) the business for the purposes of which the award or grant is made | |
(paragraph 3); | |
(b) the kind of shares acquired (paragraph 4); | |
(c) the company whose shares are acquired (paragraph 6 or 12); and | |
(d) the income tax position of the employee (paragraph 7, 14 or 20). | 35 |
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Business must be within the charge to corporation tax | |
3 (1) The business for the purposes of which the award or grant is made must— | |
(a) be carried on by the employing company, and | |
(b) be within the charge to corporation tax. | |
(2) A business is within the charge to corporation tax if, or to the extent that, it | 5 |
is carried on by a company that is within the charge to corporation tax in | |
respect of the profits of the business. | |
Kind of shares acquired | |
4 (1) The shares acquired must meet the following requirements. | |
(2) They must be ordinary shares that are fully paid-up and not redeemable. | 10 |
(3) They must be— | |
(a) shares of a class listed on a recognised stock exchange, or | |
(b) shares in a company that is not under the control of another | |
company, or | |
(c) shares in a company that is under the control of a company (other | 15 |
than a close company or a company that if resident in the United | |
Kingdom would be a close company) whose shares are listed on a | |
recognised stock exchange. | |
Part 2 | |
Award of shares | 20 |
Introduction | |
5 (1) The provisions of this Part of this Schedule apply in the case of an award of | |
shares. | |
(2) Where the shares acquired are subject to forfeiture, the provisions of this | |
Part have effect subject to the provisions of Part 4 of this Schedule. | 25 |
The company whose shares are acquired | |
6 (1) The shares acquired must be shares in— | |
(a) the employing company; or | |
(b) a company that, at the time of the award, is a parent company in | |
relation to the employing company; or | 30 |
(c) a company that, at the time of the award, is a member of a | |
consortium that owns the employing company or a company within | |
paragraph (b); or | |
(d) where at the time of the award the employing company or a | |
company within paragraph (b) is a member of a consortium that | 35 |
owns another company (C), a company that at that time— | |
(i) is a member of the consortium or a parent company in | |
relation to a member of the consortium, and | |
(ii) is also a member of the same commercial association of | |
companies as C. | 40 |
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