Finance (No. 3) Bill

Session 2010 - 11
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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.

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

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Schedule 2 — Employment income provided through third parties
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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.

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Schedule 2 — Employment income provided through third parties
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(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

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(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.

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(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