Session 2010 - 12
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Other Bills before Parliament

Public Bill Committee: 17 May 2011

74

Finance (No. 3) continued

David Gauke

47

Schedule  2,  page  69,  leave out lines 17 and 18.

David Gauke

48

Schedule  2,  page  69,  line  30,  leave out ‘which is three months after’ and insert

‘falling immediately after the period of three months starting with’.

David Gauke

49

Schedule  2,  page  70,  line  20,  leave out ‘subsection (11) does not apply’ and insert

‘neither subsection (10A) nor subsection (11) applies’.

David Gauke

50

Schedule  2,  page  70,  line  26,  at end insert—

‘(10A)

This subsection applies to any earmarked shares if—

(a)	A receives the shares before the end of the exit period, and

(b)	the receipt of the shares by A gives rise to employment

income of A which is chargeable to income tax or which is

exempt income.’.

David Gauke

51

Schedule  2,  page  70,  line  28,  leave out ‘(1)(a)’ and insert ‘(1)(a)(ii)’.

David Gauke

52

Schedule  2,  page  70,  line  34,  leave out from ‘shares’ to end of line 38 and insert ‘,

or the payment is made from another source and, correspondingly, the shares are no longer

held by any person in relation to the award.’.

David Gauke

53

Schedule  2,  page  70,  line  39,  after ‘(10)’ insert ‘, (10A)(a)’.

David Gauke

54

Schedule  2,  page  70,  line  40,  leave out ‘three’ and insert ‘six’.

David Gauke

55

Schedule  2,  page  71,  line  7,  leave out ‘B may grant A a right (“a relevant share

option”)’ and insert ‘a right (“a relevant share option”) may be granted to A’.

David Gauke

56

Schedule  2,  page  71,  line  16,  leave out from ‘terms”)’ to ‘the’ in line 21 and insert

‘the main purpose of which is to ensure that the relevant share option is not exercisable

by A before a specified date (“the vesting date”) which is after the date (“the grant date”)

on which the grant is made, while providing that’.

Public Bill Committee: 17 May 2011

75

Finance (No. 3) continued

David Gauke

57

Schedule  2,  page  71,  line  24,  leave out ‘five’ and insert ‘ten’.

David Gauke

58

Schedule  2,  page  71,  leave out lines 30 to 34.

David Gauke

59

Schedule  2,  page  71,  line  35,  leave out ‘mentioned in subsection (1)(c)(ii)’ and

insert ‘relating to revocation required by subsection (1)(c)’.

David Gauke

60

Schedule  2,  page  71,  line  44,  after ‘providing’ insert ‘relevant’.

David Gauke

61

Schedule  2,  page  71,  line  49,  leave out ‘(subject to subsection (2))’.

David Gauke

62

Schedule  2,  page  72,  line  5,  leave out ‘(subject to subsection (2))’.

David Gauke

63

Schedule  2,  page  72,  line  18,  leave out ‘which is three months after’ and insert

‘falling immediately after the period of three months starting with’.

David Gauke

64

Schedule  2,  page  72,  line  20,  after ‘at’ insert ‘the end of’.

David Gauke

65

Schedule  2,  page  73,  line  4,  after ‘before’ insert ‘the end of’.

David Gauke

66

Schedule  2,  page  73,  line  21,  leave out from ‘A’ to end of line 22 and insert ‘—

(i)	which is chargeable to income tax or would be

chargeable apart from section 474, or

(ii)	which is exempt income.’.

David Gauke

67

Schedule  2,  page  73,  line  30,  leave out from ‘A’ to ‘and’ in line 31 and insert ‘—

(i)	which is chargeable to income tax or would be

chargeable apart from section 474, or

(ii)	which is exempt income,’.

Public Bill Committee: 17 May 2011

76

Finance (No. 3) continued

David Gauke

68

Schedule  2,  page  73,  line  33,  leave out from ‘shares’ to end of line 37 and insert ‘,

or the payment is made from another source and, correspondingly, the shares are no longer

held by any person in relation to the relevant share option.’.

David Gauke

69

Schedule  2,  page  73,  line  42,  leave out from ‘correspondingly,’ to end of line 45

and insert ‘the shares are no longer held by any person in relation to the relevant share

option.’.

David Gauke

70

Schedule  2,  page  74,  line  3,  leave out from ‘correspondingly,’ to end of line 6 and

insert ‘the shares are no longer held by any person in relation to the relevant share option.’.

David Gauke

104

Schedule  2,  page  74,  line  8,  leave out ‘five’ and insert ‘ten’.

David Gauke

71

Schedule  2,  page  74,  line  19,  at end insert—

‘554LA

Exclusions: earmarking for employee share schemes (4)

(1)	This section applies if—

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

which, in respect of A’s employment with B, a right (“a

relevant share option”) may be granted to A—

(i)	to acquire relevant shares, or

(ii)	to receive a sum of money the amount of which is to

be determined by reference to the market value of any

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

(b)	the main purpose of the grant of the relevant share option

would not be the provision of relevant benefits,

(c)	the relevant shares would be—

(i)	shares (including stock) in, or

(ii)	instruments within paragraph (b) of the definition of

“relevant shares” in section 554I(4) issued by,

a trading company or a company which controls a trading

company,

(d)	the grant would be made on terms (“the deferred grant terms”)

the main purpose of which is to ensure that the relevant share

option is exercisable by A only if a specified exit event, or an

exit event within a specified description, occurs, and

(e)	as at the time the grant is made, there would be a reasonable

chance that the specified exit event, or an exit event within the

specified description, will occur.

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

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

(“P”) if—

Public Bill Committee: 17 May 2011

77

Finance (No. 3) continued

(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 providing relevant shares, or paying a

sum of money, pursuant to—

(i)	a relevant share option granted 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, or

(ii)	a relevant share option which is expected to be

granted 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,

(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 providing shares, or paying a sum

of money, pursuant to the relevant share option which is

granted or expected to be granted, and

(c)	there is no connection (direct or indirect) between the relevant

step and a tax avoidance arrangement.

(3)	If the relevant step mentioned in subsection (2) is taken in relation to

an expected grant of a relevant share option as mentioned in

subsection (2)(a)(ii), subsection (4) applies if—

(a)	the grant is not made before the end of the date (“the final

grant date”) falling immediately after the period of three

months starting with the date on which P takes the relevant

step, and

(b)	as at the end of the final grant date, any of the earmarked

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

basis mentioned in subsection (2)(a).

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

taken at the end of the final grant date—

(a)	the subject of which is—

(i)	the shares which continue to be held as mentioned in

subsection (3)(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)).

(5)	Subsection (6) applies if, at any time (“the relevant time”)—

(a)	any of the earmarked shares cease to be held by or on behalf

of P solely on the basis mentioned in subsection (2)(a), but

(b)	the shares continue to be held by or on behalf of P on the basis

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

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

taken at the relevant time—

(a)	the subject of which is—

(i)	the shares mentioned in subsection (5), and

(ii)	any relevant income in relation to those shares (see

subsection (14)), and

Public Bill Committee: 17 May 2011

78

Finance (No. 3) continued

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

section 554A(4)).

(7)	Subsection (8) applies if—

(a)	the relevant step mentioned in subsection (2) is taken in

relation to a grant of a relevant share option made as

mentioned in subsection (2)(a)(i), or

(b)	the relevant step mentioned in subsection (2) is taken in

relation to an expected grant of a relevant share option as

mentioned in subsection (2)(a)(ii) and the grant is made before

the end of the final grant date,

and the specified exit event, or an exit event within the specified

description, occurs.

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

taken at the end of the exit period—

(a)	the subject of which is—

(i)	any of the earmarked shares to which none of

subsections (9) to (11) applies, and

(ii)	any relevant income in relation to any of the

earmarked shares mentioned in sub-paragraph (i) (see

subsection (14)), and

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

section 554A(4)).

(9)	This subsection applies to any earmarked shares if—

(a)	A exercises the relevant share option (wholly or partly) before

the end of the exit period and, as a result, receives the shares,

and

(b)	the receipt of the shares gives rise to employment income of

A—

(i)	which is chargeable to income tax or would be

chargeable apart from section 474, or

(ii)	which is exempt income.

(10)	This subsection applies to any earmarked shares if—

(a)	A exercises the relevant share option (wholly or partly) before

the end of the exit period and, as a result, a sum of money is

paid to A as mentioned in subsection (1)(a)(ii),

(b)	the payment of the sum gives rise to employment income of

A—

(i)	which is chargeable to income tax or would be

chargeable apart from section 474, or

(ii)	which is exempt income, and

(c)	the payment represents the proceeds of the disposal of the

shares, or the payment is made from another source and,

correspondingly, the shares are no longer held by any person

in relation to the relevant share option.

(11)	This subsection applies to any earmarked shares if—

(a)	the relevant share option becomes exercisable by A before the

end of the exit period but the option lapses (in whole or in

part) at or before the end of that period, and

Public Bill Committee: 17 May 2011

79

Finance (No. 3) continued

(b)	correspondingly, the shares are no longer held by any person

in relation to the relevant share option.

(12)	In subsections (8), (9)(a), (10)(a) and (11)(a) “the exit period”

means—

(a)	the period of six months starting with the date on which the

exit event occurs, or

(b)	if it ends earlier, the period during which the relevant share

option is exercisable by A in accordance with the deferred

grant terms.

(13)	If the exit event is an event within section 554I(6)(a), in subsection

(12)(a) the reference to six months is to be read as a reference to five

years.

(14)	In subsections (4)(a)(ii), (6)(a)(ii) and (8)(a)(ii) “relevant income”, in

relation to any earmarked shares, means any income—

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

subsection (4), (6) or (8) (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

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).’.

David Gauke

72

Schedule  2,  page  74,  line  43,  after ‘421E(1),’ insert ‘429, 443,’.

David Gauke

73

Schedule  2,  page  74,  line  44,  at end insert—

‘(6A)

Subsection (6E) applies if there is an acquisition of an asset within

section 554C(4)(a) or (b) (“the relevant asset”) and—

(a)	relevant consideration is given by A for the relevant asset of

an amount equal to or greater than the market value of the

relevant asset at the time of the acquisition, or

(b)	ignoring any relevant consideration given for the relevant

asset, the acquisition gives rise (or would give rise) to

earnings of A within Chapter 1 of Part 3 from A’s

employment with B—

(i)	the amount of which is equal to or greater than the

market value of the relevant asset at the time of the

acquisition, and

(ii)	which are not exempt income.

(6B)	In subsection (6A) “relevant consideration”—

(a)	means consideration—

(i)	which is given before, or at or about, the time of the

acquisition, and

(ii)	which is money or money’s worth, but

(b)	does not include—

Public Bill Committee: 17 May 2011

80

Finance (No. 3) continued

(i)	a promise to do anything, or

(ii)	the performance of any duties of, or in connection

with, an employment.

(6C)	If section 437(1) or 452(1) applies in relation to the acquisition, or

would apply if Chapter 3 or 4A of Part 7 (as the case may be) applied

in relation to the acquisition, in subsection (6A) references to the

market value of the relevant asset are to be read as references to that

value determined on the basis mentioned in section 437(1) or 452(1)

(as the case may be).

(6D)	Subsection (6E) also applies if—

(a)	there is an acquisition of an asset within section 554C(4)(a) or

(b) (“the relevant asset”),

(b)	the acquisition is pursuant to an employment-related

securities option (within the meaning of Chapter 5 of Part 7,

but ignoring section 474(1)) acquired by reason of A’s

employment, or former or prospective employment, with B,

and

(c)	the acquisition is a chargeable event for the purposes of

section 476 or would be a chargeable event apart from section

474(1).

(6E)	Chapter 2 does not apply by reason of a relevant step taken after the

acquisition if—

(a)	the subject of the relevant step is the relevant asset, and

(b)	there is no connection (direct or indirect) between the relevant

step and a tax avoidance arrangement.

(6F)	In subsections (6A) to (6E) “acquisition” is to be read in accordance

with section 421B(2)(a).’.

David Gauke

74

Schedule  2,  page  75,  line  4,  leave out ‘a share option’ and insert ‘an employment-

related securities option (within the meaning of Chapter 5 of Part 7)’.

David Gauke

75

Schedule  2,  page  75,  line  7,  after ‘tax’ insert ‘or would be chargeable apart from

section 474’.

David Gauke

76

Schedule  2,  page  75,  leave out lines 11 and 12.

David Gauke

77

Schedule  2,  page  75,  line  28,  leave out from beginning to ‘is’ in line 30 and insert

‘of 40 days starting with the day on which the relevant step mentioned in subsection (7)’.

David Gauke

78

Schedule  2,  page  77,  line  17,  leave out ‘554L’ and insert ‘554LA’.

© Parliamentary copyright	Revised 17 May 2011