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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Part 7 — Employment income: share-related income and exemptions
Chapter 11 — Supplementary provisions about employee benefit trusts

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           (c)           dependants of persons within paragraph (a), or

           (d)           relatives, or spouses of relatives, of persons within paragraph (a) or (b).

     (3)    In subsection (2) each reference to the company includes a reference to a

company controlled by the company.

     (4)    Condition 2 is that the property has been applied for charitable purposes.

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     (5)    Condition 3 is that the property has been transferred to—

           (a)           the trustees of another employee benefit trust,

           (b)           the trustees of a qualifying employee share ownership trust (within the

meaning of Schedule 5 to FA 1989), or

           (c)           the trustees of a profit sharing scheme approved under Schedule 9 to

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ICTA (approved share option schemes and profit sharing schemes).

     (6)    In this section “relative” means—

           (a)           parent, child or remoter relation in the direct line, or

           (b)           brother, sister, uncle, aunt, nephew or niece.

Attribution of interests in company

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 552   Attribution of interest in company to beneficiary or associate

     (1)    This section applies if—

           (a)           after 13th March 1989 B, or an associate of B’s, has received a payment

(“the relevant payment”) from the trustees of the employee benefit

trust, and

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           (b)           at any time during the period of 3 years ending with the day on which

the relevant payment was received (“the payment date”), the property

subject to the trust consisted of or included any part of the ordinary

share capital of the company.

     (2)    In such a case B or the associate is to be treated for the purposes of the listed

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provision as having been the beneficial owner of the appropriate percentage of

the ordinary share capital of the company on the payment date.

     (3)    This is in addition to any percentage of that share capital of which B or the

associate was actually the beneficial owner on that date.

     (4)    Section 553 explains what is meant by “the appropriate percentage”.

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 553   Meaning of “appropriate percentage” for purposes of section 552

     (1)    For the purposes of section 552 “the appropriate percentage” is—equation: over[cross[char[P],num[100.00000000,"100"]],char[D]]

            where P and D have the meaning given by the following provisions.

     (2)    Unless subsection (3) applies, P is the aggregate of the relevant payment and

any other payments received by B or associates of B’s from the trustees of the

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trust during the period of 12 months ending with the payment date.

     (3)    If—

 

 

Income Tax (Earnings and Pensions) Bill
Part 7 — Employment income: share-related income and exemptions
Chapter 11 — Supplementary provisions about employee benefit trusts

    274

 

           (a)           any distributions were made to the trustees of the trust by the company

in respect of its ordinary share capital during the period of 3 years

ending with the payment date, and

           (b)           the aggregate of those distributions is less than the aggregate

mentioned in subsection (2),

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            P is the aggregate of those distributions.

     (4)    Unless subsection (5) applies, D is the amount determined as follows—

Step 1

            Calculate the aggregate of—

           (a)           any distributions made by the company in respect of its ordinary share

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capital during the period of 12 months ending with the payment date,

           (b)           any distributions so made during the period of 12 months immediately

preceding that mentioned in paragraph (a), and

           (c)           any distributions so made during the period of 12 months immediately

preceding that mentioned in paragraph (b).

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Step 2

            Divide the aggregate so calculated by the number of the periods mentioned in

paragraphs (a) to (c) in which distributions were so made.

     (5)    If no distributions were so made during any of those periods, D is 1.

     (6)    In this section “the payment date” and “the relevant payment” have the

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meaning indicated in section 552(1).

 554   Attribution of further interest in company

     (1)    This section applies if—

           (a)           B or an associate of B’s is (apart from this section) to be treated by virtue

of section 552(2) as having been the beneficial owner of a percentage of

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the ordinary share capital of the company as a result of receiving the

relevant payment from the trustees of an employment benefit trust, and

           (b)           B or an associate of B’s has, during the period of 12 months ending with

the payment date, received one or more payments from the trustees of

any other employee benefit trust or trusts connected with the company.

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     (2)    In such a case section 552 applies to B or (as the case may be) the associate

mentioned in subsection (1) (a) as if B or the associate had received—

           (a)           any payment from the trustees of a trust as mentioned in subsection

(1)(b), or

           (b)           where more than one payment has been received from the trustees of a

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trust, the last of the payments,

            on the payment date.

     (3)    B or the associate is accordingly to be treated for the purposes of the listed

provision as having been the beneficial owner on the payment date of both—

           (a)           the percentage of the ordinary share capital of the company mentioned

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in subsection (1)(a), and

           (b)           the appropriate percentage of that share capital as determined in

accordance with subsection (2).

     (4)    This is in addition to any percentage of that share capital of which B or the

associate was actually the beneficial owner on that date.

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Income Tax (Earnings and Pensions) Bill
Part 8 — Former employees: deductions for liabilities

    275

 

     (5)    For the purposes of this section a trust is “connected with” the company if, at

any time during the period of 3 years ending with the payment date, the

property subject to the trust consisted of or included any part of the ordinary

share capital of the company.

     (6)    In this section “the payment date” and “the relevant payment” have the

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meaning indicated in section 552(1).

Part 8

Former employees: deductions for liabilities

Deductions from total income

 555   Former employee entitled to deduction from total income

10

     (1)    This Part applies if—

           (a)           a former employee makes a deductible payment, or

           (b)           a former employer makes a deductible payment on behalf of a former

employee and the payment is treated—

                  (i)                 as a relevant retirement benefit, or

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                  (ii)                as post-employment earnings,

                         of the former employee.

     (2)    A deduction of the amount of the deductible payment may be made when

computing the former employee’s total income for the tax year in which the

payment is made.

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     (3)    Subsection (2) applies only if the former employee makes a claim to the

deduction.

     (4)    The entitlement to a deduction under this section is subject to sections 556 and

557.

     (5)    For the application of this Part in relation to former office-holders, see section

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564.

     (6)    For relief from capital gains tax where the amount of the deduction allowed

under this section exceeds total income, see section 263ZA of TCGA 1992.

 556   Deductible payments made outside the time limits allowed

     (1)    No deduction may be made under section 555 if the deductible payment is

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made—

           (a)           on or before the day on which the former employee ceased to hold the

former employment, or

           (b)           after the end of the sixth tax year following the tax year in which the

former employee ceased to hold the former employment.

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     (2)    If subsection (1)(a) applies, see section 346.

 557   Deductible payments wholly or partly borne by the former employer etc.

     (1)    This section applies if—

 

 

Income Tax (Earnings and Pensions) Bill
Part 8 — Former employees: deductions for liabilities

    276

 

           (a)           a deductible payment is made by the former employee (and not by the

former employer on behalf of the former employee), but

           (b)           the whole or a part of the cost of making the payment is borne—

                  (i)                 by the former employer, or

                  (ii)                out of the proceeds of a contract of insurance.

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     (2)    No deduction of the amount of the cost borne as mentioned in subsection (1)(b)

(the “relevant amount”) may be made under section 555.

     (3)    But this is subject to subsection (4) if the whole or a part of the relevant amount

is treated—

           (a)           as a relevant retirement benefit of the former employee, or

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           (b)           as post-employment earnings of the former employee.

     (4)    In such a case, a deduction of so much of the relevant amount as is treated in

that way may be made under section 555.

Interpretation

 558   Meaning of “deductible payment”

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     (1)    For the purposes of this Part each of the following is a deductible payment—

            

            A. Payment in or towards the discharge of a liability related to the former

employment.

            

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            B. Payment of any costs or expenses incurred in connection with—

                  (a)                    a claim that the former employee is subject to a liability related

to the former employment, or

                  (b)                    proceedings relating to or arising out of a claim that the former

employee is subject to a liability related to the former

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employment.

            

            C. Payment of a premium under a qualifying insurance contract, but only to the

extent that the premium relates to—

                  (a)                    provision in the contract for the former employee to be

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indemnified against a payment falling within paragraph A, or

                  (b)                    provision in the contract for the payment of any costs or

expenses falling within paragraph B.

     (2)    But a payment which falls within paragraph A or B is not a deductible payment

if it would have been unlawful for the former employer to enter into a contract

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of insurance in respect of the liability, or costs or expenses, in question.

     (3)    In this Part—

           (a)           “premium”, in relation to a qualifying insurance contract, means an

amount payable to the insurer under the contract, and

           (b)           where a qualifying insurance contract relates to more than one person,

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employment or risk, the part of the premium to be treated as relating to

each of them is to be determined by apportionment on a just and

reasonable basis.

 

 

 
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Revised 17 February 2003