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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Schedule 5 — Enterprise management incentives
Part 8 — Supplementary provisions

    462

 

          (2)      Where sub-paragraph (1)(b) applies, any further time limit running from the

end of the period concerned is instead to run from the time when the thing

in question was actually done.

Power to amend by Treasury order

  54      (1)      The Treasury may by order amend the EMI code—

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              (a)             to make such amendments of paragraphs 13 to 23 (the trading

activities requirement and related provisions) as they consider

expedient;

              (b)             to substitute different sums of money for those for the time being

specified in—

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                    (i)                   paragraphs 5(1) and 6(1) and (3) (maximum entitlement of

employee);

                    (ii)                  paragraph 12(1) and (2) (the gross assets requirement).

          (2)      An order under sub-paragraph (1)(b) which amends paragraphs 5(1) and

6(1) and (3) may amend section 536(1)(e) (other disqualifying events) so as

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to substitute the same sum for the one that is for the time being specified

there.

Meaning of “market value” of shares

  55      (1)      For the purposes of the EMI code the “market value” of shares has the same

meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that

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Act.

          (2)      Sub-paragraph (1) is subject to paragraph 5(7) (valuation of shares subject to

restriction or risk of forfeiture) as it applies for the purposes of any provision

of the EMI code.

Determination of market value of shares

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  56      (1)      This paragraph applies to the determination of the market value of shares

for the purposes of the EMI code.

          (2)      Unless—

              (a)             it is agreed between the employer company and the Inland Revenue,

or

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              (b)             a reference is made under sub-paragraph (4),

                   the market value of shares is to be determined by the Inland Revenue

          (3)      Where the market value of shares on any date needs to be determined for the

purposes of the EMI code, the Inland Revenue and the employer company

may agree that it is to be determined by reference to a date or dates, or to the

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average of the values on a number of dates, stated in the agreement.

          (4)      At any time before notice of the Inland Revenue’s determination has been

given to the employer company, the company may give the Inland Revenue

a notice requiring the question of the market value of the shares to be

referred to the Commissioners.

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          (5)      Any reference under sub-paragraph (4) must be made—

              (a)             to the General Commissioners, or

              (b)             if the applicant so elects (in accordance with section 46(1) of TMA

1970), to the Special Commissioners.

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 5 — Enterprise management incentives
Part 8 — Supplementary provisions

    463

 

          (6)      The Commissioners to whom the reference is made must determine it in the

same way as an appeal.

Appeal against determination of market value of shares

  57      (1)      The employer company may appeal against any determination by the Inland

Revenue under paragraph 56.

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          (2)      Notice of appeal must be given to the Inland Revenue within 30 days after

the date when notice of their determination is given to the employer

company.

          (3)      An appeal under this paragraph lies—

              (a)             to the General Commissioners, or

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              (b)             if the applicant so elects (in accordance with section 46(1) of TMA

1970), to the Special Commissioners.

Minor definitions

  58       In the EMI code—

                    “arrangements” includes any scheme, agreement or understanding,

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whether it is legally enforceable or not;

                    “company” means a body corporate;

                    “group of companies” means a parent company and its 51%

subsidiaries;

                    “the group”, in relation to a parent company, means that company and

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its 51% subsidiaries;

                    “parent company” means a company that has one or more 51%

subsidiaries and “single company” means a company that does not;

                    “research and development” has the meaning given by section 837A of

ICTA;

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                    “shares” includes stock.

Index of defined expressions

  59       In the EMI code the following expressions are defined or otherwise

explained by the provisions indicated below:

 

the appropriate time

paragraph 1(4)

 

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arrangements

paragraph 58(1)

 
 

child

section 832(5) of ICTA,

 
  

(and see section 721(6)

 
  

of this Act)

 
 

close company

section 832(1) of ICTA,

 

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(and see paragraph

 
  

29(4)).

 
 

closure notice

paragraph 47(4)

 
 

company

paragraph 58

 
 

 

Income Tax (Earnings and Pensions) Bill
Schedule 5 — Enterprise management incentives
Part 8 — Supplementary provisions

    464

 
 

company reorganisation (in Part 6 of this Schedule)

paragraph 39(2)

 
 

connected person

section 718

 
 

control

section 719 (and see

 
  

paragraphs 10(2) and

 
  

23(6))

 

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disqualifying event

see sections 532 to 539

 
 

distribution

section 832(1) of ICTA

 
 

earnings

section 62 and see

 
  

section 721(7)

 
 

employee and employment

section 4

 

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eligible employee

paragraph 24

 
 

the EMI code

section 527(3)

 
 

employer company

paragraph 2

 
 

excluded activities

paragraph 16

 
 

farming

section 832(1) of ICTA

 

15

 

General Commissioners

section 2 of TMA 1970

 
 

generally accepted accounting practice

section 836A of ICTA

 
 

group of companies

paragraph 58

 
 

the group

paragraph 58

 
 

the Inland Revenue

section 720(1)

 

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market value

paragraph 55 (and see

 
  

paragraph 5(7))

 
 

met (in Part 7 of this Schedule)

paragraph 44(7)

 
 

new option

paragraph 41(6)

 
 

notice

section 832(1) of ICTA

 

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old option

paragraph 41(6)

 
 

ordinary share capital

section 832(1) of ICTA

 
 

original option

section 529(3)

 
 

parent company

paragraph 58

 
 

personal representatives

section 721(1)

 

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qualifying company

paragraph 8

 
 

qualifying option

section 527(4) (and see

 
  

paragraph 41(5))

 
 

qualifying subsidiary

paragraph 11

 
 

 

Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 1 — Income and Corporation Taxes Act 1988

    465

 
 

qualifying trade

paragraph 15

 
 

relevant company

paragraph 2

 
 

replacement option

section 527(4)

 
 

the requirements of this Schedule

section 527(4)

 
 

research and development

paragraph 58

 

5

 

share option

section 527(4)

 
 

shares

paragraph 58 (and see

 
  

paragraph 40(4)(a))

 
 

single company

paragraph 58

 
 

Special Commissioners

section 4 of TMA 1970

 

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51% subsidiary

section 838(1) of ICTA

 
 

tax

section 832(3) of ICTA

 
 

tax year

section 721(1)

 
 

trade

section 832(1) of ICTA

 
 

United Kingdom

section 830 of ICTA

 

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Schedule 6

Section 722

 

Consequential Amendments

Part 1

Income and Corporation Taxes Act 1988

  1        The Income and Corporation Taxes Act 1988 (c. 1) is amended as follows.

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  2       (1)      Amend section 1 (the charge to income tax) as follows.

          (2)      For subsection (1) substitute—

              “(1)                Income tax is charged in accordance with the Income Tax Acts on—

                    (a)                   all amounts which, under those Acts, are charged to tax

under any of Schedules A, D and F (set out in sections 15, 18

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and 20),

                    (b)                   all amounts which are charged to tax under any of the

following provisions of ITEPA 2003—

                           (i)                          Part 2 (employment income),

                           (ii)                         Part 9 (pension income), and

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                           (iii)                        Part 10 (social security income), and

                    (c)                   any other amounts which, under the Income Tax Acts, are

charged to income tax.”

          (3)      In subsection (5A) for “section 203” substitute “PAYE regulations”.

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 1 — Income and Corporation Taxes Act 1988

    466

 

  3        In section 4(1) (construction of references in Income Tax Acts to deduction of

tax) for “in pursuance of section 203” substitute “under PAYE regulations”.

  4        In section 9(3) (computation of income for corporation tax: application of

income tax principles)—

              (a)             for “the like Schedules and Cases as apply for purposes of income

5

tax” substitute—

                                                        “(a) Schedules A, D and F, and the Cases of those

Schedules, as they apply for purposes of income tax,

and

                                                        (b) the following provisions of ITEPA 2003 (which

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impose the charge to income tax)—

                                 (i)                                Part 2 (employment income),

                                 (ii)                               Part 9 (pension income), and

                                 (iii)                              Part 10 (social security income),” and

              (b)             after “those Schedules and Cases” insert “and those Parts”.

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  5       (1)      Amend section 18 (Schedule D) as follows.

          (2)      In subsection (1), in paragraph (b) of Schedule D, for “or E” substitute “or

under ITEPA 2003 as employment income, pension income or social security

income”.

          (3)      In subsection (3)—

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              (a)             in Case V for “income consisting of emoluments of any office or

employment” substitute “employment income, pension income or

social security income on which tax is charged under ITEPA 2003”;

              (b)             in Case VI for “or E” substitute “or by virtue of ITEPA 2003 as

employment income, pension income or social security income”.

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  6        Omit section 19 (Schedule E).

  7        In section 21A(2) (computation of amount chargeable)—

              (a)             for “sections 588 and 589” substitute “section 588”;

              (b)             for “sections 589A and 589B” substitute “section 589A”;

              (c)             for “1989 (deductions in respect of certain emoluments)” substitute

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“1989 (Schedule D: computation)”.

  8        Omit section 58 (foreign pensions).

  9        In section 65(2) (Cases IV and V assessments: general) omit “Subject to

section 330,”.

  10       After section 68 insert—

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       “68A             Share incentive plans: application of section 68B

              (1)             Section 68B applies for income tax purposes in connection with

shares awarded under an approved share incentive plan.

              (2)             But that section does not apply to an individual if, at the time of the

award of shares in question—

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                    (a)                   the earnings from the eligible employment are not (or would

not be if there were any) general earnings to which any of the

charging provisions of Chapter 4 or 5 of Part 2 of ITEPA 2003

apply, or

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 1 — Income and Corporation Taxes Act 1988

    467

 

                    (b)                   in the case of an award made before 6th April 2003, he was

not chargeable to tax under Schedule E in respect of the

employment by reference to which he met the requirement of

paragraph 14 of Schedule 8 to the Finance Act 2000

(employee share ownership plans: the employment

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requirement) in relation to the plan.

              (3)             For the purposes of subsection (2)(a)—

                    (a)                   “the eligible employment” means the employment which

results in the individual meeting the employment

requirement in relation to the plan, and

10

                    (b)                   the reference to any of the charging provisions of Chapter 4

or 5 of Part 2 of ITEPA 2003 has the same meaning as it has in

the employment income Parts of that Act (see sections 14(3)

and 20(3) of that Act).

       68B            Share incentive plans: cash dividends and dividend shares

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              (1)             Where a cash dividend is paid over to a participant under paragraph

68(4) of Schedule 2 to ITEPA 2003 (cash dividend paid over if not

reinvested), the participant is chargeable to tax on the amount paid

over, to the extent that it represents a foreign cash dividend, under

Case V of Schedule D for the year of assessment in which the

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dividend is paid over to the participant.

              (2)             If dividend shares cease to be subject to the plan before the end of the

period of three years beginning with the date on which the shares

were acquired on the participant’s behalf, the participant is

chargeable to tax on the amount of the relevant dividend, to the

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extent that it represents a foreign cash dividend, under Case V of

Schedule D for the year of assessment in which the shares cease to be

subject to the plan.

                              For this purpose “the relevant dividend” is the cash dividend

applied to acquire those shares on the participant’s behalf.

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              (3)             Where the participant is charged to tax under subsection (2) the tax

due shall be reduced by the amount or aggregate amount of any tax

paid on any capital receipts under section 501 of ITEPA 2003 in

respect of those shares.

              (4)             Subsection (2) has effect subject to section 498 of that Act (no charge

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on shares ceasing to be subject to plan in certain circumstances).

       68C            Share incentive plans: interpretation

              (1)             Sections 68A and 68B and this section form part of the SIP code (see

section 488 of ITEPA 2003 (approved share incentive plans)).

              (2)             Accordingly, expressions used in those sections and contained in the

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index at the end of Schedule 2 to that Act (approved share incentive

plans) have the meaning indicated by that index.

              (3)             In section 68B, “foreign cash dividend” means a cash dividend paid

in respect of plan shares in a company not resident in the United

Kingdom.”

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Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 1 — Income and Corporation Taxes Act 1988

    468

 

  11      (1)      Amend section 84A (costs of establishing share option or profit sharing

schemes: relief from corporation tax) as follows.

          (2)      After subsection (3) insert—

              “(3A)                In this section, “share option scheme” means—

                    (a)                   an SAYE option scheme within the meaning of the SAYE

5

code (see section 516(4) of ITEPA 2003 (approved SAYE

option schemes)), or

                    (b)                   a CSOP scheme within the meaning of the CSOP code (see

section 521(4) of that Act (approved CSOP schemes)).”

          (3)      In subsection (4), at the end add “to this Act or under Schedule 3 or 4 to

10

ITEPA 2003 (approved SAYE option schemes and approved CSOP

schemes)”.

  12       After section 85A insert—

       “85B Approved share incentive plans

Schedule 4AA (which provides for deductions relating to approved

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share incentive plans) shall have effect.”

  13      (1)      Amend section 86A (charitable donations: contributions to agent’s

expenses) as follows.

          (2)      In subsection (1)(a) for “by virtue of section 203 and regulations under that

section” substitute “under PAYE regulations”.

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          (3)      In subsection (1)(b) for the words from “a scheme” to the end of the

paragraph substitute “an approved scheme and pays the sums to an

approved agent”.

          (4)      After subsection (1) insert—

              “(1A)                In subsection (1)(b) approved scheme and approved agent have the

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same meaning as in section 714 of ITEPA 2003.”

  14       Omit sections 131 to 134 (miscellaneous provisions relating to the Schedule

E charge).

  15       Omit sections 135 to 137 (provisions relating to gains by directors and

employees from share options).

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  16      (1)      Amend section 138 (share acquisitions by directors and employees) as

follows.

          (2)      In subsection (1)(b) for “Schedule E” substitute “the employment income

Parts of ITEPA 2003”.

          (3)      In subsection (4)(b) for “Case I of Schedule E” substitute “section 15 or 21 of

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ITEPA 2003 (earnings of employee resident and ordinarily resident in the

UK)”.

  17       Omit section 140 (further interpretation of sections 135 to 139).

  18       Omit sections 140A to 140H (further provisions relating to share acquisitions

by directors and employees).

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  19       Omit sections 141 to 144 (vouchers and credit tokens).

  20       Omit section 144A (payments received free of tax).

 

 

 
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