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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

    488

 

                           (2)               For this purpose the expenses of the trustees in operating the

plan—

                      (a)                     do not include expenses in acquiring shares for the

purposes of the trust, other than incidental acquisition

costs, but

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                      (b)                     do include the payment of interest on money borrowed by

them for that purpose.

                           (3)               In sub-paragraph (2)(a) “incidental acquisition costs” means any

fees, commission, stamp duty and similar incidental costs

attributable to the acquisition of the shares.

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Deduction for contribution to plan trust

          9                (1)               A deduction is allowed to a company under this paragraph

where—

                      (a)                     on or after 6th April 2003, that company makes a payment

to the trustees of an approved share incentive plan in order

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to enable them to acquire shares in that company or a

company which controls it,

                      (b)                     the payment is applied by the trustees to acquire such

shares,

                      (c)                     the shares are not acquired from a company, and

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                      (d)                     the condition in sub-paragraph (2) is met in relation to the

company in which the shares are acquired.

                           (2)               The condition in this sub-paragraph is that, at the end of the

period of 12 months beginning with the date of the acquisition, the

trustees hold shares in the company for the plan trust that—

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                      (a)                     constitute not less than 10 per cent of the ordinary share

capital of the company, and

                      (b)                     carry rights to not less than 10 per cent of—

                             (i)                            any profits available for distribution to

shareholders of the company,

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                             (ii)                           any assets of that company available for

distribution to its shareholders in the event of a

winding-up.

                           (3)               For the purposes of sub-paragraph (2), shares that have been

appropriated to, and acquired on behalf of, an individual under

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the plan shall continue to be treated as held by the trustees of the

plan trust for the beneficiaries of that trust until such time as they

cease to be subject to the plan (within the meaning of the SIP code).

                           (4)               A deduction allowed under this paragraph—

                      (a)                     is of an amount equal to the amount of the payment

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referred to in sub-paragraph (1), and

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

condition in sub-paragraph (2) is met.

                           (5)               No other deduction is allowed for any amount in respect of which

a deduction has been made under this paragraph (except as

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specified in paragraph 10).

 

 

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

    489

 

Withdrawal of deduction under paragraph 9

          10               (1)               The Inland Revenue may by notice direct that the benefit of a

deduction made under paragraph 9 is withdrawn where—

                      (a)                     fewer than 30 per cent of the shares acquired by virtue of

the payment in respect of which the deduction is made

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have been awarded under the plan before the end of the

period of 5 years beginning with the date of acquisition, or

                      (b)                     not all the shares acquired by virtue of that payment have

been so awarded before the end of the period of 10 years

beginning with that date.

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                           (2)               The effect of a direction under sub-paragraph (1)(a) or (b) is that

the amount of the deduction is treated as a trading receipt of the

company for the period of account in which the direction is given.

                           (3)               However, where—

                      (a)                     the Inland Revenue give a direction under sub-paragraph

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(1)(a) or (b) in respect of any deduction, and

                      (b)                     at any time after the giving of the direction, all the shares

acquired by virtue of the payment in respect of which the

deduction was made are awarded under the plan,

                                             a further deduction is allowed under this sub-paragraph to the

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company which made the payment.

                           (4)               A deduction under sub-paragraph (3)—

                      (a)                     is of an amount equal to the amount of the payment

referred to in that sub-paragraph, and

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

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paragraph (3)(b) is first satisfied.

                           (5)               No other deduction is allowed in respect of any amount for which

a deduction has been made under sub-paragraph (3).

                           (6)               Sub-paragraph (8) applies where—

                      (a)                     a deduction is made under paragraph 9 (deduction for

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contribution to plan trust) or sub-paragraph (3) in respect

of a payment for the acquisition of shares, but

                      (b)                     shares are awarded under the plan to an individual at a

time when the earnings from the required employment are

not (or would not be if there were any) chargeable

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earnings.

                           (7)               In sub-paragraph (6) “required employment” and “chargeable

earnings”, in relation to an individual, have the same meanings as

they have in paragraph 4(2) (cases in which no deduction is

allowed).

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                           (8)               An amount equal to the appropriate proportion of the deduction

is treated as a trading receipt of the company for the period of

account in which the shares are so awarded.

                           (9)               For the purposes of sub-paragraph (8), the appropriate proportion

of the deduction is the proportion which the number of shares

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awarded to the individual bears to the total number of shares

acquired by virtue of the payment.

 

 

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

    490

 

                           (10)              For the purposes of this paragraph, where shares are 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.

Withdrawal of deductions on withdrawal of approval

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          11               (1)               If approval of a share incentive plan is withdrawn the Inland

Revenue may by notice to a company direct that the benefit of—

                      (a)                     any deductions under paragraph 2 (deduction for

providing free or matching shares),

                      (b)                     any deductions under paragraph 3 (deduction for

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additional expenses in providing partnership shares),

                      (c)                     any deductions under paragraph 9 (deduction for

contribution to plan trust) (in so far as not already

withdrawn under paragraph 10), or

                      (d)                     any deductions under paragraph 10(3) (further deduction

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where deduction under paragraph 9 withdrawn),

                                             in relation to the plan is also withdrawn.

                           (2)               The effect of the direction is that the aggregate amount of the

deductions is treated as a trading receipt of that company for the

period of account in which the Inland Revenue give notice of the

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withdrawal of approval.

Termination of plan: shares acquired as mentioned in paragraph 9 but not yet

awarded

          12               (1)               This paragraph applies where the company has issued a plan

termination notice under paragraph 89 of Schedule 2 to ITEPA

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2003 (termination of plan).

                           (2)               In a case where—

                      (a)                     by virtue of a payment made to the trustees by the

company, the trustees acquire shares in the company, or a

company which controls it,

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                      (b)                     a deduction under paragraph 9 (deduction for

contribution to plan trust) has been made in respect of that

payment (and has not been withdrawn under paragraph

10), and

                      (c)                     not all the shares acquired by virtue of the payment have

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been awarded under the plan before issue of the plan

termination notice,

                                             an amount equal to the appropriate proportion of the deduction is

treated as a trading receipt of the company for the period of

account in which the plan termination notice is given.

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                           (3)               For the purposes of sub-paragraph (2), the appropriate proportion

of the deduction is the proportion which the number of shares

acquired by virtue of the payment and not awarded as specified in

sub-paragraph (2)(c) bears to the total number of shares so

acquired.

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

    491

 

Application of provisions to expenses of management of investment companies etc.

          13               (1)               The provisions of this Schedule apply in relation to—

                      (a)                     investment companies, and

                      (b)                     companies to which section 75 (expenses of management:

investment companies) applies by virtue of section 76

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(expenses of management: insurance companies),

                                             in accordance with the following provisions.

                           (2)               The provisions of this Schedule which allow a deduction in

calculating the profits of a trade apply to treat amounts as

disbursed as expenses of management.

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                           (3)               Paragraph 11(2) applies as if the reference to a trading receipt for

the period of account in which the Inland Revenue give notice of

the withdrawal of approval were a reference to profits or gains

chargeable to tax under Case VI of Schedule D arising when the

Inland Revenue give notice of the withdrawal.”

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  110      Omit Schedules 6 and 6A (taxation of directors and others: cars and vans).

  111      Omit Schedules 7 and 7A (taxation of benefit of loans).

  112     (1)      Amend Schedule 9 (approved share option schemes and profit sharing

schemes) as follows.

          (2)      Omit Parts 1, 2 and 6 except so far as relating to profit sharing schemes.

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          (3)      Omit Parts 3 and 4.

  113     (1)      Amend Schedule 10 (further provisions relating to profit sharing schemes)

as follows.

          (2)      In paragraphs 3(1) and 6(4) for “charging an individual to income tax under

Schedule E” substitute “under which an amount counts as employment

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income of an individual”.

          (3)      In paragraph 7—

              (a)             in sub-paragraph (1), for “a participant in the scheme is chargeable to

income tax under Schedule E” substitute “an amount counts as

employment income of the participant”,

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              (b)             in sub-paragraph (6), for the words from “section 203” to “Schedule

E” substitute “section 684 of ITEPA 2003 (PAYE regulations) and

PAYE regulations as PAYE income payable to the recipient”, and

              (c)             in sub-paragraph (7)(b)—

                    (i)                   omit second “to”, and

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                    (ii)                  for “the participant is chargeable” substitute “is charged on

the participant”.

  114      Omit Schedule 11 (payments and other benefits in connection with

termination of employment etc.).

  115      Omit Schedule 11A (removal benefits and expenses).

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  116      Omit Schedule 12 (foreign earnings).

  117      Omit Schedule 12AA (mileage allowances).

  118      Omit Schedule 12A (ordinary commuting and private travel).

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 6 — Consequential Amendments
Part 2 — Other enactments

    492

 

  119      In Schedule 14 (modification of section 266 in certain cases), in paragraph 5

for “section 595” substitute “section 386 of ITEPA 2003 (payments to non-

approved retirement benefits schemes)”.

  120     (1)      Amend paragraph 2 of Schedule 15A (contractual savings schemes) as

follows.

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          (2)      In sub-paragraph (1)(a) for “savings-related share” substitute “SAYE”.

          (3)      For sub-paragraph (2) substitute—

          “(2)                                                     In sub-paragraph (1) above, “approved” and “SAYE option

scheme” have the same meanings as in the SAYE code (see section

516(4) of ITEPA 2003 (approved SAYE option schemes)).”

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  121     (1)      Amend paragraph 5B of Schedule 18 (group relief: equity holders and

profits available for distribution) as follows.

          (2)      In sub-paragraph (4)(d) for “approved under Schedule 9” substitute “which

was approved”.

          (3)      After sub-paragraph (4) insert—

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          “(4A)                                   In sub-paragraph (4)(d) above—

                       “share option scheme” means—

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

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

(approved SAYE option schemes)), or

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

code (see section 521(4) of that Act (approved

CSOP schemes)); and

                       “approved” means—

                              (a)                             in relation to an SAYE option scheme, approved

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under Schedule 3 to that Act (approved SAYE

option schemes), and

                              (b)                             in relation to a CSOP scheme, approved under

Schedule 4 to that Act (approved CSOP

schemes).”

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Part 2

Other enactments

Finance Act 1969 (c. 32)

  122     (1)      Section 58 of the Finance Act 1969 (disclosure of information for statistical

purposes by Board of Inland Revenue) is amended as follows.

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          (2)      In subsection (1)(a)—

              (a)             for “section 203 of the Taxes Act 1988 (pay as you earn)” substitute

“PAYE regulations”;

              (b)             for “emoluments to which that section applies” substitute “earnings

or amounts treated as earnings from an employment”.

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          (3)      In subsection (1)(b) for “emoluments” substitute “earnings or amounts

treated as earnings”.

          (4)      After subsection (1) insert—

 

 

 
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