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Finance Bill
Schedule 21 — Approved share plans and schemes
Part 2 — SAYE option schemes

    254

 

Part 2

SAYE option schemes

Introductory

  9        Schedule 3 to the Income Tax (Earnings and Pensions) Act 2003 (c. 1)

(approved SAYE option schemes) is amended as follows.

5

Minor correction

  10       In paragraph 25(3)(a) (limit on contributions under CCS schemes linked to

approved SAYE schemes), after “SAYE” insert “option”.

Exercise of options: scheme-related employment ends because of change of control or transfer

  11      (1)      Paragraph 34 (exercise of options: scheme-related employment ends) is

10

amended as follows.

          (2)      In sub-paragraph (2)(a), after “1996” insert “or ER(NI)O 1996”.

          (3)      In sub-paragraph (5)—

              (a)             for “provide that,” substitute “make provision about the time when

the options may be exercised”, and

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              (b)             omit the words following paragraph (b).

          (4)      After that sub-paragraph insert—

                           “(5A)                  If the scheme makes provision by virtue of sub-paragraph (5), the

provision must be either—

                      (a)                                             that the options may be exercised within 6 months after the

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termination date, or

                      (b)                     that the options may be exercised within 6 months after the

date (if any) when P ceases to hold the employment which

(before the termination date) was the scheme-related

employment for a reason within sub-paragraph (2)(a) or

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(b).”.

Alteration of schemes

  12      (1)      Paragraph 42 (withdrawal of approval) is amended as follows.

          (2)      In sub-paragraph (2), after “to be met;” insert—

                      “(aa)                        an alteration is made in a key feature of the scheme

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without the approval of the Inland Revenue;”.

          (3)      After that sub-paragraph insert—

                           “(2A)                  For the purposes of sub-paragraph (2)(aa) the Inland Revenue

may not withhold their approval unless it appears to them at the

time in question that the scheme as proposed to be altered would

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not then be approved on an application under paragraph 40.

                           (2B)                  For the purposes of that sub-paragraph a “key feature” of a scheme

is a provision of the scheme which is necessary in order to meet the

requirements of this Schedule.”.

          (4)      For paragraph 43 (approval ineffective after unapproved alteration and

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Finance Bill
Schedule 21 — Approved share plans and schemes
Part 3 — CSOP schemes

    255

 

notice of decisions) and the heading before it substitute—

“Notice of decision about alteration

          43                  Where the Inland Revenue—

                      (a)                     have been requested to approve any alteration in a SAYE

option scheme that has been approved, and

5

                      (b)                     have decided whether or not to approve the alteration,

                            they must give notice of their decision to the scheme organiser.”.

          (5)      For paragraph 44(1)(b) (appeal against decision not to approve alteration)

substitute—

                      “(b)                        decide to refuse approval under paragraph 42(2)(aa).”.

10

Part 3

CSOP schemes

Introductory

  13       The Income Tax (Earnings and Pensions) Act 2003 (c. 1) is amended as

follows.

15

Exercise of options: exclusion of income tax liability

  14      (1)      Section 524 (no charge in respect of exercise of option under CSOP scheme)

is amended as follows.

          (2)      For subsection (1)(b) substitute—

                    “(b)                      Condition A or B is met.”.

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          (3)      For subsections (2) and (3) substitute—

              “(2)                Condition A is that the option is exercised—

                    (a)                   on or after the third anniversary of the date on which it was

granted, but

                    (b)                   not later than the tenth anniversary of that date.

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              (2A)                Condition B is that the option—

                    (a)                   is exercised before the third anniversary of the date on which

it was granted, and

                    (b)                   is so exercised by virtue of a provision included in the scheme

under paragraph 24 of Schedule 4 (exercise of options after

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ceasing to be director or employee) in circumstances in which

subsection (2B) applies.

              (2B)                This subsection applies if the individual exercising the option—

                    (a)                   has ceased to be a full-time director or qualifying employee

of the scheme organiser (or, in the case of a group scheme, a

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constituent company) because of injury, disability,

redundancy or retirement, and

                    (b)                   exercises the option within 6 months of the day on which he

ceases to be such a director or employee.

              (2C)                In subsection (2B)—

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Finance Bill
Schedule 21 — Approved share plans and schemes
Part 3 — CSOP schemes

    256

 

                                      “redundancy” means redundancy within the meaning of ERA

1996 or ER(NI)O 1996, and

                                      “retirement” means retirement on or after reaching a retirement

age specified in the scheme.”.

          (4)      For section 525(1)(b) (no charge in respect of post-acquisition benefits)

5

substitute—

                    “(b)                      Condition A or B (as set out in section 524(2) or (2A)) is met.”.

          (5)      This paragraph has effect in relation to any exercise of an option on or after

9th April 2003.

  15      (1)      Schedule 4 (approved CSOP schemes) is amended as follows.

10

          (2)      After paragraph 35 insert—

“Retirement age

          35A                                   A retirement age specified in a CSOP scheme—

                      (a)                     must be the same for men and women, and

                      (b)                     must not be less than 55.”.

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Meaning of “material interest”

  16      (1)      In paragraphs 10(2) and (3), 11(3) and (4) and 13(2) (material interest), for

“10%” substitute “25%”.

          (2)      This paragraph has effect for the purpose of determining whether a person

is eligible to participate in a scheme on the date on which this Act is passed

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or any later date (by altering what constitutes a material interest on that date

and within the 12 months preceding that date).

Alteration of schemes

  17      (1)      Paragraph 30 (withdrawal of approval) is amended as follows.

          (2)      In sub-paragraph (2), after “to be met;” insert—

25

                      “(aa)                        an alteration is made in a key feature of the scheme

without the approval of the Inland Revenue;”.

          (3)      After that sub-paragraph insert—

                           “(3)                  For the purposes of sub-paragraph (2)(aa) the Inland Revenue

may not withhold their approval unless it appears to them at the

30

time in question that the scheme as proposed to be altered would

not then be approved on an application under paragraph 28.

                           (4)                  For the purposes of that sub-paragraph a “key feature” of a scheme

is a provision of the scheme which is necessary in order to meet the

requirements of this Schedule.”.

35

          (4)      For paragraph 31 (approval ineffective after unapproved alteration and

notice of decisions) and the heading before it substitute—

“Notice of decision about alteration

          31                  Where the Inland Revenue—

                      (a)                     have been requested to approve any alteration in a CSOP

40

scheme that has been approved, and

 

 

Finance Bill
Schedule 22 — Employee securities and options

    257

 

                      (b)                     have decided whether or not to approve the alteration,

                            they must give notice of their decision to the scheme organiser.”.

          (5)      For paragraph 32(1)(b) (appeal against decision not to approve alteration)

substitute—

                      “(b)                        decide to refuse approval under paragraph 30(2)(aa).”.

5

PAYE

  18      (1)      Section 701(2)(c) (PAYE: exclusions from meaning of “asset”) is amended as

follows.

          (2)      In sub-paragraph (i), omit “or 4 (approved CSOP schemes)”.

          (3)      After that sub-paragraph insert—

10

                           “(ia)                             any shares acquired by the employee (whether or not

as a result of the exercise of a right to acquire shares)

under a scheme approved under Schedule 4

(approved CSOP schemes), other than shares

acquired as a result of the exercise of the right before

15

the third anniversary of the date on which it was

granted or later than the tenth anniversary of that

date;”.

          (4)      In sub-paragraph (ii), for “such a scheme” substitute “a scheme such as is

mentioned in sub-paragraph (i) or (ia)”.

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          (5)      This paragraph has effect in relation to shares acquired on or after 9th April

2003.

Schedule 22

Section 140

 

Employee securities and options

Introductory

25

  1        The Income Tax (Earnings and Pensions) Act 2003 (c. 1) is amended as

follows.

 

 

Finance Bill
Schedule 22 — Employee securities and options

    258

 

Main provisions

  2       (1)      For Chapter 1 of Part 7 (and the heading of that Part) substitute—

Employment income: income and exemptions relating to securities

Chapter 1

Introduction

5

General

       417            Scope of Part 7

              (1)             This Part contains special rules about cases where securities,

interests in securities or securities options are acquired in connection

with an employment.

10

              (2)             The rules are contained in—

                                      Chapter 2 (restricted securities),

                                      Chapter 3 (convertible securities),

                                      Chapter 3A (securities with artificially depressed market

value),

15

                                      Chapter 3B (securities with artificially enhanced market value),

                                      Chapter 3C (securities acquired for less than market value),

                                      Chapter 3D (securities disposed of for more than market value),

                                      Chapter 4 (post-acquisition benefits from securities),

                                      Chapter 5 (securities options),

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                                      Chapter 6 (approved share incentive plans),

                                      Chapter 7 (approved SAYE option schemes),

                                      Chapter 8 (approved CSOP schemes),

                                      Chapter 9 (enterprise management incentives), and

                                      Chapter 10 (priority share allocations).

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              (3)             The following make provision for amounts to count as employment

income—

                                      Chapters 2 to 6, and

                                      Chapter 8.

              (4)             The following make provision for exemptions and reliefs from

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income tax—

                                      Chapters 2 and 3, and

                                      Chapters 5 to 10.

              (5)             Chapter 11 contains supplementary provisions relating to employee

benefit trusts.

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              (6)             Section 5(1) (application of employment income Parts to office-

holders generally) does not apply to Chapters 6 to 10; and section

549(5) makes provision about its application to Chapter 11.

       418            Other related provisions

              (1)             In Part 3—

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Finance Bill
Schedule 22 — Employee securities and options

    259

 

                                      Chapter 1 (earnings), and

                                      Chapter 10 (taxable benefits: residual liability to charge),

                              may also have effect in relation to securities and interests in

securities (but not securities options).

              (2)             Part 7 of Schedule 7 (transitional provisions relating to securities and

5

securities options) may also be relevant.

              (3)             In view of section 49 of FA 2000 (phasing out of APS schemes) the

following are not rewritten in this Act and continue in force

unaffected by the repeals made by this Act—

                                      section 186 of ICTA (APS schemes) and section 187 of that Act

10

(interpretation) so far as relating to APS schemes, and

                                      Schedule 9 to ICTA (approval of share schemes) so far as

relating to APS schemes and Schedule 10 to that Act (further

provisions about APS schemes).

            “APS schemes” means profit sharing schemes approved under

15

Schedule 9 to ICTA.

              (4)             Sections 138 to 140 of ICTA (share acquisitions by directors and

employees) continue to apply in relation to shares or interests in

shares acquired before 26th October 1987 (see paragraph 57 of

Schedule 7).

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       419            Negative amounts treated as nil

If the result given by any formula under any provision of this Part

would otherwise be a negative amount, the result is to be taken to be

nil instead.

Interpretation of Chapters 1 to 5

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       420            Meaning of “securities” etc

              (1)             Subject to subsections (5) and (6), for the purposes of this Chapter

and Chapters 2 to 5 the following are “securities”—

                    (a)                   shares in any body corporate (wherever incorporated) or in

any unincorporated body constituted under the law of a

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country or territory outside the United Kingdom,

                    (b)                   debentures, debenture stock, loan stock, bonds, certificates of

deposit and other instruments creating or acknowledging

indebtedness,

                    (c)                   warrants and other instruments entitling their holders to

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subscribe for securities (whether or not in existence or

identifiable),

                    (d)                   certificates and other instruments conferring rights in respect

of securities held by persons other than the persons on whom

the rights are conferred and the transfer of which may be

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effected without the consent of those persons,

                    (e)                   units in a collective investment scheme,

                    (f)                   futures, and

                    (g)                   rights under contracts for differences or contracts similar to

contracts for differences.

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Finance Bill
Schedule 22 — Employee securities and options

    260

 

              (2)             In subsection (1)(e) “collective investment scheme” means

arrangements—

                    (a)                   which are made with respect to property of any description,

including money, and

                    (b)                   the purpose or effect of which is to enable persons taking part

5

in the arrangements (whether by becoming owners of the

property or any part of it or otherwise) to participate in or

receive profits or income arising from the acquisition,

holding, management or disposal of the property or sums

paid out of such profits or income.

10

              (3)             In subsection (1)(f) “futures” means rights under a contract for the

sale of a commodity or other property under which delivery is to be

made at a future date at a price agreed when the contract is made;

and for this purpose a price is to be taken to be agreed when the

contract is made—

15

                    (a)                   if it is left to be determined by reference to the price at which

a contract is to be entered into on a market or exchange or

could be entered into at a time and place specified in the

contract, and

                    (b)                   in a case where the contract is expressed to be by reference to

20

a standard lot and quality, even if provision is made for a

variation in the price to take account of any variation in

quantity or quality on delivery.

              (4)             For the purposes of subsection (1)(g) a contract similar to a contract

for differences is a contract—

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                    (a)                   which is not a contract for differences, but

                    (b)                   the purpose or pretended purpose of which is to secure a

profit or avoid a loss by reference to fluctuations in the value

or price of property or an index or other factor designated in

the contract.

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              (5)             The following are not “securities” for the purposes of this Chapter or

Chapters 2 to 5—

                    (a)                   cheques and other bills of exchange, bankers’ drafts and

letters of credit (other than bills of exchange accepted by a

banker),

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                    (b)                   money and statements showing balances on a current,

deposit or savings account,

                    (c)                   leases and other dispositions of property and heritable

securities,

                    (d)                   rights under contracts of insurance (within the meaning of

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the Financial Services and Markets Act 2000 (Regulated

Activities) Order 2001), and

                    (e)                   options.

              (6)             The Treasury may by order amend subsections (1) to (5).

              (7)             An order under subsection (6) may include any appropriate

45

consequential provision (including provision amending any

enactment).

              (8)             In this Chapter and Chapters 2 to 5—

 

 

 
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