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Income Tax (Earnings and Pensions) Bill


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

    481

 

              “(4B)                This subsection applies to earnings and amounts treated as earnings

for a year of assessment if—

                    (a)                   the employee or office-holder is not domiciled in the United

Kingdom in that year, and

                    (b)                   the employment is with a foreign employer.

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              (4C)                If there is a dispute as to whether the employee or office-holder is not

domiciled in the United Kingdom, sections 42 and 43 of ITEPA 2003

(Board to determine dispute as to domicile) apply to the dispute as

they apply to a dispute mentioned in section 42(1) of that Act.

              (4D)                In this section—

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                                      “earnings and amounts treated as earnings” means earnings

and amounts treated as earnings which constitute

employment income (see section 7(2)(a) or (b) of ITEPA 2003);

                                      “foreign employer” has the meaning given by section 721 of

ITEPA 2003.”

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  94       In section 646(2) (meaning of “net relevant earnings”) for paragraph (b)

substitute—

                                          “(b) deductions made by virtue of section 232, 336, 343, 344 or

351 of ITEPA 2003 (mileage allowance, expenses,

professional membership fees, annual subscriptions,

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ministers of religion);

                                          (ba) travelling or subsistence expenses deducted by virtue of

Part 5 of that Act;

                                          (bb) deductions made by virtue of section 332(3) of this Act;”.

  95      (1)      Amend section 646A (earnings from associated employments) as follows.

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          (2)      In subsection (2) for “emoluments” substitute “general earnings”.

          (3)      In subsection (3) for “emoluments” substitute “general earnings”.

  96       Omit sections 647 to 648A (personal pensions: unauthorised payments,

contributions under unapproved arrangements and annuities).

  97       In section 657(2)(f)(i) (purchased life annuities to which section 656 applies)

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for “section 596(1)” substitute “section 387(2) of ITEPA 2003 (meaning of

non-approved retirement benefits scheme)”.

  98       In section 658A(1) (charges and assessments on administrators) after “this

Part” insert “or under section 394(2) of ITEPA 2003 (benefits from non-

approved pension schemes)”.

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  99      (1)      Amend section 659B (definition of insurance company) as follows.

          (2)      For subsection (9)(a) substitute—

                    “(a)                      any duty to pay under PAYE regulations tax charged under

Part 9 of ITEPA 2003 (pension income) because section 580 of

that Act applies (approved retirement benefits schemes:

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pensions and annuities);”;

          (3)      In subsection (9)(c) after “section 605” insert “of this Act or section 589 of

ITEPA 2003”.

          (4)      For subsection (9)(d) substitute—

                    “(d)                      any duty to pay under PAYE regulations tax charged under

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Part 9 of ITEPA 2003 (pension income) because section 595 of

 

 

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

    482

 

                    that Act applies (approved personal pension schemes:

annuities).”.

  100      After section 686A insert—

       “686B  Share incentive plans: distributions in respect of unappropriated

shares

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              (1)             This section applies to income of the trustees of an approved share

incentive plan consisting of dividends or other distributions in

respect of shares held by them in relation to which the requirements

of Part 4 of Schedule 2 to ITEPA 2003 (approved share incentive

plans: types of shares that may be awarded) are met.

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              (2)             Income to which this section applies is income to which section 686

applies only if and when—

                    (a)                   the period applicable to the shares under the following

provisions of this section comes to an end without the shares

being awarded to a participant in accordance with the plan,

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or

                    (b)                   if earlier, the shares are disposed of by the trustees.

              (3)             If any of the shares in the company in question are readily

convertible assets at the time the shares are acquired by the trustees,

the period applicable to the shares is the period of two years

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beginning with the date on which the shares were acquired by the

trustees.

            This is subject to subsection (5).

              (4)             If at the time of the acquisition of the shares by the trustees none of

the shares in the company in question are readily convertible assets,

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the period applicable to the shares is—

                    (a)                   the period of five years beginning with the date on which the

shares were acquired by the trustees, or

                    (b)                   if within that period any of the shares in that company

become readily convertible assets, the period of two years

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beginning with the date on which they did so,

                              whichever ends first.

                              This is subject to subsection (5).

              (5)             If the shares are acquired by the trustees by virtue of a payment in

respect of which a deduction is allowed under paragraph 9 of

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Schedule 4AA (deduction for contribution to plan trust), the period

applicable to the shares is the period of ten years beginning with the

date of acquisition.

              (6)             For the purposes of determining whether shares are awarded to a

participant within the period applicable under the above provisions,

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shares acquired by the trustees at an earlier time are taken to be

awarded to a participant before shares of the same class acquired by

the trustees at a later time.

              (7)             For the purposes of this section shares which are subject to provision

for forfeiture are treated as acquired by the trustees if and when the

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forfeiture occurs.

 

 

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

    483

 

              (8)             In relation to shares acquired by the trustees before 11th May 2001

this section has effect with the substitution—

                    (a)                   in subsection (3), of “Subject to subsection (4)” for the words

before “the period applicable”, and

                    (b)                   in subsection (4)(b), of “the shares in question” for “any of the

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shares in that company”.

       686C  Interpretation of section 686B

              (1)             Section 686B and this section form part of the SIP code (see section

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

              (2)             Accordingly, expressions used in section 686B or this section and

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contained in the index at the end of Schedule 2 to that Act (approved

share incentive plans) have the meaning indicated by that index.

              (3)             References in section 686B to shares being awarded to a participant

include references to the shares being acquired on behalf of the

participant as dividend shares.

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              (4)             In section 686B, “readily convertible assets” has the meaning given

by sections 701 and 702 of ITEPA 2003, but this is subject to

subsection (5).

              (5)             In determining for the purposes of section 686B whether shares are

readily convertible assets, any market for the shares that—

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                    (a)                   is created by virtue of the trustees acquiring shares for the

purposes of the plan, and

                    (b)                   exists solely for the purposes of the plan,

                              shall be disregarded.”

  101      In section 779(13)(e) (sale and lease-back: limitation on tax reliefs), for “a

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deduction from emoluments to be assessed under Schedule E made in

pursuance of section 198(1)” substitute “a deduction from earnings allowed

under section 336 of ITEPA 2003 (expenses)”.

  102      In section 781(4)(d) (assets leased to traders and others), for “a deduction

from emoluments to be assessed under Schedule E made in pursuance of

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section 198(1)” substitute “a deduction from earnings allowed under section

336 of ITEPA 2003 (expenses)”.

  103      In section 794(2)(b) (requirements as to residence) for “income tax

chargeable under Schedule E” substitute “income tax on employment

income”.

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  104      In section 824(4A) (repayment supplement: individuals and others) for

“section 203” substitute “PAYE regulations”.

  105     (1)      Amend section 828 (orders and regulations made by the Treasury or the

Board) as follows.

          (2)      In subsection (1), for “subsection (2)” substitute “subsections (2) and (5)”.

40

          (3)      In subsection (3), for “subsection (4)” substitute “subsections (4) and (5)”.

          (4)      At the end add—

 

 

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

    484

 

              “(5)                Nothing in this section applies in relation to any of the following (in

relation to which section 717 of ITEPA 2003 applies)—

                    (a)                   any power of the Treasury or the Board to make any order or

regulations under ITEPA 2003;

                    (b)                   any statutory instrument containing any order or regulations

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made by the Treasury or the Board under that Act.”

  106      In section 830 (territorial sea and designated areas) omit subsection (5).

  107      In section 831(3) (interpretation of ICTA) before the entry relating to “the

Management Act” insert—

                    ““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act

10

2003;”.

  108     (1)      Amend section 833 (interpretation of Income Tax Acts) as follows.

          (2)      For subsection (3)(a) substitute—

                    “(a)                      any payment or other benefit charged to tax under Chapter 3

of Part 6 of ITEPA 2003 (payments and other benefits on

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termination of employment);”.

          (3)      For subsection (4)(a) and (b) substitute—

                    “(a)                      any income charged to tax under ITEPA 2003 except—

                           (i)                          payments that meet the conditions in section 623 of

that Act (return of surplus employee additional

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voluntary contributions); and

                           (ii)                         jobseeker’s allowance (to which Chapter 3 of Part 10

of that Act applies);

                    (b)                      any income from any property which is attached to or forms

part of the general earnings from any employment;”.

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          (4)      For paragraphs (a) to (e) of subsection (5) substitute “income which is earned

income by virtue of section 529”.

  109      After Schedule 4 insert—

“SCHEDule 4AA

Section 85B

 

Share incentive plans: corporation tax deductions

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Introductory

          1                (1)               This Schedule forms part of the SIP code (see section 488 of ITEPA

2003 (approved share incentive plans)).

                           (2)               Accordingly, expressions used in this Schedule and contained in

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

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incentive plans) have the meaning indicated by that index.

                           (3)               References in this Schedule to deductions are to deductions by a

company in calculating for the purposes of corporation tax the

profits of a trade carried on by it.

                           (4)               Sub-paragraph (3) is subject to paragraph 13 (application of

40

provisions to expenses of management of investment companies

etc.).

 

 

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

    485

 

Deduction for providing free or matching shares

          2                (1)               Where, under an approved share incentive plan, shares are

awarded to employees as free or matching shares by reason of

their employment with a company, a deduction is allowed under

this paragraph to that company.

5

                           (2)               Any such deduction—

                      (a)                     is of an amount equal to the market value of the shares at

the time they are acquired by the trustees, and

                      (b)                     must be made for the period of account in which the shares

are awarded to employees in accordance with the plan.

10

                           (3)               Except as provided by sub-paragraph (1), no deduction may be

made by the company or any associated company in respect of the

provision of those shares.

                                             This is subject to paragraphs 7 and 8 (deductions for costs of

setting up, and contributions to running expenses of, plan).

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                           (4)               Where the shares are awarded under a group plan, the market

value of the shares at the time they are acquired by the trustees

shall for the purposes of this paragraph be taken to be the relevant

proportion of the total market value of the shares included in the

award.

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                           (5)               For the purposes of sub-paragraph (4) “the relevant proportion”

means the proportion that the number of shares in the award

awarded to the employees of the company concerned bears to the

total number of shares in the award.

                           (6)               In determining the market value of any shares for the purposes of

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this paragraph, if shares have been acquired by the trustees on

different days it shall be assumed that those acquired on an earlier

day are awarded to employees under the plan before those

acquired by the trustees on a later day.

                           (7)               If a deduction is made under this paragraph by a company, no

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deduction may be made by any other company under this

paragraph in respect of the provision of the shares.

                           (8)               This paragraph has effect subject to paragraph 4 (cases in which no

deduction is allowed).

Deduction for additional expenses in providing partnership shares

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          3                (1)               Where under an approved share incentive plan—

                      (a)                     partnership shares are awarded to employees by reason of

their employment with a company, and

                      (b)                     the market value of those shares at the time they are

acquired by the trustees exceeds the partnership share

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money paid by the participants to acquire those shares,

                                             a deduction is allowed under this paragraph to that company.

                           (2)               Any such deduction—

                      (a)                     is of an amount equal to the amount of the excess referred

to in sub-paragraph (1)(b), and

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

    486

 

                      (b)                     must be made for the period of account in which the shares

are awarded to employees in accordance with the plan.

                           (3)               Except as provided by sub-paragraph (1), no deduction may be

made by that company or any associated company in respect of

the provision of those shares.

5

                                             This is subject to paragraphs 7 and 8 (deductions for costs of

setting up, and contributions to running expenses of, plan).

                           (4)               If a deduction is made under this paragraph by a company, no

deduction may be made by any other company under this

paragraph in respect of the provision of the shares.

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                           (5)               This paragraph has effect subject to paragraph                   4 (cases in which no

deduction is allowed).

Cases in which no deduction is allowed

          4                (1)               No deduction is allowed under paragraph 2                   or 3 (deductions for

providing free or matching shares or for additional expenses in

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providing partnership shares) in the following cases.

                           (2)               No deduction is allowed in respect of shares awarded to an

individual under the plan unless, at the time of the award, any

earnings from the required employment are (or would be)

chargeable earnings.

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                           (3)               In sub-paragraph (2)—

                       “chargeable earnings” means general earnings to which any

of the charging provisions of Chapter 4 or 5 of Part 2 of

ITEPA 2003 apply, and

                       the “required employment” means the employment by

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reference to which the individual is eligible to participate

in the award.

                           (4)               In sub-paragraph (3), the reference to any of the charging

provisions of Chapter 4 or 5 of Part 2 of that Act has the same

meaning as it has in the employment income Parts of ITEPA 2003

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(see sections 14(3) and 20(3) of that Act).

                           (5)               No deduction is allowed in respect of shares that are liable to

depreciate substantially in value for reasons that do not apply

generally to shares in the company.

                           (6)               No deduction is allowed if a deduction has been made—

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                      (a)                     by the company, or

                      (b)                     by an associated company of the company,

                                             in respect of the provision of the same shares for this or another

trust.

                           (7)               Sub-paragraph (6) applies whatever the nature or purpose of the

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other trust and whatever the basis on which the deduction was

made.

                           (8)               For the purposes of determining whether the same shares have

been provided to more than one trust, if shares have been acquired

by the trustees of the plan trust on different days it shall be

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assumed that those acquired on an earlier day are awarded under

the plan before those acquired by the trustees on a later day.

 

 

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

    487

 

                           (9)               No deduction is allowed in respect of the award of shares acquired

by the trustees by virtue of a payment in respect of which a

deduction has been made under paragraph 9 (deduction for

contribution to plan trust) or 10(3) (further deduction where

deduction under paragraph 9 withdrawn).

5

No deduction for expenses in providing dividend shares

          5                (1)               No deduction is allowed for expenses in providing shares that are

acquired on behalf of individuals under an approved share

incentive plan as dividend shares.

                           (2)               This is subject to paragraph 8 (deductions for contributions to

10

running expenses of plan).

Treatment of forfeited shares

          6                (1)               This paragraph applies if any of a participant’s plan shares are

forfeited.

                           (2)               The shares are treated for the purposes of this Schedule as

15

acquired by the trustees—

                      (a)                     when the forfeiture occurs, and

                      (b)                     for no consideration.

                           (3)               No deduction is allowed under paragraph 2 or 3 (deductions for

providing free or matching shares or for additional expenses in

20

providing partnership shares) in respect of any subsequent award

of those shares under the plan.

Deduction for costs of setting up the plan

          7                (1)               A deduction is allowed under this paragraph for expenses

incurred by a company in establishing a share incentive plan

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which is approved by the Inland Revenue.

                           (2)               No deduction may be made under this paragraph if—

                      (a)                     any employee acquires rights under the plan, or

                      (b)                     the trustees acquire any shares for the purposes of the plan,

                                             before the Inland Revenue approve the plan.

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                           (3)               If Inland Revenue approval of the plan is given more than nine

months after the end of the period of account in which the

expenses are incurred, the expenses are treated for the purposes of

this paragraph as incurred in the period in which the approval is

given.

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                           (4)               No other deduction is allowed in respect of expenses for which a

deduction is allowed under this paragraph.

Deductions for contributions to running expenses of plan

          8                (1)               Nothing in this Schedule affects any deduction for expenses

incurred by a company in contributing to the expenses of the

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trustees in operating an approved share incentive plan.

 

 

 
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