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Income Tax (Earnings and Pensions) Bill


Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 7 — Employment income: share-related income

    542

 

  43      (1)      This paragraph applies for the purpose of determining how the £30,000

threshold referred to in sections 403 and 404 operates where—

              (a)             payments or other benefits to which Chapter 3 of Part 6 apply are

received, and

              (b)             payments or benefits to which section 148 of ICTA applied were

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received in respect of the same person—

                    (i)                   in respect of the same employment, or

                    (ii)                  in respect of different employments with the same employer

or associated employers.

          (2)      For the purposes of section 403(4) and (5), section 415 (valuation of benefits)

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does not apply to the payments and benefits referred to in sub-paragraph

(1)(b), and their aggregate amount is to be taken to be their aggregate

amount immediately before 6th April 2003.

          (3)      The references in sections 403(4) and (5) and 404(3)(b) to payments or

benefits to which Chapter 3 of Part 6 applies include references to the

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payments and benefits referred to in sub-paragraph (1)(b).

          (4)      Section 404(2) (when employers are associated) applies for the purposes of

this paragraph.

Part 7

Employment income: share-related income

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Conditional interests in shares

  44       Chapter 2 of Part 7 does not apply in relation to interests acquired before

17th March 1998.

  45      (1)      This paragraph relates to the operation of section 425 (cases where Chapter

2 of Part 7 does not apply).

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          (2)      Section 425(1) applies in relation to any acquisition made before 6th April

2003 with the substitution of “if the person was not chargeable under Case I

of Schedule E in respect of the office or employment in question” for the

words from “if the earnings” onwards.

  46      (1)      This paragraph relates to the operation of section 428 (amount of charge

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where interest in shares ceases to be only conditional or on disposal) in

relation to an acquisition made before 6th April 2003.

          (2)      For the purposes of section 428(1) each of the following is a “deductible

amount”—

              (a)             any amounts on which the employee has become chargeable to tax

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under Schedule E in respect of the acquisition of the employee’s

interest; and

              (b)             any amount on which the employee has become chargeable to tax in

respect of the shares under section 78 or 79 of FA 1988 (unapproved

employee share schemes) by reference to an event that occurred

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before 6th April 2003.

  47      (1)      This paragraph applies where—

              (a)             in the tax year 2002-03 a person provided an individual with an

interest in shares which was only conditional, and

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 7 — Employment income: share-related income

    543

 

              (b)             the circumstances were such that subsequent events might have

given rise to a charge under section 140A of ICTA (charge on

conditional interest in shares ceasing to be conditional or on

disposal) on that individual.

          (2)      Section 432 (duty to notify provision of conditional interests in shares)

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applies in relation to the provision subject to the following provisions.

          (3)      The particulars required by section 432(2) must be provided to the Inland

Revenue before 6th May 2003.

          (4)      However, no particulars of the provision need be provided by a person

under section 432 if that person has already given particulars of it under

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section 140G(1) of ICTA (which made provision corresponding to section

432 for tax years before 2003-04).

  48      (1)      This paragraph applies where—

              (a)             a person had an interest in shares which was only conditional,

              (b)             in the tax year 2002-03 either—

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                    (i)                   the shares ceased to be shares in which that person’s interest

was only conditional,

                    (ii)                  the shares were disposed of, or

                    (iii)                 that person died, and

              (c)             that event gave rise to a charge under section 140A of ICTA (charge

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on conditional interest in shares ceasing to be conditional or on

disposal).

          (2)      Section 433 (duty to notify events resulting in charges under section 427)

applies in relation to the event subject to the following provisions.

          (3)      The particulars required by section 433(2) must be provided to the Inland

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Revenue before 6th May 2003.

          (4)      However, no particulars of the provision need be provided by a person

under section 433 if that person has already given particulars of it under

section 140G(2) of ICTA (which made provision corresponding to section

433 for tax years before 2003-04).

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Convertible shares

  49       Chapter 3 of Part 7 does not apply in relation to shares acquired before 17th

March 1998.

  50      (1)      This paragraph relates to the operation of section 437 (cases where Chapter

3 of Part 7 does not apply).

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          (2)      Section 437(1) applies in relation to any acquisition made before 6th April

2003 with the substitution of “if the person was not chargeable under Case I

of Schedule E in respect of the office or employment in question” for the

words from “if the earnings” onwards.

  51      (1)      This paragraph relates to the operation of section 439 (amount of charge on

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conversion of shares) in relation to an acquisition made before 6th April

2003.

          (2)      For the purposes of section 439(1) each of the following is a “deductible

amount”—

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 7 — Employment income: share-related income

    544

 

              (a)             any amounts on which the employee has become chargeable to tax

under Schedule E in respect of the acquisition of the convertible

shares or the interest in them;

              (b)             if the convertible shares, or an interest in them, were acquired

through a series of conversions each of which was a pre-

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commencement taxable conversion, the amount of the gain under

section 140D(5) of ICTA from each conversion, so far as not falling

within paragraph (a); and

              (c)             any amount on which the employee has become chargeable to tax in

respect of the shares under section 78 or 79 of FA 1988 (unapproved

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employee share schemes) by reference to an event that occurred

before 6th April 2003.

          (3)      In sub-paragraph (2)(b) a “pre-commencement taxable conversion” means a

conversion which—

              (a)             gave rise to a gain on which the employee was chargeable to tax by

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virtue of section 140D of ICTA, or

              (b)             would have done so but for the fact that the market value of the

shares at the time of the conversion did not exceed the sum of the

deductible amounts.

  52      (1)      This paragraph relates to the operation of section 439 (amount of charge on

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conversion of shares) in relation to an acquisition made on or after 6th April

2003 through a series of conversions, one or more of which occurred before

that date and each of which was a pre-commencement taxable conversion or

a taxable conversion.

          (2)      In this paragraph—

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               “pre-commencement taxable conversion” has the meaning given by

paragraph 51(3), and

               “taxable conversion” has the meaning given by section 439(6).

          (3)      For the purposes of section 439(1) each of the following is a “deductible

amount”—

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              (a)             the amount of the gain under section 140D(5) of ICTA from each pre-

commencement taxable conversion; and

              (b)             the taxable amount for each taxable conversion, so far as not falling

within paragraph (c), (d) or (e) of section 439(2).

  53      (1)      This paragraph applies where—

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              (a)             a person provided an individual with convertible shares, or an

interest in such shares, in a company,

              (b)             those shares were converted in the tax year 2002-03 into shares of a

different class, and

              (c)             the circumstances were such that the conversion gave rise, or might

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have given rise, to a charge under section 140D of ICTA (convertible

shares) on the individual.

          (2)      Section 445 (duty to notify conversions of shares) applies in relation to the

conversion subject to the following provisions.

          (3)      The particulars required by section 445(2) must be provided to the Inland

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Revenue before 6th May 2003.

          (4)      However, no particulars of the provision need be provided by a person

under section 445 if that person has already given particulars of it under

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 7 — Employment income: share-related income

    545

 

          (4)      section 140G(3) of ICTA (which made provision corresponding to section

445 for tax years before 2003-04).

Post-acquisition benefits from shares

  54       Chapter 4 of Part 7 does not apply in relation to shares or an interest in

shares acquired before 26th October 1987, except to the extent provided by

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paragraph 55 (read with paragraph 56).

  55      (1)      Chapter 4 of Part 7 applies in relation to shares or an interest in shares

acquired before 26th October 1987 if the company was not a dependent

subsidiary on that date.

          (2)      But it so applies—

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              (a)             with the omission of sections 453 to 460, and

              (b)             subject to paragraph 56.

  56       The removal or variation of a restriction applying to shares or an interest in

shares acquired before 26th October 1987 is not a chargeable event for the

purposes of section 449 if paragraph 7 of Schedule 8 to FA 1973 (requirement

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for disposal to nominees at price not exceeding market value on termination

of employment) would have applied to it.

  57       Despite the repeals made by this Act—

              (a)             sections 138 and 139 of ICTA (share acquisitions by directors and

employees), and

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              (b)             section 140 of ICTA (further interpretation) as it applies for the

purposes of those sections,

           continue to apply in relation to shares or interests in shares acquired before

26th October 1987.

  58      (1)      This paragraph relates to the operation of section 448 (cases where Chapter

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4 of Part 7 does not apply).

          (2)      Section 448(1) applies in relation to any acquisition made before 6th April

2003 with the substitution of “if the person was not chargeable under Case I

of Schedule E in respect of the office or employment in question” for the

words “if the earnings” onwards.

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          (3)      Section 448(3) and (4) do not apply in relation to any acquisition made before

16th January 1991.

  59      (1)      This paragraph relates to the operation of section 455 (amount of charge on

increase in value of shares) in relation to an acquisition made before 6th

April 2003.

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          (2)      If before that date an event occurred by virtue of which the employee

became chargeable to tax under—

              (a)             section 140A(4) of ICTA (employee’s interest in shares ceasing to be

only conditional), or

              (b)             section 140D(3) of ICTA (charge on conversion of convertible shares),

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                   on any amount in respect of the shares, that amount is a “deductible

amount” for the purposes of section 455(1).

  60      (1)      This paragraph applies where any acquisition of shares or an interest in

shares within section 465(1) (general duty to notify acquisitions of shares or

interests in shares) was made in the tax year 2002-03.

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Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 7 — Employment income: share-related income

    546

 

          (2)      Section 465 applies in relation to the acquisition subject to the following

provisions.

          (3)      The particulars of the acquisition required by section 465(3) must be

provided to the Inland Revenue before 7th July 2003.

          (4)      However, no particulars of the acquisition need be provided by a company

5

under section 465 if the company has already given particulars of it under—

              (a)             section 85(1) of FA 1988 (which made provision corresponding to

section 465 for tax years before 2003-04),

              (b)             section 136(6) of ICTA (which made provision corresponding to

section 486 for such tax years), or

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              (c)             section 140G(1) of ICTA (which made provision corresponding to

section 432 for such tax years).

  61      (1)      This paragraph applies where after 4th February but before 6th April 2003—

              (a)             a chargeable event (within the meaning given by section 450)

occurred in relation to shares in a company, or

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              (b)             a person received a chargeable benefit (within the meaning given by

section 458) in respect of shares, or an interest in shares, in a

company.

          (2)      Section 466 (duty to notify chargeable events and chargeable benefits)

applies in relation to the event or benefit subject to the following provisions.

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          (3)      The particulars required by section 466(2) must be provided to the Inland

Revenue within 60 days after the date on which the event occurred or the

benefit was received.

          (4)      However, no particulars of the event or benefit need be provided by a

company under section 466 if the company has already given particulars of

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it under section 85(2) of FA 1988 (which made provision corresponding to

section 466 for tax years before 2003-04).

Share options

  62       The following provisions have effect in relation to rights obtained before 6th

April 1998 with the substitution of “seventh anniversary” for “tenth

30

anniversary”—

              (a)             section 474(1) (no charge in respect of receipt of shorter-term option),

and

              (b)             section 475(1) (value of longer-term option for purposes of liability to

tax in respect of receipt).

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  63      (1)      This paragraph relates to the operation of section 473 (share options to which

Chapter 5 of Part 7 does not apply).

          (2)      Section 473(1) applies in relation to a share option granted before 6th April

2003 with the substitution of “if the person was not chargeable under Case I

of Schedule E in respect of the office or employment” for the words from “if

40

the earnings” onwards.

  64      (1)      This paragraph relates to the operation of section 478 (amount of charges) in

relation to a share option obtained before 6th April 2003.

          (2)      For the purposes of section 478(1), any amount charged to tax under

Schedule E in respect of the receipt of the share option is a deductible

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amount.

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 7 — Employment income: share-related income

    547

 

  65      (1)      This paragraph relates to the operation of section 479 (amount of gain

realised by exercising option) in relation to a share option obtained before

6th April 2003.

          (2)      For the purposes of section 479(1), if an amount was chargeable to tax under

section 185(6) of ICTA (charge where option under approved share option

5

scheme granted at a discount) in respect of the share option, so much of that

amount as is attributable to the shares in question is a deductible cost.

  66      (1)      This paragraph relates to the operation of section 480 (amount of gain

realised by assigning or releasing option) in relation to a share option

obtained before 6th April 2003.

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          (2)      For the purposes of section 480(1), if an amount was chargeable to tax under

section 185(6) of ICTA (charge where option under approved share option

scheme granted at a discount) in respect of the share option, so much of that

amount as is attributable to the shares in question is a deductible cost.

  67      (1)      This paragraph applies where in the tax year 2002-03 a company—

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              (a)             granted a share option in respect of which tax might have become

chargeable under section 135 of ICTA,

              (b)             allotted or transferred shares on the exercise of such a share option,

              (c)             received notice of the assignment of such a share option, or

              (d)             provided a benefit in money or money’s worth—

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                    (i)                   for the assignment of such a share option,

                    (ii)                  for the release in whole or in part of such a share option,

                    (iii)                 for or in connection with a failure, or undertaking not, to

exercise such a share option, or

                    (iv)                  for or in connection with the grant of, or an undertaking to

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grant, a right to acquire shares or an interest in shares to

which such a share option relates.

          (2)      Section 486 (duty to notify matters relating to share options) applies in

relation to the matter subject to the following provisions.

          (3)      The particulars required by section 486(2) must be provided to the Inland

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Revenue before 7th July 2003.

          (4)      However, no particulars of the provision need be provided by a company

under section 486 if the company has already given particulars of it under—

              (a)             section 136(6) of ICTA (which made provision corresponding to

section 486 for tax years before 2003-04), or

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              (b)             paragraph 2 of Schedule 14 to FA 2000 (which made provision

corresponding to paragraph 44 of Schedule 5 for tax years before

2003-04).

Approved share incentive plans

  68      (1)      This paragraph applies where, immediately before 6th April 2003, an

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employee share ownership plan was approved under Schedule 8 to FA 2000

(employee share ownership plans).

          (2)      On and after that date the plan is to be treated as a share incentive plan (or

“SIP”) approved by the Inland Revenue under Schedule 2 to this Act.

          (3)      Sub-paragraph (2) has effect even if the provisions of the plan do not wholly

45

conform with the provisions of Schedule 2 to this Act, but it has effect

without prejudice to—

 

 

Income Tax (Earnings and Pensions) Bill
Schedule 7 — Transitionals and savings
Part 7 — Employment income: share-related income

    548

 

              (a)             paragraphs 83 and 84 of that Schedule (withdrawal of approval),

              (b)             paragraphs 89 and 90 of that Schedule (termination of plan), and

              (c)             any alteration of the plan.

          (4)      For the purposes of paragraph 84(1)(a) of Schedule 2, as it applies to the plan,

nothing is to be regarded as a disqualifying event because of a contravention

5

of any of the requirements of that Schedule if the requirement in question

does not correspond to any of the requirements of Schedule 8 to FA 2000.

          (5)      Nothing in this Act affects the validity of—

              (a)             any provision of the plan which was included in it at any time before

6th April 2003 in accordance with the provisions of Schedule 8 to FA

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2000 as then in force, or

              (b)             any award of shares under the plan which was made at any such

time in accordance with the provisions of that Schedule as then in

force.

          (6)      In this paragraph—

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               “award of shares” means the appropriation of shares to, or the

acquisition of shares on behalf of, a person;

               “employee share ownership plan” has the meaning given by

paragraph 1(1) of Schedule 8 to FA 2000.

  69      (1)      Any reference in any enactment, instrument or document—

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              (a)             to an employee share ownership plan, or

              (b)             to an employee share ownership plan approved under Schedule 8 to

FA 2000,

                   is to be read as including, in relation to times after 5th April 2003, a reference

to a share incentive plan or to a share incentive plan approved under

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Schedule 2 to this Act.

          (2)      Any reference in any enactment, instrument or document—

              (a)             to a share incentive plan (or SIP), or

              (b)             to a share incentive plan (or SIP) approved under Schedule 2 to this

Act,

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                   is to be read as including, in relation to times before 6th April 2003, a

reference to an employee share ownership plan or to an employee share

ownership plan approved under Schedule 8 to FA 2000.

          (3)      Accordingly any reference in the SIP code to shares awarded under an

approved SIP is to be read as including, in relation to times before 6th April

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2003, a reference to shares awarded under a plan approved under Schedule

8 to FA 2000.

          (4)      Any reference in a plan within paragraph 68(1) to a person chargeable to tax

under Case I of Schedule E is to be read as including, in relation to times after

5th April 2003, a reference to a person whose earnings fall within paragraph

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8(2) of Schedule 2 to this Act.

          (5)      This paragraph—

              (a)             is without prejudice to Part 1 of this Schedule, and

              (b)             applies only in so far as the context permits.

          (6)      In this paragraph—

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               “awarded” means appropriated to, or acquired on behalf of, a person;

               “employee share ownership plan” has the same meaning as in

paragraph 68.

 

 

 
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