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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Schedule 2 — Approved share incentive plans
Part 11 — Supplementary provisions

    399

 

          (3)      For the purposes of the SIP code a company is a member of a consortium

owning another company if it is one of a number of companies—

              (a)             which between them beneficially own not less than 75% of the other

company’s ordinary share capital, and

              (b)             each of which beneficially owns not less than 5% of that capital.

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Index of defined expressions

  100      In the SIP code the following expressions are defined or otherwise explained

by the provisions indicated below:

 

accumulation period

paragraph 51

 
 

approval, approved

section 488(4) (and see

 

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paragraph 83(4))

 
 

articles of association

paragraph 99(1)

 
 

associated company

paragraph 94 (and see

 
  

paragraph 29(3))

 
 

award of shares

paragraph 5(1)

 

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the Board of Inland Revenue

section 720(2)

 
 

building society

section 832(1) of ICTA

 
 

ceasing to be in relevant employment (in relation to a

paragraph 95

 
 

participant)

  
 

ceasing to be subject to plan (in relation to shares)

paragraph 97

 

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child

section 832(5) of ICTA

 
  

(and see section 721(6))

 
 

close company

section 832(1) of ICTA

 
  

(and see paragraph

 
  

20(4))

 

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company

paragraph 99(1)

 
 

the company (in relation to a SIP)

paragraph 2(2)

 
 

company reconstruction (in Part 11 of this Schedule)

paragraph 86(1)

 
 

connected person

section 718

 
 

constituent company

paragraph 4(3)

 

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consortium (member of)

paragraph 99(3)

 
 

control

section 719 (and see

 
  

paragraphs 29(5), 37(6)

 
  

and 94(3))

 
 

distribution

section 832(1) of ICTA

 

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dividend shares

paragraph 62(3)(b)

 
 

 

Income Tax (Earnings and Pensions) Bill
Schedule 2 — Approved share incentive plans
Part 11 — Supplementary provisions

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earnings

section 62 and see

 
  

section 721(7)

 
 

eligible shares (in Part 4 of this Schedule)

paragraph 25(2)

 
 

employee, employed, employer and employment

section 4

 
 

the employment requirement

paragraph 15(3)

 

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forfeiture, provision for

paragraph 99(1)

 
 

free shares

paragraph 2(1)(a)

 
 

group of companies

paragraph 99(1)

 
 

group company

paragraph 99(1)

 
 

group plan

paragraph 4(2)

 

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holding period

paragraph 36 (and see

 
  

paragraph 67)

 
 

the Inland Revenue

section 720(1)

 
 

market value (of shares)

paragraph 92

 
 

matching shares

paragraph 3(1)

 

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notice (except in paragraph 54 or 55)

section 832(1) of ICTA

 
 

ordinary share capital

section 832(1) of ICTA

 
 

parent company

paragraph 4(1)

 
 

participant (in relation to a SIP)

paragraph 5(4)

 
 

participant’s plan shares

paragraph 99(1) (and

 

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see paragraph 87(1))

 
 

participation in an award of shares

paragraph 5(3)

 
 

partnership share agreement

paragraph 44

 
 

partnership share money

paragraph 45(2)

 
 

partnership shares

paragraph 2(1)(b)

 

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PAYE deduction

section 488(4)

 
 

PAYE obligations

paragraph 99(1)

 
 

PAYE regulations

section 684(8)

 
 

performance allowances

paragraph 34(4)

 
 

personal representatives

section 721(1)

 

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plan requirements (in relation to a SIP)

paragraph 2(2)

 
 

plan shares (in relation to a SIP)

paragraph 99(1) (and

 
  

see paragraphs 86, 87,

 
  

88)

 
 

 

Income Tax (Earnings and Pensions) Bill
Schedule 3 — Approved SAYE option schemes
Part 1 — Introduction

    401

 
 

the plan trust

paragraph 71(3)

 
 

provision for forfeiture

paragraph 99(1)

 
 

qualifying corporate bond

paragraph 99(1)

 
 

qualifying employee

paragraph 8(6)

 
 

recognised stock exchange

section 841 of ICTA

 

5

 

redundancy

paragraph 99(1)

 
 

reinvestment

paragraph 62(3)(a)

 
 

relevant employment

paragraph 95(2)

 
 

rights arising under a rights issue

paragraph 99(1)

 
 

salary

paragraph 43(4)

 

10

 

share incentive plan (“SIP”)

section 488(4)

 
 

shares

paragraph 99(2) (and

 
  

in the context of a new

 
  

holding, paragraph

 
  

87(6))

 

15

 

the SIP code

section 488(3)

 
 

Special Commissioners

section 4 of TMA 1970

 
 

the specified retirement age

paragraph 98(1)

 
 

tax

section 832(3) of ICTA

 
 

tax year

section 721(1)

 

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the trustees

paragraphs 2(2), 71(1)

 
 

the trust instrument

paragraph 71(3)

 
 

withdrawal of shares from plan

paragraph 96(1)

 
 

Schedule 3

Section 516

 

Approved SAYE option schemes

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Part 1

Introduction

Approval of SAYE option schemes

  1       (1)      This Schedule makes provision for the approval of SAYE option schemes by

the Inland Revenue.

30

          (2)      Parts 2 to 7 of this Schedule contain requirements that have to be met in

order for schemes to be approved under this Schedule.

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 3 — Approved SAYE option schemes
Part 2 — General requirements for approval

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          (3)      The requirements consist of general requirements (see Part 2) and

requirements as to—

               the eligibility of individuals to participate in a scheme (see Part 3),

               the shares to which schemes can apply (see Part 4),

               the existence of a linked savings scheme (see Part 5),

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               the share options that may be granted under the scheme (see Part 6),

and

               the exchange of share options (see Part 7).

          (4)      Part 8 of this Schedule deals with the approval of schemes and the

withdrawal of approval.

10

SAYE option schemes

  2       (1)      In the SAYE code an “SAYE option scheme” means (in accordance with

section 516(4)) a scheme established by a company which provides—

              (a)             for share options to be granted to employees and directors, and

              (b)             for the shares acquired by the exercise of the share options to be paid

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for in the way mentioned in paragraph 24 (payments for shares to be

linked to approved savings schemes).

          (2)      In the SAYE code, in relation to an SAYE option scheme—

               “participant” means an individual who has been granted (but has not

yet exercised) share options under the scheme (“the options”);

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               “participate” means obtain and exercise share options under the

scheme;

               “the scheme organiser” means the company which has established the

scheme.

Group schemes

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  3       (1)      An SAYE option scheme established by a company that controls one or more

other companies (a “parent scheme company”) may extend to all or any of

those other companies.

          (2)      In the SAYE code an SAYE option scheme established by a parent scheme

company which so extends is called a “group scheme”.

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          (3)      In relation to a group scheme a “constituent company” means—

              (a)             the parent scheme company, or

              (b)             any other company to which for the time being the scheme is

expressed to extend.

          (4)      Paragraph 46 deals with jointly owned companies and companies controlled

35

by them.

Part 2

General requirements for approval

General requirements for approval: introduction

  4        An SAYE option scheme must meet the requirements of—

40

                    paragraph 5 (general restriction on contents of scheme),

                    paragraph 6 (all-employee nature of scheme),

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 3 — Approved SAYE option schemes
Part 2 — General requirements for approval

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                    paragraph 7 (participation on similar terms), and

                    paragraph 8 (no preferential treatment for directors and senior

employees).

General restriction on contents of scheme

  5        The scheme must not contain features which are neither essential nor

5

reasonably incidental to the purpose of providing benefits for employees

and directors in the nature of share options.

All-employee nature of scheme

  6       (1)      The scheme must provide that every person who meets the conditions in

sub-paragraph (2) is eligible to participate in the scheme.

10

          (2)      A person (“E”) meets the conditions in this sub-paragraph if—

              (a)             E is an employee or a full-time director of the scheme organiser or (in

the case of a group scheme) of a constituent company,

              (b)             E has been such an employee or director at all times during a

qualifying period of not more than 5 years,

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              (c)             E’s earnings from the office or employment within paragraph (a) are

(or would be if there were any) general earnings to which section 15

or 21 applies (earnings for year when employee resident and

ordinarily resident in the UK), and

              (d)             E is not ineligible under paragraph 11 (the “no material interest”

20

requirement).

          (3)      The scheme must not contain any feature which has or is likely to have the

effect of discouraging any description of persons who—

              (a)             meet the conditions in sub-paragraph (2), or

              (b)             met those conditions before ceasing to be persons within sub-

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paragraph (2)(a),

                   from actually participating in the scheme.

          (4)      Sub-paragraph (3) does not apply to any provision required or authorised by

a provision of this Schedule.

Participation on similar terms

30

  7       (1)      The requirements of this paragraph are—

              (a)             that every person who meets the conditions in paragraph 6(2) (all-

employee nature of scheme) must be eligible to participate in the

scheme on similar terms, and

              (b)             that every person who participates in the scheme must actually do so

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on similar terms.

          (2)      The requirements of this paragraph are not infringed by the fact that the

rights of those participating in the scheme to obtain and exercise share

options vary according to—

              (a)             the levels of their remuneration,

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              (b)             the length of their service, or

              (c)             any similar factors.

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 3 — Approved SAYE option schemes
Part 3 — Eligibility of individuals to participate in scheme

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No preferential treatment for directors and senior employees

  8       (1)      The requirement of this paragraph is that, if the scheme organiser is a

member of a group of companies, the scheme does not and is not likely to

have the effect of conferring benefits wholly or mainly—

              (a)             on directors of companies in the group, or

5

              (b)             on employees of companies in the group who receive the higher or

highest levels of remuneration.

          (2)      “A group of companies” means a company and any other companies of

which it has control.

Part 3

10

Eligibility of individuals to participate in scheme

Requirements relating to the eligibility of individuals: introduction

  9        An SAYE option scheme must meet the requirements of—

                    paragraph 10 (the employment requirement), and

                    paragraph 11 (the “no material interest” requirement).

15

The employment requirement

  10      (1)      The scheme must ensure that an individual is not eligible to participate in

the scheme at a particular time unless the individual is then a director or

employee of—

              (a)             the scheme organiser, or

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              (b)             in the case of a group scheme, a constituent company.

          (2)      The requirement of this paragraph is not infringed by a provision of the

scheme required or authorised by a provision of this Schedule.

The “no material interest” requirement

  11      (1)      The scheme must ensure that an individual is not eligible to participate in

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the scheme on any date if the individual has on that date, or has had within

the 12 months ending with that date, a material interest in a close

company—

              (a)             whose shares may be acquired as a result of exercising share options

granted under the scheme, or

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              (b)             which has control of a company whose shares may be acquired as a

result of exercising share options granted under the scheme, or

              (c)             which is a member of a consortium which owns a company within

paragraph (b).

          (2)      For the purposes of this paragraph an individual is to be regarded as having

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a material interest in a company if—

              (a)             the individual, or

              (b)             the individual together with one or more of the individual’s

associates, or

              (c)             any such associate, with or without any other such associates,

40

                   has a material interest in the company.

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 3 — Approved SAYE option schemes
Part 3 — Eligibility of individuals to participate in scheme

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          (3)      This paragraph is supplemented—

              (a)             as regards the meaning of “material interest”, by paragraphs 12 and

13, and

              (b)             as regards the meaning of “associate”, by paragraph 14 (read with

paragraphs 15 and 16).

5

          (4)      In this paragraph and paragraph 12 “close company” includes a company

that would be a close company but for—

              (a)             section 414(1)(a) of ICTA (exclusion of companies not resident in the

United Kingdom), or

              (b)             section 415 of ICTA (exclusion of certain quoted companies).

10

Meaning of “material interest”

  12      (1)      In paragraph 11 (the “no material interest” requirement) references to a

“material interest” in a company are to—

              (a)             a material interest in the share capital of the company, or

              (b)             a material interest in its assets.

15

          (2)      A material interest in the share capital of a company means—

              (a)             beneficial ownership of, or

              (b)             the ability to control (directly or through the medium of other

companies or by any other indirect means),

                   more than 25% of the ordinary share capital of the company.

20

          (3)      A material interest in the assets of a company means—

              (a)             possession of, or

              (b)             an entitlement to acquire,

                   such rights as would, in the event of the winding up of the company or in

any other circumstances, give an entitlement to receive more than 25% of the

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assets that would then be available for distribution among the participators.

          (4)      In this paragraph “participator” has the meaning given by section 417(1) of

ICTA.

          (5)      This paragraph is supplemented by paragraph 13 (material interest: options

etc).

30

Material interest: options and interests in SIPs

  13      (1)      For the purposes of paragraph 12 (meaning of “material interest”) a right to

acquire shares (however arising) is to be treated as a right to control them.

          (2)      Sub-paragraph (3) also applies for the purposes of paragraph 12 in a case

where—

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              (a)             the shares to be attributed to an individual consist of or include

shares which the individual or another person has a right to acquire,

and

              (b)             the circumstances are such that, if that right were to be exercised, the

shares acquired would be shares which were previously unissued

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and which the company would be contractually bound to issue in the

event of the exercise of the right.

          (3)      In determining at any time prior to the exercise of the right whether the

number of shares to be attributed to the individual exceeds 25% of the

ordinary share capital of the company, that ordinary share capital is to be

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