|
| |
|
Disapplication of Chapters 2 and 3B |
| |
454 | Deemed election for disapplication of Chapter 2 |
| |
(1) | If the shares are restricted securities (or the interest in shares is a |
| |
restricted interest in securities), the employer and the employee are to |
| |
be treated as making an election under section 431(1) (election for |
| 5 |
disapplication of Chapter 2) in relation to the shares (or interest in |
| |
| |
(2) | But the employer and the employee may agree that subsection (1) is not |
| |
to apply in relation to the shares (or interest in shares). |
| |
(3) | An agreement under subsection (2) is irrevocable and— |
| 10 |
(a) | must be made in a form approved by the Board of the Inland |
| |
| |
(b) | may not be made more than 14 days after the acquisition. |
| |
(4) | If the employer and the employee make an agreement under subsection |
| |
(2) in relation to the shares (or interest in shares), subsection (5) applies |
| 15 |
for the purposes of determining the taxable amount for the purposes of |
| |
section 426 (charge on occurrence of chargeable event) on the |
| |
occurrence on any chargeable event in relation to the shares (or interest |
| |
| |
(5) | In determining under section 428(3) (amount of charge) what would |
| 20 |
have been the market value of the shares (or interest in shares) at the |
| |
time of the acquisition but for any restrictions (IUMV), that market |
| |
value is to be calculated disregarding the effect on that market value of |
| |
the intellectual property agreement and any transfer of intellectual |
| |
| 25 |
455 | Disapplication of Chapter 3B |
| |
For the purposes of Chapter 3B (securities with artificially enhanced |
| |
market value) neither the intellectual property agreement nor any |
| |
transfer of intellectual property pursuant to it are things done |
| |
otherwise than for genuine commercial purposes. |
| 30 |
| |
456 | Meaning of “intellectual property” and “transfer” |
| |
(1) | In this Chapter “intellectual property” means— |
| |
(a) | any patent, trade mark, registered design, copyright or design |
| |
right, plant breeders’ rights or rights under section 7 of the Plant |
| 35 |
| |
(b) | any right under the law of a country or territory outside the |
| |
United Kingdom corresponding to, or similar to, a right within |
| |
| |
(c) | any information or technique not protected by a right within |
| 40 |
paragraph (a) or (b) but having industrial, commercial or other |
| |
| |
(d) | any licence or other right in respect of anything within |
| |
paragraph (a), (b) or (c), or |
| |
|
| |
|
| |
|
(e) | any goodwill (having the meaning that it has for accounting |
| |
purposes) associated with anything within paragraphs (a) to |
| |
| |
(2) | The Treasury may by order amend the definition of “intellectual |
| |
property” in subsection (1). |
| 5 |
(3) | For the purposes of this Chapter a transfer of intellectual property |
| |
| |
(a) | a sale of the intellectual property, |
| |
(b) | the grant of a licence or other right in respect of it, and |
| |
(c) | the assignment of a licence or other right in respect of it. |
| 10 |
457 | Meaning of “research institution” |
| |
(1) | In this Chapter “research institution” means— |
| |
(a) | any university or other institution that is a publicly funded |
| |
institution as defined in section 41(2) of the Higher Education |
| |
| 15 |
(b) | any institution that carries out research activities otherwise than |
| |
for profit and that is neither controlled nor wholly or mainly |
| |
funded by a person who carries on activities for profit. |
| |
(2) | The Treasury may by order amend subsection (1) to include in or |
| |
exclude from the definition of “research institution” a person specified |
| 20 |
in the order or persons of a description specified in the order. |
| |
458 | Meaning of “involved in research” |
| |
For the purposes of this Chapter a person is involved in research in |
| |
relation to any intellectual property transferred or to be transferred |
| |
from one or more research institutions if— |
| 25 |
(a) | he has been actively engaged for the research institution (or any |
| |
of them) in connection with research (whether as an employee |
| |
| |
(b) | that research is relevant to anything to which the intellectual |
| |
| 30 |
459 | Transfer of intellectual property by controlled company |
| |
(1) | For the purposes of this Chapter where a research institution has |
| |
control of a company, a transfer of intellectual property from the |
| |
company is to be treated as a transfer from the research institution. |
| |
(2) | For the purposes of this Chapter where two or more research |
| 35 |
institutions together have control of a company, a transfer of |
| |
intellectual property from the company is to be treated as a transfer |
| |
from those research institutions. |
| |
(3) | In this section “control” means control within the meaning of section |
| |
| 40 |
| |
| |
“interest”, in relation to shares, and |
| |
| |
| have the meaning indicated in section 420. |
| 45 |
|
| |
|
| |
|
(2) | In this Chapter “market value” has the meaning indicated in section |
| |
| |
| |
| |
| 5 |
| |
| have the meaning indicated in section 421B(8). |
| |
| |
“restricted interest in securities”, and |
| |
| 10 |
| have the meaning indicated in sections 423 and 424.” |
| |
(2) | In consequence of the amendment made by subsection (1), Chapter 1 of Part 7 |
| |
of ITEPA 2003 (income and exemptions relating to securities: introduction) is |
| |
| |
(3) | Substitute “4A” for “4” in— |
| 15 |
(a) | subsections (1), (4) and (8) of section 421B, |
| |
(b) | the heading of and the heading above that section, and |
| |
(c) | subsections (5) and (6) of section 421D. |
| |
(4) | In section 421K(3)(g) (reportable events), after “securities)” insert “or would |
| |
give rise to such an amount but for Chapter 4A (shares in research institution |
| 20 |
| |
(5) | The amendments made by this section have effect in relation to shares (or an |
| |
interest in shares) acquired before an agreement for the transfer of intellectual |
| |
property is made, or within the period of 183 days beginning with the date on |
| |
which such an agreement is made, if— |
| 25 |
(a) | the date of acquisition of the shares (or interest in shares), or |
| |
(b) | the date on which the agreement was made, |
| |
| or both, fell on or after 2nd December 2004. |
| |
(6) | Where section 454 of ITEPA 2003 (as inserted by subsection (1)) has effect (by |
| |
virtue of subsection (5)) in relation to shares (or an interest in shares) acquired |
| 30 |
before 2nd December 2004, it applies in relation to them (or it) so as to treat the |
| |
election under section 431(1) as made on that date. |
| |
(7) | Where section 454 of ITEPA 2003 (as inserted by subsection (1)) has effect (by |
| |
virtue of subsection (5)) in relation to shares (or an interest in shares) acquired |
| |
before 1st October 2005, it has effect with the substitution in subsection (3)(b) |
| 35 |
of that section of “later than 15th October 2005” for “more than 14 days after the |
| |
acquisition of the shares (or interest in shares)”. |
| |
34 | Research institution spin-out companies: pre-2nd December 2004 cases |
| |
(1) | Subsections (2) to (7) have effect where— |
| |
(a) | Chapter 4A of Part 7 of ITEPA 2003 (as inserted by section 33) would |
| 40 |
apply but for subsection (5) of that section (commencement), and |
| |
(b) | an election is made under this subsection by the employee and the |
| |
employer no later than 15th October 2005. |
| |
(2) | Section 452(1) and (2)(a), (c) and (d) and section 453(1) of ITEPA 2003 apply. |
| |
|
| |
|
| |
|
(3) | But when the chargeable event occurs in relation to the shares (or interest in |
| |
shares), the taxable amount counts as employment income of the employee for |
| |
the tax year in which the chargeable event occurs. |
| |
(4) | The chargeable event occurs in relation to the shares (or interest in shares) on |
| |
| 5 |
(a) | the day on which there is a disposal for consideration of the shares, or |
| |
any interest in them, by an associated person otherwise than to another |
| |
| |
(b) | the day specified in any election made by an employee under this |
| |
| 10 |
(5) | The taxable amount for the purposes of subsection (3) is—![equation: plus[times[char[M],char[V]],minus[times[char[D],char[A]]]]](missing.gif) |
| |
| |
MV is the market value of the shares (or interest in shares) immediately |
| |
before the occurrence of the chargeable event, and |
| |
DA is the total of any deductible amounts. |
| 15 |
(6) | Each of the following is a deductible amount— |
| |
(a) | the amount of any consideration given for the acquisition of the shares |
| |
| |
(b) | any amount that constituted earnings from the employee’s |
| |
employment under Chapter 1 of Part 3 of ITEPA 2003 (earnings) in |
| 20 |
respect of the acquisition of the shares (or interest in shares), |
| |
(c) | any amount that counted as employment income in relation to the |
| |
shares (or interest in shares) under Chapter 2 or 4 of Part 7 of that Act |
| |
as originally enacted otherwise than by virtue of section 457 of that Act |
| |
(as originally enacted) (charge on receipt of chargeable benefit), |
| 25 |
(d) | if the shares (or interest in shares) were (or was) acquired on a |
| |
conversion of other shares (or of another interest in shares), any |
| |
amount that counted as employment income of the employee under |
| |
Chapter 3 of that Part (including that Chapter as originally enacted) |
| |
(convertible securities) by reason of the conversion, |
| 30 |
(e) | if the acquisition of the shares (or interest in shares) was pursuant to a |
| |
securities option, any amount that counted as employment income of |
| |
the employee under section 476 of that Act (or section 476 or 477 as |
| |
originally enacted) (acquisition of securities pursuant to securities |
| |
option) by reason of the acquisition, and |
| 35 |
(f) | in the case of a chargeable event under subsection (4)(a), the amount of |
| |
any expenses incurred by the holder of the shares (or interest in shares) |
| |
in connection with the disposal. |
| |
(7) | An election under subsection (1) or (4) is irrevocable and must be made in a |
| |
form approved by the Board of Inland Revenue. |
| 40 |
(8) | The Treasury may by regulations modify— |
| |
| |
(b) | any provision of Part 4 of TCGA 1992, and |
| |
(c) | any provision of Part 7 of ITEPA 2003, |
| |
| in relation to shares (or interests in shares) to which Chapter 4A of that Part |
| 45 |
would apply but for section 33(5) and which are restricted securities (or |
| |
|
| |
|
| |
|
restricted interests in securities) or convertible securities (or interests in |
| |
| |
(9) | The power conferred by subsection (8) is exercisable by statutory instrument. |
| |
(10) | A statutory instrument containing regulations under subsection (8) is subject |
| |
to annulment in pursuance of a resolution of the House of Commons. |
| 5 |
| |
“associated person” has the same meaning as in Chapters 1 to 5 of Part 7 |
| |
of ITEPA 2003 (see section 421C of that Act), |
| |
“Board of Inland Revenue” has the same meaning as in that Act (see |
| |
section 720(2) of that Act), and |
| 10 |
“convertible securities” has the same meaning as in Chapter 3 of Part 7 of |
| |
that Act (see section 436 of that Act), |
| |
| and expressions used in this section and in Chapter 4A of Part 7 of that Act |
| |
have the same meaning in this section as in that Chapter. |
| |
| 15 |
(1) | TCGA 1992 is amended as follows. |
| |
(2) | In section 119A(3) (increase in expenditure by reference to tax charged in |
| |
relation to employment-related securities: events giving rise to relevant |
| |
| |
(a) | after “employment income” insert “in respect of the employment- |
| 20 |
| |
(b) | for the word “or” at the end of paragraph (c) substitute— |
| |
“(ca) | under section 447 of ITEPA 2003 (receipt of benefit) in a |
| |
case where the benefit is an increase in the market value |
| |
of the employment-related securities,”, |
| 25 |
(c) | after paragraph (d) insert “or— |
| |
(e) | under subsection (3) of section 34 of the Finance Act |
| |
2005 (transitional charge in relation to shares in spin-out |
| |
companies) by virtue of subsection (4)(b) of that section |
| |
(election by employee).”, and |
| 30 |
(d) | omit the words following the paragraphs. |
| |
(3) | After section 149AA insert— |
| |
“149AB | Shares in research institution spin-out companies |
| |
(1) | Where an individual has acquired shares (or an interest in shares) in |
| |
circumstances where section 452(1) and (2)(a) of ITEPA 2003 (shares in |
| 35 |
research institution spin-out companies: market value on acquisition) |
| |
apply (and section 149AA does not apply in relation to those shares (or |
| |
interest in shares)) the consideration for the acquisition shall (subject to |
| |
section 119A) be taken to be equal to the aggregate of— |
| |
(a) | the actual amount or value given for the shares (or interest in |
| 40 |
| |
(b) | any amount that constituted earnings under Chapter 1 of Part 3 |
| |
of ITEPA 2003 (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 |
| 45 |
|
| |
|
| |
|
consideration received by the person from whom the shares (or interest |
| |
in shares) are (or is) acquired.” |
| |
(4) | The amendment made by paragraph (b) of subsection (2) has effect only in |
| |
relation to disposals on or after 6th April 2005; but the other amendments made |
| |
by that subsection have effect in relation to any disposal (whether before or |
| 5 |
after the passing of this Act). |
| |
(5) | The amendment made by subsection (3) has effect in relation to any acquisition |
| |
(whether before or after the passing of this Act). |
| |
| |
Scientific research organisations |
| 10 |
36 | Corporation tax exemption for organisations |
| |
(1) | Section 508 of ICTA (tax exemption for scientific research organisations) is |
| |
| |
(2) | In subsection (1) (Associations undertaking scientific research and approved |
| |
by Secretary of State), for paragraph (a) substitute— |
| 15 |
“(a) | an Association has as its object the undertaking of research and |
| |
development which may lead to or facilitate an extension of any |
| |
class or classes of trade; and”. |
| |
(3) | In that subsection, for “Board, be allowed in the case of the Association” |
| |
substitute “Board in relation to any accounting period, be allowed in the case |
| 20 |
of the Association for that accounting period”. |
| |
(4) | After that subsection insert— |
| |
“(1A) | The Treasury may by regulations prescribe circumstances in which the |
| |
conditions in subsection (1) above shall be deemed not to be complied |
| |
| 25 |
(1B) | The Treasury may by regulations make provision specifying for the |
| |
purposes of paragraph (a) of that subsection— |
| |
(a) | what shall be deemed to be, or not to be, an Association, |
| |
(b) | circumstances in which an Association shall be deemed to have, |
| |
or not to have, the undertaking of research and development as |
| 30 |
| |
(c) | circumstances in which the undertaking of research and |
| |
development shall be deemed to be, or not to be, capable of |
| |
leading to or facilitating an extension of a class of trade, or |
| |
(d) | what shall be deemed to be, or not to be, a class of trade.” |
| 35 |
(5) | For subsection (3) (meaning of “scientific research”) substitute— |
| |
“(3) | Section 837A (meaning of “research and development”) applies for the |
| |
purposes of subsection (1)(a) above. |
| |
(4) | Regulations under subsection (3) of that section (power to prescribe |
| |
activities which are, or are not, research and development) may make |
| 40 |
provision for the purposes of that section as it applies by virtue of |
| |
subsection (3) of this section which is additional to, or different from, |
| |
the provision made otherwise for the purposes of that section.” |
| |
|
| |
|
| |
|
(6) | This section has effect in relation to accounting periods beginning on or after |
| |
such day as the Treasury may by order made by statutory instrument appoint. |
| |
37 | Income tax deduction for payments to organisations |
| |
(1) | Section 88 of ITTOIA 2005 (income tax deduction for payments to research |
| |
associations etc.) is amended as follows. |
| 5 |
(2) | In subsection (1) (conditions for deduction), for the words from the beginning |
| |
of paragraph (a) to “research” in paragraph (b) substitute— |
| |
“(a) | pays any sum to an Association in the case of which exemption |
| |
may be claimed under section 508 of ICTA and which has as its |
| |
object the undertaking of research and development which may |
| 10 |
lead to or facilitate an extension of the class of trade to which the |
| |
trade carried on by the person belongs, or |
| |
(b) | pays any sum to be used for scientific research related to that |
| |
| |
(3) | In subsection (4), omit paragraph (a) (meaning of “approved” in relation to |
| 15 |
scientific research association). |
| |
(4) | In subsection (5) (references to scientific research related to a class of trade), for |
| |
“references in this section” substitute “reference in subsection (1)(b)”. |
| |
(5) | This section has effect in relation to sums paid to an Association during any |
| |
accounting period of the Assocation beginning on or after the day appointed |
| 20 |
| |
38 | Corporation tax deduction for payments to organisations |
| |
(1) | Section 82B of ICTA (corporation tax deduction for payments to research |
| |
associations etc.) is amended as follows. |
| |
(2) | In subsection (1) (conditions for deduction), for the words from the beginning |
| 25 |
of paragraph (a) to “above” in paragraph (b) substitute— |
| |
“(a) | pays any sum to an Association in the case of which exemption |
| |
may be claimed under section 508 and which has as its object the |
| |
undertaking of research and development which may lead to or |
| |
facilitate an extension of the class of trade to which the trade |
| 30 |
carried on by the company belongs, or |
| |
(b) | pays any sum to be used for scientific research related to that |
| |
| |
(3) | In subsection (3) (reference to scientific research related to a class of trade), for |
| |
“this section” substitute “subsection (1)(b) above”. |
| 35 |
(4) | This section has effect in relation to sums paid to an Association during any |
| |
accounting period of the Assocation beginning on or after the day appointed |
| |
| |
|
| |
|