House of Commons portcullis
House of Commons
Session 2002 - 03
Internet Publications
Other Bills before Parliament

Finance Bill


Finance Bill
Schedule 23 — Corporation tax relief for employee share acquisition
Part 5 — Supplementary provisions

    334

 

triggering event by a different company (“the successor company”)

or by different companies (“the successor companies”) from the one

by which it was carried on at the time of the award or grant.

          (2)      For the purposes of sub-paragraph (1)—

              (a)             the “relief-triggering event” for shares is the event that, in accordance

5

with paragraph 10, 17 or 22, determines the accounting period for

which relief under this Schedule is given in respect of them;

              (b)             there is a “qualifying transfer” of a business (or a part of one) where

the business (or part) is transferred from one company to another

company that is, or to two or more companies that are, members of

10

the same group.

          (3)      Where this paragraph applies—

              (a)             relief under this Schedule in respect of the shares is given to the

successor company or, as the case may be, to whichever one of the

successor companies is jointly nominated by them, and

15

              (b)             the reference in paragraph 1(1)(a) or (b) to “that company” shall be

read as a reference to the company by which the relevant business

was carried on at the time of the award or grant.

Relationship between relief and other deductions: priority of deductions under SIP code

  24      (1)      Deductions available under any of the following provisions of Schedule

20

4AA to the Taxes Act 1988 (share incentive plans) are to be given in priority

to relief under this Schedule—

              (a)             paragraph 2 (deduction for providing free or matching shares);

              (b)             paragraph 3 (deduction for expenses in providing partnership

shares);

25

              (c)             paragraph 9 or 10(3) (deduction for contribution to plan trust).

          (2)      No relief is available under this Schedule in respect of shares in relation to

which a deduction is allowable, or has been made, under any of those

provisions.

Relationship between relief and other deductions: exclusion of other deductions

30

  25      (1)      Where relief under this Schedule is available for any accounting period, no

other deduction is allowed for any corporation tax purposes (whether for

that or any other period) in respect of the cost of providing the shares.

                   This applies to any deduction, whether by the employing company or any

other company, in computing chargeable profits for the purposes of

35

corporation tax.

          (2)      For this purpose the cost of providing the shares—

              (a)             means expenses directly related to the provision of the shares, and

              (b)             includes, in a case where the shares are acquired under an employee

share scheme, any amount paid or payable by the employing

40

company in respect of the participation of the employee in that

scheme.

          (3)      The following are not regarded as part of the cost of providing the shares—

              (a)             expenses incurred in establishing the employee share scheme under

which the recipient acquires the shares;

45

 

 

Finance Bill
Schedule 23 — Corporation tax relief for employee share acquisition
Part 5 — Supplementary provisions

    335

 

              (b)             expenses incurred in meeting, or contributing to, the costs of

administering the scheme;

              (c)             the costs of borrowing for the purposes of the scheme;

              (d)             fees, commission, stamp duty and similar incidental expenses of

acquiring the shares.

5

          (4)      In this paragraph “employee share scheme” means any scheme or

arrangement for enabling shares to be acquired by reason of employees’

employment.

Meaning of “employment”

  26       For the purposes of this Schedule—

10

              (a)             references to employment by a company include holding an office

with that company, and related expressions have a corresponding

meaning, and

              (b)             members of a company whose affairs are managed by the members

themselves are treated as holding an office with the company.

15

Exercise of option after death of employee or recipient

  27      (1)      Where an option to acquire shares obtained by reason of the employee’s

employment is exercised by the recipient after the employee’s death, 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.

20

          (2)      Where an option to acquire shares obtained by reason of the employee’s

employment is exercised after the death of the recipient, paragraph 1(1)(b)

and Part 3 of this Schedule, and sub-paragraph (1) above, apply as if the

recipient were still alive and the option were exercised by him.

Meaning of “group company” and “parent company”

25

  28       For the purposes of this Schedule—

              (a)             a company is a “group company”, in relation to another company, if

they are members of the same group,

              (b)             two companies are members of the same group if, and only if, one is

a 51% subsidiary of the other or both are 51% subsidiaries of a third

30

company, and

              (c)             a company is a “parent company” in relation to another company if

that other is its 51% subsidiary.

Meaning of “consortium” and “commercial association of companies”

  29      (1)      For the purposes of this Schedule a company is a member of a consortium

35

owning another company if it is one of five or fewer companies—

              (a)             that between them beneficially own not less than 75% of the other

company’s ordinary share capital, and

              (b)             each of which beneficially owns not less than 10% of that capital.

                   For this purpose the shareholdings of members of a group of companies

40

shall be treated as held by a single company.

          (2)      In this Schedule a “commercial association of companies” means a company

together with such of its associated companies as carry on businesses that

 

 

Finance Bill
Schedule 23 — Corporation tax relief for employee share acquisition
Part 5 — Supplementary provisions

    336

 

are of such a nature that the businesses of the company and the associated

companies, taken together, may be reasonably considered to make up a

single composite undertaking.

                   “Associated company” here has the meaning given by section 416 of the

Taxes Act 1988.

5

Minor definitions

  30       In this Schedule—

                    “the Contributions and Benefits Act” means—

                    (a)                   the Social Security Contributions and Benefits Act 1992 (c. 4),

or

10

                    (b)                   the Social Security Contributions and Benefits (Northern

Ireland) Act 1992 (c. 7);

                    “control” has the meaning given by section 840 of the Taxes Act 1988;

                    “insurance company” and “life assurance business” have the meanings

given by section 431(2) of that Act;

15

                    “investment company” has the meaning given by section 130 of that

Act;

                    “market value” has the same meaning as in the Taxation of Chargeable

Gains Act 1992 (c. 12) (see sections 272 and 273 of that Act);

                    “option” includes any right to acquire shares;

20

                    “ordinary shares”, in relation to a company, means shares forming part

of the company’s ordinary share capital;

                    “shares” includes—

                    (a)                   an interest in shares, and

                    (b)                   stock or an interest in stock.

25

Index of defined expressions

  31       In this Schedule the following expressions are defined or otherwise

explained by the provisions indicated:

 

commercial association of companies

paragraph 29(2)

 
 

consortium

paragraph 29(1)

 

30

 

Contributions and Benefits Act

paragraph 30

 
 

control

paragraph 30

 
 

employment and related expressions

paragraph 26

 
 

the employee

paragraph 1(3)

 
 

employing company

paragraph 1(3)

 

35

 

group

paragraph 28(b)

 
 

group company

paragraph 28(a)

 
 

insurance company

paragraph 30

 
 

investment company

paragraph 30

 
 

 

Finance Bill
Schedule 23 — Corporation tax relief for employee share acquisition
Part 6 — Commencement and transitional provisions

    337

 
 

life assurance business

paragraph 30

 
 

market value

paragraph 30

 
 

option

paragraph 30

 
 

ordinary shares

paragraph 30

 
 

parent company

paragraph 28(c)

 

5

 

the recipient

paragraph 1(3)

 
 

shares

paragraph 30

 
 

subject to forfeiture

paragraph 19

 
 

within the charge to corporation tax (of a

paragraph 3(2)

 
 

business)

  

10

 

Part 6

Commencement and transitional provisions

Commencement

  32       This Schedule applies to accounting periods of the employing company

beginning on or after 1st January 2003.

15

Transitional provisions

  33      (1)      Relief is not available under this Schedule in respect of shares to the extent

that a deduction is available or has been made in respect of relevant

expenses in computing the chargeable profits of the employing company or

any other company for the purposes of corporation tax for an accounting

20

period beginning before 1st January 2003.

          (2)      In sub-paragraph (1) “relevant expenses” means any expenses referable,

directly or indirectly, to the provision of the shares in question.

          (3)      In relation to any time before the coming into force of the Income Tax

(Earnings and Pensions) Act 2003 (c. 1) (“ITEPA”), this Schedule has effect as

25

if—

              (a)             the references to a charge to income tax under ITEPA were to a

charge to income tax under section 19 of the Taxes Act 1988;

              (b)             the reference in paragraph 14(1)(a)(ii) to section 476 or 477 of ITEPA

were to section 135 of the Taxes Act 1988;

30

              (c)             the reference in paragraph 14(2)(a) to section 519, 520, 524 or 525 of

ITEPA were to section 185(3)(a) of the Taxes Act 1988;

              (d)             the reference in paragraph 14(2)(b) to section 530 of ITEPA were to

paragraph 44 of Schedule 14 to the Finance Act 2000 (c. 17);

              (e)             the reference in paragraph 20(2)(a) to section 427 of ITEPA were to

35

section 140A of the Taxes Act 1988;

              (f)             the references in paragraph 24(1) to paragraphs 2, 3, 9 and 10(3) of

Schedule 4AA to the Taxes Act 1988 were to paragraphs 106, 107,

112A and 112B(3) respectively of Schedule 8 to the Finance Act 2000.

 

 

 
previous section contents continue
 
House of Commons home page Houses of Parliament home page House of Lords home page search page enquiries

© Parliamentary copyright 2003
Revised 19 June 2003