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Income Tax (Earnings and Pensions) Bill


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

    515

 

              (5)             For the purposes of this section the “maximum amount”, in relation

to the excess relief for a tax year, means the amount on which the

former employee would be chargeable to capital gains tax for that

year if the following were disregarded—

                    (a)                   any relief available under this section,

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                    (b)                   any allowable losses falling to be carried forward to that year

from a previous year for the purposes of section 2(2),

                    (c)                   section 3(1) (the annual exempt amount),

                    (d)                   any relief against capital gains tax under section 72 of the

Finance Act 1991 (deduction of trading losses), and

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                    (e)                   any relief against capital gains tax under section 90(4) of the

Finance Act 1995 (relief for post-cessation expenditure).

              (6)             A former employee may make a claim under subsection (3) and a

claim under section 555(3) of ITEPA 2003 in the same notice.”

  218      In section 271 (other miscellaneous exemptions), for subsection (1)(c)

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substitute—

                    “(c)                      any gain accruing to a person from his acquisition and

disposal of assets held by him as part of a fund—

                           (i)                          mentioned in section 614(2) of the Taxes Act,

                           (ii)                         to which section 615(3) of the Taxes Act applies, or

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                           (iii)                        mentioned in section 648, 649, 650, 651 or 653 of

ITEPA 2003;”.

  219     (1)      Amend section 288(1) (interpretation) as follows.

          (2)      In the entry relating to “allowable loss” for “and 16” substitute “, 16 and

263ZA”.

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          (3)      After the entry relating to “investment trust” insert—

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

2003;”.

  220     (1)      Amend Schedule 7C (relief for transfers to approved share plans) as follows.

          (2)      In paragraph 1(1) (introductory) for “an employee share ownership”

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substitute “a share incentive”.

          (3)      In paragraph 2 (conditions relating to the disposal)—

              (a)             in sub-paragraph (1) for “Schedule 8 to the Finance Act 2000”

substitute “Schedule 2 to ITEPA 2003”,

              (b)             in sub-paragraph (2)—

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                    (i)                   for “Part VIII” substitute “Part 4”,

                    (ii)                  for “used in plan” substitute “awarded”, and

                    (iii)                 for “61(a) and (c)” substitute “27(1)(a) and (c) and (2)”,

              (c)             in sub-paragraph (4) for “of Schedule 8 to the Finance Act 2000”

substitute “given by paragraph 97 of Schedule 2 to ITEPA 2003”.

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  221      After Schedule 7C insert—

 

 

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

    516

 

“Schedule 7D

Section 238A

 

Approved share schemes and share incentives

Part 1

Approved share incentive plans

Introductory

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          1                (1)                                 The provisions of this Part of this Schedule apply for capital gains

tax purposes in relation to an approved share incentive plan (“the

plan”).

                           (2)                                 This Part of this Schedule forms part of the SIP code (see section

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

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                           (3)                                 Accordingly, expressions used in this Part of this Schedule and

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

(approved share incentive plans) have the meaning indicated by

the index.

                           (4)               In particular, for the purposes of paragraphs 5 and 7 of this

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Schedule “market value” has the meaning given by paragraph 92

of Schedule 2 to that Act (determination of market value); and Part

8 of this Act has effect subject to this paragraph.

Gains accruing to trustees

          2                (1)                                 Any gain accruing to the trustees is not a chargeable gain if the

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shares—

                      (a)                     are shares 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, and

                      (b)                     are awarded to employees, or acquired on their behalf as

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dividend shares, in accordance with the plan within the

relevant period.

                           (2)                                 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 relevant period is the period of two years beginning

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with the date on which the shares were acquired by the trustees.

                            This is subject to sub-paragraph (4).

                           (3)                                                   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, the relevant period is—

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                      (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

beginning with the date on which they did so,

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                                             whichever ends first.

                                             This is subject to sub-paragraph (4).

                           (4)               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

 

 

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

    517

 

                           (4)               Schedule 4AA to the Taxes Act (deduction for contribution to plan

trust), the relevant period is the period of ten years beginning with

the date of acquisition.

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

participant within the relevant period, shares acquired by the

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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.

                           (6)                                 Sub-paragraph (5) is subject to paragraph 78(1) of Schedule 2 to

ITEPA 2003 (acquisition by trustees of shares from employee share

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ownership trust).

                           (7)                                 For the purposes of this paragraph “readily convertible assets” has

the meaning given by sections 701 and 702 of that Act (readily

convertible assets).

                                             This is subject to sub-paragraph (8).

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                           (8)                                 In determining for the purposes of this paragraph whether shares

are readily convertible assets any market for the shares that—

                      (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,

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                                             shall be disregarded.

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

this paragraph has effect with the substitution—

                      (a)                     in sub-paragraph (2), of “If the shares are readily

convertible assets at the time they” for the words before

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“are acquired”, and

                      (b)                     in sub-paragraph (3)—

                             (i)                            of “If at the time of their acquisition by the trustees

the shares are not readily convertible assets” for the

words before “the relevant period”, and

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                             (ii)                           in paragraph (b), of “the shares in question” for

“any of the shares in that company”.

Participant absolutely entitled as against trustees 

          3                (1)               Sub-paragraph (2) applies to any shares awarded to                   a participant

under the plan.

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                           (2)               The participant is treated for capital gains tax purposes as

absolutely entitled to those shares as against the trustees.

                           (3)               Sub-paragraph (2) applies notwithstanding anything in the plan

or the trust instrument.

Different classes of shares  

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          4                (1)               For the purposes of Chapter 1 of Part 4 of this Act (shares,

securities, options etc: general) a participant’s plan shares are

treated, so long as they are subject to the plan, as of a different class

from any shares (which would otherwise be treated as of the same

class) that are not plan shares.

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

    518

 

                           (2)                                 For the purposes of that Chapter, any shares to which sub-

paragraph (3) applies shall be treated as of a different class from

any shares to which sub-paragraph (4) applies, even if they would

otherwise fall to be treated as of the same class.

                           (3)               This sub-paragraph applies to any shares transferred to the

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trustees of the plan trust by a qualifying transfer that have not

been awarded to participants under the plan.

                           (4)               This sub-paragraph applies to any shares held by the trustees that

were not transferred to them by a qualifying transfer.

                           (5)                                 In this paragraph “qualifying transfer” has the meaning given in

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paragraph 78(2) of Schedule 2 to ITEPA 2003 (acquisition by

trustees of shares from employee share ownership trust).

                           (6)               For the purposes of Chapter 1 of Part 4 of this Act any shares

which—

                      (a)                     were acquired by the trustees by virtue of a payment in

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respect of which a deduction is allowed under paragraph

9 of Schedule 4AA to the Taxes Act (deduction for

contribution to plan trust), and

                      (b)                     have not been awarded under the plan,

                                             shall be treated as of a different class from any shares held by the

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trustees that were not so acquired by them, even if they would

otherwise fall to be treated as of the same class.

No chargeable gain on shares ceasing to be subject to the plan 

          5                (1)                                 Shares which cease to be subject to the plan are treated as having

been disposed of and immediately reacquired by the participant at

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market value.

                           (2)               Any gain accruing on that disposal is not a chargeable gain.

Deemed disposal by trustees on disposal of beneficial interest

          6                (1)               If at any time the participant’s beneficial interest in any of his

shares is disposed of, the shares in question shall be treated for the

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purposes of the SIP code as having been disposed of at that time

by the trustees for the like consideration as was obtained for the

disposal of the beneficial interest.

                           (2)               For this purpose there is no disposal of the participant’s beneficial

interest if and at the time when—

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                      (a)                     in England and Wales or Northern Ireland, that interest

becomes vested in any person on the insolvency of the

participant or otherwise by operation of law, or

                      (b)                     in Scotland, that interest becomes vested in a judicial

factor, in a trustee of the participant’s sequestrated estate

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or in a trustee for the benefit of the participant’s creditors.

                           (3)               If a disposal of shares falling within this paragraph is not at arm’s

length, the proceeds of the disposal shall be taken for the purposes

of the SIP code to be equal to the market value of the shares at the

time of the disposal.

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

    519

 

Treatment of forfeited shares

          7                (1)                                 If any of the participant’s plan shares are forfeited, they are treated

as having been disposed of by the participant and acquired by the

trustees at market value at the date of forfeiture.

                           (2)               Any gain accruing on that disposal is not a chargeable gain.

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Disposal of rights under rights issue

          8                (1)                                 Any gain accruing on the disposal of rights under paragraph 77 of

Schedule 2 to ITEPA 2003 (power of trustees to raise funds to

subscribe for rights issue) is not a chargeable gain.

                           (2)                                 Sub-paragraph (1) does not apply to a disposal of rights unless

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similar rights are conferred in respect of all ordinary shares in the

company.

Part 2

Approved SAYE option schemes

Introductory

15

          9                (1)               This Part of this Schedule forms part of the SAYE code (see section

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

                           (2)               Accordingly, expressions used in this Part of this Schedule and

contained in the index at the end of Schedule 3 to that Act

(approved SAYE option schemes) have the meaning indicated by

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the index.

Market value rule not to apply

          10               (1)               This paragraph applies where—

                      (a)                     a share option (“the option”) has been granted to an

individual—

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                             (i)                            in accordance with the provisions of an approved

SAYE option scheme, and

                             (ii)                           by reason of the individual’s office or employment

as a director or employee of a company,

                      (b)                     the individual exercises the option in accordance with the

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provisions of the SAYE option scheme at a time when the

scheme is approved, and

                      (c)                     Condition A or Condition B in section 519(2) or (3) of

ITEPA 2003 (no charge in respect of exercise of option) is

met.

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                           (2)               The company mentioned in sub-paragraph (1)(a)(ii) may be—

                      (a)                     the company whose shares are the subject of the option, or

                      (b)                     some other company.

                           (3)               If the option—

                      (a)                     was granted under the SAYE option scheme before the

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withdrawal of approval under paragraph 42 of Schedule 3

to ITEPA 2003, but

 

 

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

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                      (b)                     is exercised after the withdrawal of approval,

                                             then, for the purposes of sub-paragraph (1)(b) above in its

application to the option, the scheme is to be treated as if it were

still approved at the time of the exercise.

                           (4)               Section 17(1) (disposals and acquisitions treated as made at market

5

value) shall not apply in calculating the consideration for—

                      (a)                     the individual’s acquisition of shares by the exercise of the

option, or

                      (b)                     any corresponding disposal of those shares to the

individual.

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                           (5)               References in sub-paragraphs (1)(b) and (4) above to the

individual include references to a person exercising the option in

accordance with provision included in the scheme by virtue of

paragraph 32 of Schedule 3 to ITEPA 2003 (exercise of options:

death); and sub-paragraph (1)(c) above does not apply in relation

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to a person so exercising the option.

Part 3

Approved CSOP schemes

Introductory

          11               (1)               This Part of this Schedule forms part of the CSOP code (see section

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521 of ITEPA 2003 (approved CSOP schemes)).

                           (2)               Accordingly, expressions used in this Part of this Schedule and

contained in the index at the end of Schedule 4 to that Act

(approved CSOP schemes) have the meaning indicated by the

index.

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                           (3)               This Part of this Schedule applies where—

                      (a)                     a share option (“the option”) has been granted to an

individual—

                             (i)                            in accordance with the provisions of an approved

CSOP scheme, and

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                             (ii)                           by reason of the individual’s office or employment

as a director or employee of a company, and

                      (b)                     shares (“the relevant shares”) are acquired by the exercise

of the option.

                           (4)               The company mentioned in sub-paragraph (3)(a)(ii) may be—

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                      (a)                     the company whose shares are the subject of the option, or

                      (b)                     some other company.

Relief where income tax charged in respect of grant of option

          12               (1)               This paragraph applies where an amount (the “employment

income amount”) counted as employment income of the

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individual under section 526 of ITEPA 2003 (charge where option

granted at a discount) in respect of the option.

                           (2)               For the purposes of section 38(1)(a) (acquisition and disposal costs

etc.), that part of the employment income amount which is

 

 

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

    521

 

                           (2)               attributable to the relevant shares shall be treated as consideration

given for the acquisition of the relevant shares.

                           (3)               This paragraph also applies where the individual was chargeable

to income tax on an amount in respect of the option under—

                      (a)                     subsection (6) of section 185 of ICTA (as it had effect before

5

1st January 1992),

                      (b)                     subsection (6A) of that section (as it had effect in relation to

options obtained on or after 1st January 1992 but before 29

April 1996), or

                      (c)                     subsection (6) of that section (as it had effect in relation to

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options obtained on or after 29 April 1996);

                                             and in such a case the “employment income amount” means the

amount on which the individual was so chargeable.

                           (4)               This paragraph applies whether or not—

                      (a)                     the exercise of the option is in accordance with the

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provisions of the CSOP scheme, or

                      (b)                     the CSOP scheme is approved at the time of the exercise.

Market value rule not to apply

          13               (1)               This paragraph applies where—

                      (a)                     the individual exercises the option in accordance with the

20

provisions of the CSOP scheme at a time when the scheme

is approved, and

                      (b)                     the condition in section 524(2) of ITEPA 2003 (no charge in

respect of exercise of option) is met.

                           (2)               Section 17(1) (disposals and acquisitions treated as made at market

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value) shall not apply in calculating the consideration for—

                      (a)                     the individual’s acquisition of the relevant shares by the

exercise of the option, or

                      (b)                     any corresponding disposal of the relevant shares to the

individual.

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                           (3)               Sub-paragraph (2) also applies where the option is exercised at a

time when the scheme is approved in accordance with provision

included in the scheme by virtue of paragraph 25 of Schedule 4 to

ITEPA 2003 (exercise of options: death); and references in that sub-

paragraph to the individual are to be read accordingly.

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Part 4

Enterprise management incentives

Introductory

          14               (1)               This Part of this Schedule forms part of the EMI code (see section

527 of ITEPA 2003 (enterprise management incentives: qualifying

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options)).

                           (2)               Accordingly, expressions used in this Part of this Schedule and

contained in the index at the end of Schedule 5 to that Act

 

 

 
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