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Income tax position of employee | |
7 (1) It must be the case that the employee— | |
(a) is subject to a charge to income tax under the Income Tax (Earnings | |
and Pensions) Act 2003 (c. 1) in respect of the award, or | |
(b) would be subject to such a charge if the conditions specified in sub- | 5 |
paragraph (2) were met. | |
(2) The conditions mentioned in sub-paragraph (1)(b) are— | |
(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 | 10 |
made were performed in the United Kingdom at all material times. | |
Amount of relief | |
8 (1) The amount of the relief is equal to the difference between— | |
(a) the market value of the shares at the time of the award, and | |
(b) the total amount or value of any consideration given, by the recipient | 15 |
or another, in respect of the shares. | |
(2) The consideration mentioned in sub-paragraph (1)(b) does not include the | |
performance of any duties of, or in connection with, the employee’s | |
employment with the employing company. | |
(3) A just and reasonable apportionment shall be made for the purposes of this | 20 |
paragraph of any consideration given partly in respect of the shares and | |
partly in respect of other matters. | |
(4) If the award 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 | 25 |
which those requirements are not met, the amount of the relief shall be | |
reduced to such extent as is just and reasonable. | |
How relief is given | |
9 (1) The amount of the relief is allowed as a deduction in computing for the | |
purposes of corporation tax the profits of the business for the purposes of | 30 |
which the award was made. | |
(2) If the company carrying on that business is an investment company, the | |
amount of the relief is treated as disbursed as expenses of management for | |
the purposes of section 75 of the Taxes Act 1988. | |
(3) If the company carrying on that business is an insurance company carrying | 35 |
on life assurance business, the amount of the relief is included among the | |
amounts the company may treat as part of its expenses of management for | |
the purposes of section 76 of the Taxes Act 1988. | |
(4) If the award was made for the purposes of more than one business within | |
the charge to corporation tax, the amount of the deduction must be | 40 |
apportioned between them on a just and reasonable basis. | |
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Timing of relief | |
10 (1) The relief is given for the accounting period in which the recipient acquires | |
the shares. | |
(2) The time when the shares are acquired is when the recipient acquires a | |
beneficial interest in the shares and not, if different, the time the shares are | 5 |
conveyed or transferred. | |
Part 3 | |
Grant of option | |
Introduction | |
11 (1) The provisions of this Part of this Schedule apply in the case of the grant of | 10 |
an option to acquire shares. | |
(2) Where the shares acquired in exercise of the option are subject to forfeiture, | |
the provisions of this Part have effect subject to the provisions of Part 4 of | |
this Schedule. | |
The company whose shares are acquired | 15 |
12 The company whose shares are acquired in exercise of the option must be— | |
(a) the employing company; or | |
(b) a company that, at the time the option is granted, is a parent | |
company in relation to the employing company; or | |
(c) a company that, at that time, is a member of a consortium that owns | 20 |
the employing company or a company within paragraph (b); or | |
(d) where, at that time, the employing company or a company within | |
paragraph (b) is a member of a consortium that owns another | |
company (C), a company that, at that time— | |
(i) is a member of the consortium or a parent company in | 25 |
relation to a member of the consortium, and | |
(ii) is also a member of the same commercial association of | |
companies as C; or | |
(e) a qualifying successor company (see paragraph 13). | |
Takeover of company whose shares are subject of option | 30 |
13 (1) This paragraph applies where— | |
(a) there is a takeover of a company whose shares are the subject of a | |
qualifying option, | |
(b) the holder of the option, by agreement with the acquiring company, | |
releases his rights under that option (“the old option”) in | 35 |
consideration of the grant to him of another option (“the new | |
option”), and | |
(c) the new option relates to shares in a qualifying company. | |
(2) Where those conditions are met— | |
(a) the company whose shares are the subject of the new option is a | 40 |
qualifying successor company for the purposes of paragraph 12 | |
(requirement as to company whose shares are acquired), | |
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(b) shares acquired in exercise of the new option are treated for the | |
purposes of this Schedule as if they had been acquired in exercise of | |
the old option, and | |
(c) in determining the amount of relief any consideration given in | |
respect of the grant or exercise of the new option is treated as if it had | 5 |
been given in respect of the grant or exercise of the old option. | |
(3) For the purposes of this paragraph— | |
(a) there is a takeover of a company where another company (“the | |
acquiring company”) acquires control of it; and | |
(b) an option is a “qualifying option” if the requirements of paragraph | 10 |
12 would be met in relation to its exercise. | |
(4) The following are qualifying companies for the purposes of this | |
paragraph— | |
(a) the acquiring company; | |
(b) a company that, at the time of the takeover, is a parent company in | 15 |
relation to the acquiring company; | |
(c) a company that, at that time, is a member of a consortium that owns | |
the acquiring company or a company within paragraph (b); | |
(d) where, at that time, the acquiring company or a company within | |
paragraph (b) is a member of a consortium that owns another | 20 |
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. | 25 |
Income tax position of the employee | |
14 (1) It must be the case that the employee— | |
(a) either— | |
(i) was subject to a charge to income tax under the Income Tax | |
(Earnings and Pensions) Act 2003 (c. 1) in respect of the grant | 30 |
of the option, or | |
(ii) is subject to a charge to income tax under that Act by virtue | |
of section 476 or 477 of that Act in respect of the gain realised | |
by the exercise of the option, or | |
(b) would be subject to such a charge as is mentioned in paragraph (a)(ii) | 35 |
but for a relevant exemption, or | |
(c) would be within paragraph (a) or (b) if the conditions specified in | |
sub-paragraph (3) were met. | |
(2) In sub-paragraph (1)(b) a “relevant exemption” means an exemption | |
under— | 40 |
(a) section 519, 520, 524 or 525 of the Income Tax (Earnings and | |
Pensions) Act 2003 (exercise of option under approved SAYE scheme | |
or approved CSOP scheme), or | |
(b) section 530 of that Act (exercise of qualifying option under EMI | |
code). | 45 |
(3) The conditions mentioned in sub-paragraph (1)(c) are— | |
(a) that the employee was resident and ordinarily resident in the United | |
Kingdom at all material times, and | |
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(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. | |
Amount of relief | |
15 (1) The amount of the relief is equal to the difference between— | |
(a) the market value of the shares at the time the option is exercised, and | 5 |
(b) the total amount or value of any consideration given, by the recipient | |
or another, in respect of the grant or exercise of the option. | |
(2) The consideration mentioned in sub-paragraph (1)(b) does not include— | |
(a) the performance of any duties of, or in connection with, the | |
employee’s employment with the employing company, or | 10 |
(b) any amount paid or payable by the employee in pursuance of— | |
(i) an agreement within paragraph 3A(2) of Schedule 1 to the | |
Contributions and Benefits Act (agreement for recovery from | |
earner of secondary Class 1 contributions in respect of share | |
option gain), or | 15 |
(ii) an election under paragraph 3B of that Schedule (election | |
transferring to earner liability for secondary Class 1 | |
contributions in respect of share option gain). | |
(3) A just and reasonable apportionment shall be made for the purposes of this | |
paragraph of any consideration given partly in respect of the grant or | 20 |
exercise of the option and partly in respect of other matters. | |
(4) If the option was granted 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 not met, the amount of the relief shall be | 25 |
reduced to such extent as is just and reasonable. | |
How relief is given | |
16 (1) The amount of the relief is allowed as a deduction in computing for the | |
purposes of corporation tax the profits of the business for the purposes of | |
which the option was granted. | 30 |
(2) If the company carrying on the business is an investment company, the | |
amount of the relief is treated as disbursed as expenses of management for | |
the purposes of section 75 of the Taxes Act 1988. | |
(3) If the company carrying on the business is an insurance company carrying | |
on life assurance business, the amount of the relief is included among the | 35 |
amounts the company may treat as part of its expenses of management for | |
the purposes of section 76 of the Taxes Act 1988. | |
(4) If the option was granted for the purposes of more than one business within | |
the charge to corporation tax, the amount of the deduction must be | |
apportioned between them on a just and reasonable basis. | 40 |
Timing of relief | |
17 (1) The relief is given for the accounting period in which the shares are acquired | |
in exercise of the option. | |
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(2) The time when the 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. | |
Part 4 | |
Provisions applying in case of shares subject to forfeiture | 5 |
Introduction | |
18 In the case of— | |
(a) an award of shares that are subject to forfeiture, or | |
(b) the acquisition in exercise of an option of shares that are subject to | |
forfeiture, | 10 |
the provisions of Part 2 or 3 have effect subject to the provisions of this Part | |
of this Schedule. | |
Meaning of shares being “subject to forfeiture” | |
19 (1) This paragraph explains what is meant in this Schedule by shares being | |
“subject to forfeiture”. | 15 |
(2) Subject to the following provisions of this paragraph, shares are “subject to | |
forfeiture” for so long as the terms on which the recipient is entitled to | |
them— | |
(a) provide that if certain circumstances arise, or do not arise, there will | |
be a transfer, reversion or forfeiture as a result of which the recipient | 20 |
will cease to be entitled to any beneficial interest in the shares, and | |
(b) are not such that, in that event, he will be entitled to receive an | |
amount that is equal to or more than the market value of the shares | |
at that time. | |
(3) In sub-paragraph (2)— | 25 |
(a) the reference to circumstances arising includes— | |
(i) the expiry of a period specified in, or determined under, the | |
terms on which the recipient is entitled to the shares, | |
(ii) the exercise by any person of a power conferred on him by or | |
under those terms, or | 30 |
(iii) the death of any person; and | |
(b) the reference to the market value of the shares is to the market value | |
determined as if there were no provision for transfer, reversion or | |
forfeiture. | |
(4) Shares are not “subject to forfeiture”— | 35 |
(a) because they are unpaid or partly paid and may be forfeited for non- | |
payment of calls, provided there is no restriction on the meeting of | |
calls by the recipient, or | |
(b) because the articles of association of the company require the shares | |
to be offered for sale or transferred if the employee ceases to hold | 40 |
specified employment, or | |
(c) because the recipient may be required to offer the shares for sale or | |
transfer them on the employee ceasing, as a result of misconduct, to | |
hold specified employment. | |
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(5) In sub-paragraph (4)— | |
(a) “articles of association” includes, in the case of a company | |
incorporated under the law of a country outside the United | |
Kingdom, any equivalent document; | |
(b) the references to the employee ceasing to hold specified employment | 5 |
are to his ceasing— | |
(i) to be an employee of the employing company, or | |
(ii) to be an employee of one or more group companies, or | |
(iii) to be an employee of any group company, | |
as specified by the terms on which he is entitled to the shares. | 10 |
(6) References in this section to the terms on which the recipient is entitled to | |
shares include terms imposed by any contract or arrangement or in any | |
other way. | |
Income tax position of the employee in case of shares subject to forfeiture | |
20 (1) Where the recipient acquires shares that are subject to forfeiture, this | 15 |
paragraph applies in place of paragraph 7 or 14 (income tax position of the | |
employee). | |
(2) It must be the case that the employee— | |
(a) is subject to a charge to income tax under the Income Tax (Earnings | |
and Pensions) Act 2003 (c. 1) by virtue of section 427 of that Act— | 20 |
(i) on the shares ceasing to be subject to forfeiture, or | |
(ii) on the recipient disposing of the shares, or dying, without the | |
shares having ceased to be subject to forfeiture, or | |
(b) would be subject to such a charge if the conditions in sub-paragraph | |
(3) were met. | 25 |
(3) The conditions mentioned in sub-paragraph (2)(b) are— | |
(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 | 30 |
Kingdom at all material times. | |
Amount of relief in case of shares subject to forfeiture | |
21 (1) Where the recipient acquires shares that are subject to forfeiture, this | |
paragraph applies in place of paragraph 8 or 15 (amount of relief). | |
(2) The amount of the relief is equal to the difference between— | 35 |
(a) the market value of the shares at the relevant time, and | |
(b) the total amount or value of any consideration given, by the recipient | |
or another— | |
(i) in respect of the shares or, as the case may be, in respect of the | |
grant or exercise of the option, or | 40 |
(ii) in respect of the shares ceasing to be subject to forfeiture. | |
(3) For the purposes of sub-paragraph (2)(a)— | |
(a) the “relevant time” is the time at which the shares cease to be subject | |
to forfeiture or, where the recipient disposes of the shares, or dies, | |
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without the shares having ceased to be subject to forfeiture, the time | |
of the disposal or death; and | |
(b) the market value of the shares at that time is their market value | |
immediately after they cease to be subject to forfeiture or, where the | |
recipient disposes of the shares, or dies, without the shares having | 5 |
ceased to be subject to forfeiture, at the time of the disposal or death. | |
(4) The consideration mentioned in sub-paragraph (2)(b) does not include— | |
(a) the performance of any duties of, or in connection with, the | |
employee’s employment with the employing company, or | |
(b) any amount paid or payable by the employee in pursuance of— | 10 |
(i) an agreement within paragraph 3A(2) of Schedule 1 to the | |
Contributions and Benefits Act (agreement for recovery from | |
earner of secondary Class 1 contributions in respect of share | |
option gain), or | |
(ii) an election under paragraph 3B of that Schedule (election | 15 |
transferring to earner liability for secondary Class 1 | |
contributions in respect of share option gain). | |
(5) For the purposes of this paragraph a just and reasonable apportionment | |
shall be made of any consideration given partly in respect of the matters | |
mentioned in sub-paragraph (2)(b) and partly in respect of other matters. | 20 |
(6) 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 not met, the amount of the relief shall be | |
reduced to such extent as is just and reasonable. | 25 |
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 | 30 |
(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 | 35 |
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 | 40 |
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- | 45 |
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