Session 2010 - 11
Internet Publications
Other Bills before Parliament

Finance (No. 3) Bill


Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

60

 

(a)   

a person (“P”) takes a relevant step within section 554B by

reason of which Chapter 2 would apply apart from

subsection (1)(e), and

(b)   

at any time (“the relevant time”) the sum of money or asset

(or any part of it) which is the subject of the relevant step—

5

(i)   

ceases to be held by or on behalf of P solely for the

purpose mentioned in subsection (2)(b), but

(ii)   

continues to be held by or on behalf of P on the basis

mentioned in section 554B(1)(a) or (b).

(7)   

This Part has effect as if a relevant step within section 554B were

10

taken at the relevant time—

(a)   

the subject of which is the sum of money or asset (or the part

of it) mentioned in subsection (6)(b), and

(b)   

by reason of which Chapter 2 is to apply (subject only to

section 554A(4)).

15

(8)   

Chapter 2 does not apply by reason of a relevant step taken by the

Independent Parliamentary Standards Authority in relation to a

member of the House of Commons.

554F    

Exclusions: commercial transactions

(1)   

Chapter 2 does not apply by reason of a relevant step which is the

20

payment of a sum of money by way of a loan if—

(a)   

the loan is a loan on ordinary commercial terms within the

meaning of section 176, ignoring conditions B and C in that

section, and

(b)   

there is no connection (direct or indirect) between the

25

relevant step and a tax avoidance arrangement.

(2)   

Chapter 2 does not apply by reason of a relevant step taken by a

person (“P”), which is not the payment of a sum of money by way of

a loan, if—

(a)   

the step is taken for the sole purpose of a transaction which P

30

has with A and which P entered into in the ordinary course

of P’s business,

(b)   

a substantial proportion of P’s business involves similar

transactions with members of the public,

(c)   

the terms on which P entered into the transaction with A are

35

substantially the same as the terms on which P normally

enters into similar transactions with members of the public,

and

(d)   

there is no connection (direct or indirect) between the

relevant step and a tax avoidance arrangement.

40

(3)   

For the purposes of subsection (2)(b) and (c) a transaction is “similar”

if it is of the same or a similar type to the transaction which P has with

A.

(4)   

In subsection (2)(b) and (c) “members of the public” means members

of the public at large with whom P deals at arm’s length.

45

(5)   

In this section references to A include references to any person linked

with A.

 
 

Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

61

 

554G    

Exclusions: transactions under employee benefit packages

(1)   

Chapter 2 does not apply by reason of a relevant step taken by a

person (“P”) if—

(a)   

the step is not taken under a pension scheme,

(b)   

the step is taken for the sole purpose of a transaction which P

5

has with A and which P entered into in the ordinary course

of P’s business,

(c)   

if the step is the payment of a sum of money by way of a

loan—

(i)   

a substantial proportion of P’s business involves

10

making similar loans to members of the public,

(ii)   

the transaction with A is part of a package of benefits

which is available to a substantial proportion of B’s

employees, and

(iii)   

subsection (3) does not apply,

15

(d)   

if the step is not the payment of a sum of money by way of a

loan, the transaction with A is part of a package of benefits

which is available—

(i)   

to a substantial proportion of B’s employees, or

(ii)   

to a substantial proportion of those employees of B

20

whose status as employees of B is comparable with

A’s status as an employee of B (taking into account

(for example) levels of seniority, types of duties and

levels of remuneration),

(e)   

the terms on which similar transactions are offered by P

25

under the package of benefits mentioned in paragraph (c)(ii)

or (d) (as the case may be) are generous enough to enable

substantially all of the employees of B to whom the package

is available to take advantage of what is offered (if they want

to),

30

(f)   

the terms on which P enters into the transaction with A are

substantially the same as the terms on which P normally

enters into similar transactions with employees of B under

the package of benefits,

(g)   

if B is a company, a majority of B’s employees to whom the

35

package of benefits is available do not have a material interest

(as defined in section 68) in B, and

(h)   

there is no connection (direct or indirect) between the

relevant step and a tax avoidance arrangement.

(2)   

For the purposes of subsection (1)(c)(i)—

40

(a)   

a loan is “similar” if it is made for the same or similar

purposes as the loan which is the subject of the relevant step,

and

(b)   

“members of the public” means members of the public at

large with whom P deals at arm’s length.

45

(3)   

This subsection applies if any feature of the package of benefits

mentioned in subsection (1)(c)(ii) has or is likely to have the effect

that, of the employees of B to whom the package is available, it is

employees within subsection (4) on whom benefits under the

package will be wholly or mainly conferred.

50

 
 

Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

62

 

(4)   

The employees within this subsection are—

(a)   

directors,

(b)   

senior employees,

(c)   

employees who receive, or as a result of the package of

benefits are likely to receive, the higher or highest levels of

5

remuneration, and

(d)   

if B is a company and is a member of a group of companies,

any employees not within paragraph (b) or (c) who—

(i)   

are senior employees in the group, or

(ii)   

receive, or as a result of the package of benefits are

10

likely to receive, the higher or highest levels of

remuneration in the group.

(5)   

For the purposes of subsection (1)(e) and (f) a transaction is “similar”

if it is of the same or a similar type to the transaction which P has with

A.

15

(6)   

If the relevant step is not the payment of a sum of money by way of

a loan, in this section references to employees of B are references to

those employees of B whose duties of employment are performed in

the United Kingdom; and for this purpose duties performed outside

the United Kingdom the performance of which is merely incidental

20

to the performance of duties in the United Kingdom are to be treated

as performed in the United Kingdom.

(7)   

In this section (apart from subsection (1)(d)(ii)) references to A

include references to any person linked with A.

554H    

Exclusions: earmarking of deferred remuneration

25

(1)   

This section applies if—

(a)   

on a date (“the award date”) B awards A remuneration (“the

deferred remuneration”) in respect of A’s employment with

B,

(b)   

the main purpose of the award is not the provision of relevant

30

benefits (within the meaning of Chapter 2 of Part 6, but

ignoring section 393B(2)(a)),

(c)   

the deferred remuneration is awarded on terms (“the

deferred remuneration terms”) under which—

(i)   

the deferred remuneration is to be provided to A on

35

(and not before) a specified date (“the vesting date”)

which is after the award date, and

(ii)   

the award of the deferred remuneration is revoked if

specified conditions are not met on or before the

vesting date,

40

(d)   

the vesting date is not more than five years after the award

date,

(e)   

as at the award date, there is a reasonable chance that the

award of the deferred remuneration will be revoked because

not all the specified conditions will be met on or before the

45

vesting date,

(f)   

if the deferred remuneration were to be provided to A by any

person on the award date, that action would, for the purposes

 
 

Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

63

 

of Part 11, be a payment of PAYE employment income of A

in respect of A’s employment with B,

(g)   

before the end of the vesting date, a person (“P”) takes a

relevant step within section 554B by reason of which Chapter

2 would apply apart from this section,

5

(h)   

on the taking of the relevant step, the sum of money or asset

which is the subject of the step represents the deferred

remuneration or any part of it (and nothing else), and

(i)   

there is no connection (direct or indirect) between the

relevant step and a tax avoidance arrangement.

10

(2)   

For the purpose of determining whether the requirements of

subsection (1)(c)(i) and (ii) and (d) to (f) are met, ignore any of the

deferred remuneration terms dealing with what is to happen if A

dies after the making of the award but before the end of the vesting

date.

15

(3)   

In addition to the provision mentioned in subsection (1)(c)(ii) (which

must be included), the deferred remuneration terms may also

provide that the award of the deferred remuneration is partly

revoked if specified conditions are not met on or before the vesting

date.

20

(4)   

Chapter 2 does not apply by reason of the relevant step mentioned in

subsection (1)(g).

(5)   

In the following subsections “the earmarked deferred remuneration”

means the deferred remuneration so far as, on the taking of the

relevant step mentioned in subsection (1)(g), it is represented by the

25

sum of money or asset which is the subject of the step as mentioned

in subsection (1)(h).

(6)   

Subsection (7) applies if, at any time (“the relevant time”)—

(a)   

any sum of money or asset held by or on behalf of P on the

basis mentioned in section 554B(1)(a) or (b) which represents

30

any of the earmarked deferred remuneration ceases to

represent that earmarked deferred remuneration or a part of

it (because the remuneration is to be provided to A in another

way or its award has been revoked or for any other reason),

but

35

(b)   

the sum of money or asset continues to be held by or on

behalf of P on the basis mentioned in section 554B(1)(a) or (b).

(7)   

This Part has effect as if a relevant step within section 554B were

taken at the relevant time—

(a)   

the subject of which is—

40

(i)   

the sum of money or asset mentioned in subsection

(6), and

(ii)   

a just and reasonable proportion of any relevant

income (see subsection (14)), and

(b)   

by reason of which Chapter 2 is to apply (subject only to

45

section 554A(4)).

(8)   

Subsection (9) applies if neither subsection (11) nor subsection (12)

applies to the earmarked deferred remuneration or to a part of it.

 
 

Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

64

 

(9)   

This Part has effect as if a relevant step within section 554B were

taken at the end of the vesting date—

(a)   

the subject of which is—

(i)   

a sum of money of the notional PAYE amount, and

(ii)   

a just and reasonable proportion of any relevant

5

income (see subsection (14)), and

(b)   

by reason of which Chapter 2 is to apply (subject only to

section 554A(4)).

(10)   

In subsection (9)(a) “the notional PAYE amount” means the amount

which the payment of PAYE employment income would have been

10

had, as the case may be—

(a)   

the earmarked deferred remuneration, or

(b)   

the part of it to which neither subsection (11) nor subsection

(12) applies,

   

been provided to A at the end of the vesting date in a way which is,

15

for the purposes of Part 11, a payment of PAYE employment income

of A in respect of A’s employment with B.

(11)   

This subsection applies to the earmarked deferred remuneration so

far as it is provided to A before the end of the vesting date in a way

which is, for the purposes of Part 11, a payment of PAYE

20

employment income of A in respect of A’s employment with B.

(12)   

This subsection applies to the earmarked deferred remuneration so

far as—

(a)   

before the end of the vesting date, the award of the

earmarked deferred remuneration is revoked in accordance

25

with the deferred remuneration terms, and

(b)   

correspondingly, no further relevant step is or will be taken

by P or any other person in relation to—

(i)   

any sum of money or asset which has represented the

earmarked deferred remuneration, or

30

(ii)   

any sum of money or asset which (directly or

indirectly) may arise or derive, or has arisen or

derived, from a sum of money or asset which has

represented the earmarked deferred remuneration.

(13)   

In subsection (12)(b)(i) and (ii) references to any sum of money or

35

asset do not include any sum of money or asset which is the subject

of a relevant step treated as taken by subsection (7) where that

subsection applies because a sum of money or asset ceases to

represent any of the earmarked deferred remuneration as mentioned

in subsection (6)(a) by virtue of its award being revoked in

40

accordance with the deferred remuneration terms before the end of

the vesting date.

(14)   

In subsections (7)(a)(ii) and (9)(a)(ii) “relevant income” means any

income—

(a)   

which, before the relevant time or the end of the vesting date

45

(as the case may be)—

(i)   

arises (directly or indirectly) from a sum of money or

asset held by or on behalf of P representing any of the

earmarked deferred remuneration, and

 
 

Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

65

 

(ii)   

is the subject of a relevant step within section 554B

taken by P by reason of which Chapter 2 would apply

apart from section 554P, and

(b)   

which, at the relevant time or the end of the vesting date (as

the case may be), continues to be held by or on behalf of P on

5

the basis mentioned in section 554B(1)(a) or (b).

554I    

Exclusions: introduction to sections 554J to 554L

(1)   

Sections 554J and 554K are about steps within section 554B taken in

relation to awards of shares or of sums of money determined by

reference to the market value of shares.

10

(2)   

Section 554L is about steps within section 554B taken in relation to

grants of rights to acquire shares or to receive sums of money

determined by reference to the market value of shares.

(3)   

Sections 554J to 554L apply only if B is a company.

(4)   

In those sections—

15

“relevant benefits” has the same meaning as in Chapter 2 of Part

6, but ignoring section 393B(2)(a), and

“relevant shares”—

(a)   

means shares (including stock) in B, and

(b)   

if B is a member of a group of companies, includes

20

shares (including stock) in any other company which

is a member of that group.

554J    

Exclusions: earmarking for employee share schemes (1)

(1)   

This section applies if—

(a)   

there is an arrangement (“B’s employee share scheme”)

25

under which, in respect of A’s employment with B, B may

make to A an award of—

(i)   

relevant shares, or

(ii)   

a sum of money the amount of which is to be

determined by reference to the market value of any

30

relevant shares at the time the sum is to be paid,

(b)   

the main purpose of the award of the relevant shares or sum

of money would not be the provision of relevant benefits,

(c)   

the award of the relevant shares or sum of money would be

on terms (“the deferred award terms”) under which—

35

(i)   

the relevant shares are to be received by A, or the sum

of money is to be paid to A, on (and not before) a

specified date (“the vesting date”) which is after the

date (“the award date”) on which the award is made,

and

40

(ii)   

the award is revoked if specified conditions are not

met on or before the vesting date,

(d)   

the vesting date would not be more than five years after the

award date, and

(e)   

as at the award date, there would be a reasonable chance that

45

the award of the relevant shares or sum of money will be

revoked because not all the specified conditions will be met

on or before the vesting date.

 
 

Finance (No. 3) Bill
Schedule 2 — Employment income provided through third parties

66

 

(2)   

For the purpose of determining whether the requirements of

subsection (1)(c)(i) and (ii) and (d) and (e) would be met, ignore any

of the deferred award terms which would deal with what is to

happen if A dies after the making of the award but before the end of

the vesting date.

5

(3)   

In addition to the provision mentioned in subsection (1)(c)(ii) (which

must be included), the deferred award terms may also provide that

the award of the relevant shares or sum of money is partly revoked

if specified conditions are not met on or before the vesting date.

(4)   

Chapter 2 does not apply by reason of a relevant step within section

10

554B (by reason of which it would otherwise apply) taken by a

person (“P”) if—

(a)   

the subject of the relevant step is relevant shares (“earmarked

shares”) which are earmarked, or otherwise start being held,

solely with a view to the meeting of—

15

(i)   

an award of relevant shares or a sum of money made

to A under B’s employee share scheme as mentioned

in subsection (1)(a) in relation to which the

requirements of subsection (1)(b) to (e) are met

(subject to subsection (2)), or

20

(ii)   

an award of relevant shares or a sum of money which

is expected to be made to A under B’s employee share

scheme as mentioned in subsection (1)(a) and in

relation to which the requirements of subsection

(1)(b) to (e) would be met (subject to subsection (2)),

25

(b)   

the number of relevant shares of any type which are

earmarked shares does not exceed the maximum number of

relevant shares of that type which might reasonably be

expected to be needed for meeting the award or expected

award, and

30

(c)   

there is no connection (direct or indirect) between the

relevant step and a tax avoidance arrangement.

(5)   

If the relevant step mentioned in subsection (4) is taken in relation to

an expected award as mentioned in subsection (4)(a)(ii), subsection

(6) applies if—

35

(a)   

the award is not made before the end of the date (“the final

award date”) which is three months after the date on which P

takes the relevant step, and

(b)   

as at the end of the final award date, any of the earmarked

shares continue to be held by or on behalf of P solely on the

40

basis mentioned in subsection (4)(a).

(6)   

This Part has effect as if a relevant step within section 554B were

taken at the end of the final award date—

(a)   

the subject of which is—

(i)   

the shares which continue to be held as mentioned in

45

subsection (5)(b), and

(ii)   

any relevant income in relation to those shares (see

subsection (14)), and

(b)   

by reason of which Chapter 2 is to apply (subject only to

section 554A(4)).

50

 
 

 
previous section contents continue
 

© Parliamentary copyright
Revised 31 March 2011