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Finance (No. 3) Bill


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

74

 

lapses (in whole or in part) before the end of the final exercise

date, and

(b)   

correspondingly, no further relevant step is or will be taken

by P or any other person in relation to the shares or to any

sum of money or asset which (directly or indirectly) may

5

arise or derive, or has arisen or derived, from the shares.

(15)   

In subsections (10) to (14) “the final exercise date” means the date

which is five years after the grant date.

(16)   

In subsections (6)(a)(ii), (8)(a)(ii) and (10)(a)(ii) “relevant income”, in

relation to any earmarked shares, means any income—

10

(a)   

which, before the relevant step is treated as being taken by

subsection (6), (8) or (10) (as the case may be)—

(i)   

arises (directly or indirectly) from the shares, and

(ii)   

is the subject of a relevant step within section 554B

taken by P by reason of which Chapter 2 would apply

15

apart from section 554P, and

(b)   

which, at the time the relevant step is treated as being taken,

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

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

554M    

Exclusions: other cases involving employment-related securities etc

20

(1)   

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

which is employment-related securities if—

(a)   

by virtue of the step, the securities are acquired by a person,

and

(b)   

section 425(2) applies, or would apply apart from section

25

421E(1), to the acquisition.

(2)   

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

which is an employment-related securities option if—

(a)   

by virtue of the step, the option is acquired by a person, and

(b)   

section 475(1) applies, or would apply apart from section

30

474(1), to the acquisition.

(3)   

Terms used in subsection (1) or (2) have the same meanings as they

have in Chapter 2 or 5 of Part 7 (as the case may be).

(4)   

Chapter 2 does not apply by reason of an event within subsection (5)

if by virtue of the event an amount counts as employment income of

35

A in respect of A’s employment with B.

(5)   

The events within this subsection are—

(a)   

a chargeable event for the purposes of section 426, 438 or 476,

(b)   

an event which gives rise to the discharge of a notional loan

for the purposes of section 446U, or

40

(c)   

a disposal to which Chapter 3D of Part 7 applies.

(6)   

Chapter 2 does not apply by reason of an event to which subsection

(4) would apply apart from section 421B(6), 421E(1), 474(1) or 477(2)

or apart from an election under section 430 or 431.

(7)   

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

45

554C(1)(a) taken by a person (“P”) if—

 
 

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

75

 

(a)   

the payment of the sum of money is by way of a loan (“the

relevant loan”),

(b)   

the relevant loan is made and used solely for the purpose of

enabling A to exercise a share option,

(c)   

the exercise of the option by A gives rise to employment

5

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

(i)   

which is chargeable to income tax, or

(ii)   

which is exempt income, and

(d)   

there is no connection (direct or indirect) between the

relevant step and a tax avoidance arrangement.

10

(8)   

In subsection (7) “share option” means a right to acquire shares

(including stock) in a company.

(9)   

Subsection (10) applies if—

(a)   

apart from subsection (7), Chapter 2 would apply by reason

of the relevant step mentioned in that subsection, and

15

(b)   

by the end of the relevant period, the relevant loan has not

been fully repaid.

(10)   

This Part has effect as if a relevant step within section 554C(1)(a)

were taken at the end of the relevant period—

(a)   

the subject of which is a sum of money of an amount equal to

20

the outstanding amount of the relevant loan as at the end of

the relevant period,

(b)   

in relation to which the relevant person (within the meaning

of section 554C(1)) is the person to whom the relevant loan is

made, and

25

(c)   

by reason of which Chapter 2 is to apply.

(11)   

In subsections (9) and (10) “the relevant period” means the period

which runs from the time the relevant step mentioned in subsection

(7) is taken until the end of the 6th day of the month following the

month in which the step is taken.

30

554N    

Exclusions: employee car ownership schemes

(1)   

This section applies if—

(a)   

there is an arrangement (“the car ownership arrangement”)

which—

(i)   

provides for A to purchase a new car from another

35

person (“P”) using a loan (“the car loan”) to be made

to A by a licensed lender,

(ii)   

specifies the date (“the repayment date”) by which the

car loan must be fully repaid which must be no later

than four years after the date on which the car loan is

40

made, and

(iii)   

permits A, in order to obtain funds to repay the car

loan, to sell the car back to P on a specified date at a

specified price based on an estimate (made at the time

the car ownership arrangement is made) of the likely

45

outstanding amount of the car loan on the specified

date, and

(b)   

as provided for by the car ownership arrangement, A

purchases the car using the car loan.

 
 

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

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(2)   

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

sole purpose of—

(a)   

the purchase of the car or its sale-back as provided for by the

car ownership arrangement, or

(b)   

the making of the car loan as so provided,

5

   

so long as the car ownership arrangement is not a tax avoidance

arrangement and there is no other connection (direct or indirect)

between the relevant step and a tax avoidance arrangement.

(3)   

Subsection (4) applies if—

(a)   

apart from subsection (2), Chapter 2 would apply by reason

10

of the making of the car loan, and

(b)   

by the end of the repayment date, the car loan has not been

fully repaid.

(4)   

This Part has effect as if a relevant step within section 554C(1)(a)

were taken at the end of the repayment date—

15

(a)   

the subject of which is a sum of money of an amount equal to

the outstanding amount of the car loan as at the end of the

repayment date,

(b)   

in relation to which the relevant person (within the meaning

of section 554C(1)) is A, and

20

(c)   

by reason of which Chapter 2 is to apply.

(5)   

In this section—

“car” has the meaning given by section 235(2), and

“licensed lender” means a person—

(c)   

who is a licensee under the Consumer Credit Act 1974

25

acting within the terms of the person’s licence, and

(d)   

who is not acting as a trustee.

554O    

Exclusions: employment income exemptions under Part 4

(1)   

Chapter 2 does not apply by reason of a relevant step if an

employment income exemption under Part 4 applies to the subject of

30

the relevant step.

(2)   

If the employment income exemption applies to the subject of the

relevant step in part only, the relevant step is to be treated for the

purposes of this Part as being two separate relevant steps—

(a)   

one in relation to the subject of the step so far as the

35

exemption applies to it, and

(b)   

one in relation to the subject of the step so far as the

exemption does not apply to it,

   

with subsection (1) applying only in relation to the separate relevant

step mentioned in paragraph (a).

40

(3)   

In order to give effect to subsection (2), the sum of money or asset

which is the subject of the relevant step is to be apportioned between

the two separate relevant steps on a just and reasonable basis.

(4)   

In this section “employment income exemption” includes the

exemption under section 271.

45

 
 

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

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554P    

Exclusions: income arising from earmarked sum or asset

(1)   

This section applies if—

(a)   

a sum of money or asset (“sum or asset R”) is held by or on

behalf of a person (“P”),

(b)   

income arises from sum or asset R, and

5

(c)   

when the income arises, it—

(i)   

is received by or on behalf of P, and

(ii)   

is the subject of a relevant step within section 554B

taken by P.

(2)   

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

10

subsection (1)(c)(ii) if—

(a)   

before the income arises, sum or asset R was the subject of a

relevant step within section 554B taken by P,

(b)   

Chapter 2 applied by reason of the relevant step mentioned

in paragraph (a) in respect of A’s employment with B or

15

would have so applied apart from this section or section 554Q

or any of sections 554H to 554L or section 554S,

(c)   

immediately before the income arises, sum or asset R is still

earmarked or otherwise held on the basis mentioned in

554B(1)(a) or (b), and

20

(d)   

subsection (3) does not apply.

(3)   

This subsection applies if it is reasonable to suppose that, taking into

account the type of investments from which the income derives

(directly or indirectly), in essence, the income represents a return

from sum or asset R which exceeds the return which might be

25

expected applying the assumption that all relevant connected

persons are acting at arm’s length of each other.

(4)   

In subsection (3) “relevant connected person” means a person with a

connection (direct or indirect) to the arrangement under which the

income arises.

30

554Q    

Exclusions: acquisitions out of earmarked sums or assets

(1)   

This section applies if—

(a)   

a sum of money or asset (“sum or asset S”) is held by or on

behalf of a person (“P”),

(b)   

a sum of money or asset (“sum or asset T”) is acquired by or

35

on behalf of P wholly out of sum or asset S,

(c)   

sum or asset T is not acquired (directly or indirectly) from A

or any person linked with A, and

(d)   

on its acquisition, sum or asset T is the subject of a relevant

step within section 554B taken by P.

40

(2)   

The cases covered by subsection (1)(b) include (in particular) cases in

which sum or asset T represents the proceeds of the disposal of sum

or asset S.

(3)   

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

subsection (1)(d) if—

45

(a)   

before the acquisition, sum or asset S was the subject of a

relevant step within section 554B taken by P,

 
 

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

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(b)   

Chapter 2 applied by reason of the relevant step mentioned

in paragraph (a) in respect of A’s employment with B or

would have applied apart from this section or section 554P or

554S,

(c)   

immediately before the acquisition, sum or asset S is still

5

earmarked or otherwise held on the basis mentioned in

554B(1)(a) or (b), and

(d)   

subsection (4) does not apply.

(4)   

This subsection applies if it is reasonable to suppose that, in

essence—

10

(a)   

at the time of the acquisition, the value of sum or asset T is

greater or less than the value of sum or asset S, and

(b)   

the difference in the values might not have been expected

applying the assumption that all relevant connected persons

are acting at arm’s length of each other.

15

(5)   

In subsection (4)(b) “relevant connected person” means a person

with a connection (direct or indirect) to the arrangement under

which sum or asset T is acquired.

(6)   

Subsection (7) applies if—

(a)   

subsection (3) applies to the relevant step mentioned in

20

subsection (1)(d) or would have applied had the words “or

any of sections 554H to 554L” been inserted after “554S” in

subsection (3)(b), and

(b)   

for the sole purpose of the acquisition, sum or asset S or sum

or asset T is the subject of a relevant step within section

25

554C(1)(a) to (c).

(7)   

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

subsection (6)(b).

554R    

Exclusions: pension income chargeable under Part 9 etc

(1)   

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

30

554C or 554D if the step is the provision of pension income which is

chargeable to income tax under Part 9 or is exempt income (within

the meaning of that Part).

(2)   

Sections 554S, 554T, 554U, 554V and 554W contain further provision

relating to retirement benefits etc and are to be applied, so far as

35

applicable, in that order.

554S    

Exclusions: employee pension contributions

(1)   

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

554B if the sum of money or asset which is the subject of the step

arises or derives (whether wholly or partly or directly or indirectly)

40

from an excluded pension contribution paid by A on or after 6 April

2011.

(2)   

If the sum of money or asset arises or derives from the excluded

pension contribution only partly, the relevant step is to be treated for

the purposes of this Part as being two separate relevant steps—

45

(a)   

one in relation to the sum of money or asset so far as it arises

or derives from the excluded pension contribution, and

 
 

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

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(b)   

one in relation to the sum of money or asset so far as it does

not arise or derive from the excluded pension contribution,

   

with subsection (1) applying only in relation to the separate relevant

step mentioned in paragraph (a).

(3)   

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

5

554C or 554D if the sum of money or asset which is the subject of the

step—

(a)   

represents relevant benefits, and

(b)   

arises or derives (whether wholly or partly or directly or

indirectly) from an excluded pension contribution paid by A.

10

(4)   

If the sum of money or asset arises or derives from the excluded

pension contribution only partly, the relevant step is to be treated for

the purposes of this Part as being two separate relevant steps—

(a)   

one in relation to the sum of money or asset so far as it arises

or derives from the excluded pension contribution, and

15

(b)   

one in relation to the sum of money or asset so far as it does

not arise or derive from the excluded pension contribution,

   

with subsection (3) applying only in relation to the separate relevant

step mentioned in paragraph (a).

(5)   

In order to give effect to subsection (2) or (4), the sum of money or

20

asset which is the subject of the relevant step is to be apportioned

between the two separate relevant steps on a just and reasonable

basis.

(6)   

For the purposes of this section an excluded pension contribution is

a contribution—

25

(a)   

which is made to an arrangement by A by way of a payment

of a sum of money,

(b)   

by virtue of which A acquires rights to receive relevant

benefits under the arrangement (and nothing else),

(c)   

which is neither a relievable pension contribution nor a tax-

30

relieved contribution, and

(d)   

which is not a repayment of any loan and otherwise has

nothing to do with any loan and has nothing to do with a sum

of money or asset which has been the subject of a relevant

step within section 554C(1)(d).

35

(7)   

In this section—

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

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

“relievable pension contribution” means a contribution in

respect of which an individual is entitled to relief under

40

section 188 of FA 2004, and

tax-relieved contribution” has the meaning given by paragraph

3(3) of Schedule 34 to FA 2004.

554T    

Exclusions: pre-6 April 2006 contributions to employer-financed

retirement benefit schemes

45

(1)   

This section applies if the subject of a relevant step is a sum of money

or asset which has (wholly or partly) arisen or derived (directly or

indirectly) from a sum of money (“the taxed sum”)—

 
 

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

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(a)   

which was paid by B in accordance with an employer-

financed retirement benefits scheme (within the meaning of

Chapter 2 of Part 6) with a view to the provision of benefits

under the scheme, and

(b)   

in respect of which A is taxed.

5

(2)   

For the purpose of determining whether A is taxed in respect of a

sum of money, paragraph 53(3) of Schedule 36 to FA 2004 applies as

it applies for the purpose of determining whether an employee is

taxed for the purposes of paragraph 53(1)(b) of that Schedule.

(3)   

Chapter 2 does not apply by reason of the relevant step.

10

(4)   

Subsection (5) applies if the sum of money or asset which is the

subject of the relevant step only partly arises or derives from the

taxed sum.

(5)   

The relevant step is to be treated for the purposes of this Part as being

two separate relevant steps—

15

(a)   

one in relation to the sum of money or asset so far as it arises

or derives from the taxed sum, and

(b)   

one in relation to the sum of money or asset so far as it does

not arise or derive from the taxed sum,

   

with subsection (3) applying only in relation to the separate relevant

20

step mentioned in paragraph (a).

(6)   

In order to give effect to subsection (5), the sum of money or asset

which is the subject of the relevant step is to be apportioned between

the two separate relevant steps on a just and reasonable basis.

(7)   

If B is a company and is a member of a group of companies at any

25

time (“the relevant time”), in subsection (1)(a), in relation to any sum

of money paid at the relevant time, the reference to B is to be read as

including a reference to any other company which is a member of

that group at the relevant time.

554U    

Exclusions: purchases of annuities out of pension scheme rights

30

(1)   

This section applies if—

(a)   

an annuity contract is purchased from an insurance company

wholly out of rights which A has under a pension scheme,

and

(b)   

A’s rights out of which the annuity contract is purchased are,

35

wholly or partly, pre-6 April 2011 annuity rights.

(2)   

If the purchaser—

(a)   

takes a relevant step for the sole purpose of purchasing the

annuity contract or transferring the beneficiary’s rights

under the annuity contract to A or a person linked with A, or

40

(b)   

on the purchase of the annuity contract, otherwise takes a

relevant step within section 554B the subject of which is the

beneficiary’s rights under the annuity contract,

   

Chapter 2 does not apply by reason of the relevant step.

(3)   

If the insurance company—

45

(a)   

takes a relevant step for the sole purpose of selling the

annuity contract, or

 
 

 
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Revised 31 March 2011