House of Lords portcullis
House of Lords
Session 2002 - 03
Internet Publications
Other Bills before Parliament

Finance Bill


Finance Bill
Schedule 22 — Employee securities and options

    261

 

                                      “interest”, in relation to securities (or shares), means an interest

in them less than full beneficial ownership and includes an

interest in proceeds of their sale, but does not include a right

to acquire them,

                                      “securities option” means a right to acquire securities, and

5

                                      “shares” includes stock.

       421            Meaning of “market value” etc

              (1)             In this Chapter and Chapters 2 to 5 “market value” has the same

meaning as it has for the purposes of TCGA 1992 by virtue of Part 8

of that Act.

10

              (2)             Where consideration for anything is given in the form of an asset (as

opposed to a payment), any reference in this Chapter or any of

Chapters 2 to 5 to the amount of the consideration is to the market

value of the asset.

       421A            Meaning of “consideration”

15

              (1)             This section applies for determining for the purposes of Chapters 2

to 5 the amount of the consideration given for anything.

              (2)             If any consideration is given partly in respect of one thing and partly

in respect of another, the amount given in respect of the different

things is to determined on a just and reasonable apportionment.

20

              (3)             The consideration which is taken to be given wholly or partly for

anything does not include the performance of any duties of, or in

connection with, an employment.

              (4)             No amount is to be counted more than once in calculating the

amount of any consideration.

25

Application of Chapters 2 to 4

       421B            Application of Chapters 2 to 4

              (1)             Subject as follows (and to any provision contained in Chapters 2 to

4) those Chapters apply to securities, or an interest in securities,

acquired by a person where the right or opportunity to acquire the

30

securities or interest is available by reason of an employment of that

person or any other person.

              (2)             For the purposes of subsection (1)—

                    (a)                   securities are, or an interest in securities is, acquired at the

time when the person acquiring the securities or interest

35

becomes beneficially entitled to those securities or that

interest (and not, if different, the time when the securities are,

or interest is, conveyed or transferred), and

                    (b)                   “employment” includes a former or prospective

employment.

40

              (3)             A right or opportunity to acquire securities or an interest in securities

made available by a person’s employer, or by a person connected

with a person’s employer, is to be regarded for the purposes of

 

 

Finance Bill
Schedule 22 — Employee securities and options

    262

 

subsection (1) as available by reason of an employment of that

person unless—

                    (a)                   the person by whom the right or opportunity is made

available is an individual, and

                    (b)                   the right or opportunity is made available in the normal

5

course of the domestic, family or personal relationships of

that person.

              (4)             Chapters 2 to 4 cease to apply to securities, or an interest in securities,

when subsection (5), (6) or (7) is satisfied.

              (5)             This subsection is satisfied immediately after the securities are, or the

10

interest in securities is, disposed of otherwise than to an associated

person.

              (6)             This subsection is satisfied immediately before the death of the

employee.

              (7)             This subsection is satisfied 7 years after the first date after the

15

acquisition on which the employee is an employee of none of the

following—

                    (a)                   the employer,

                    (b)                   (if the securities are, or the interest in securities is an interest

in, securities issued by a company) the company by which

20

they are issued, or

                    (c)                   a person connected with a person within paragraph (a) or (b).

              (8)             In this Chapter and Chapters 2 to 4—

                                      “the acquisition”, in relation to employment-related securities,

means the acquisition of the employment-related securities

25

pursuant to the right or opportunity available by reason of

the employment,

                                      “the employment”, in relation to employment-related

securities, means the employment by reason of which the

right or opportunity to acquire the employment-related

30

securities is available (“the employee” and “the employer”

being construed accordingly unless otherwise indicated),

and

                                      “employment-related securities” means securities or an interest

in securities to which Chapters 2 to 4 apply (ignoring any

35

provision of any of those Chapters which limits the

application of the Chapter to a particular description or

descriptions of employment-related securities).

       421C                        Associated persons

              (1)             For the purposes of this Chapter and Chapters 2 to 4 the following

40

are “associated persons” in relation to employment-related

securities—

                    (a)                   the person who acquired the employment-related securities

on the acquisition,

                    (b)                   (if different) the employee, and

45

                    (c)                   any relevant linked person.

              (2)             A person is a relevant linked person if—

 

 

Finance Bill
Schedule 22 — Employee securities and options

    263

 

                    (a)                   that person (on the one hand), and

                    (b)                   either the person who acquired the employment-related

securities on the acquisition or the employee (on the other),

                              are connected or, although not connected, are members of the same

household.

5

              (3)             But a company which would otherwise be a relevant linked person

is not if it is—

                    (a)                   the employer,

                    (b)                   the person from whom the employment-related securities

were acquired,

10

                    (c)                   the person by whom the right or opportunity to acquire the

employment-related securities was made available, or

                    (d)                   the person by whom the employment-related securities (or

the securities in which they are an interest) were issued.

       421D Replacement and additional securities and changes in interests

15

              (1)             Subsections (2) and (3) apply where an associated person is entitled

to employment-related securities (the “original securities”) and

either—

                    (a)                   as a result of the conversion of the original securities (or the

securities in which they are an interest), or of any other

20

transaction or series of transactions, that person ceases to be

entitled to the original securities but that person or another

associated person acquires securities or an interest in

securities (the “replacement securities”), or

                    (b)                   by virtue of that person being entitled to the original

25

securities, that person or another associated person acquires

other securities or an interest in other securities (the

“additional securities”).

              (2)             The replacement securities or the additional securities are to be

regarded for the purposes of section 421B(1) (securities acquired

30

pursuant to a right or opportunity available by reason of an

employment) as acquired pursuant to the same right or opportunity

as the original securities.

              (3)             Where the market value of the original securities is reduced by

reason of the issue of, or of securities including, the replacement

35

securities or the additional securities (or the securities in which they

are an interest), the amount of that reduction is to be treated for the

purposes of Chapters 2 and 3 as consideration or additional

consideration given for the acquisition of the replacement securities

or the additional securities.

40

              (4)             Subsections (2) and (3) apply whether or not the replacement

securities, or the additional securities, were acquired for

consideration.

              (5)             Where Chapters 2 to 4 apply to an interest in securities, an increase

of that interest is to be treated for the purposes of section 421B(1)

45

(securities acquired pursuant to a right or opportunity available by

reason of an employment) as a separate interest acquired pursuant to

the same right or opportunity as the original interest.

 

 

Finance Bill
Schedule 22 — Employee securities and options

    264

 

              (6)             Where Chapters 2 to 4 apply to an interest in securities, a reduction

of that interest (otherwise than by a disposal to an associated person)

is to be treated for the purposes of those Chapters as the disposal

otherwise than to an associated person of a separate interest

proportionate to the reduction.

5

       421E            Exclusions: residence etc

              (1)             Chapters 2, 3 and 4 do not apply in relation to employment-related

securities if, at the time of the acquisition, the earnings from the

employment were not (or would not have been if there had been any)

general earnings to which section 15 or 21 applies (earnings for year

10

when employee resident and ordinarily resident in the UK).

              (2)             Chapters 3A to 3D do not apply in relation to employment-related

securities if, at the time of the acquisition, the earnings from the

employment were not (or would not have been if there had been any)

general earnings to which any of the charging provisions of Chapter

15

4 or 5 of Part 2 apply.

              (3)             Chapters 2 to 4 do not apply in the case of a former employment if

they would not apply if the acquisition had taken place in the last tax

year in which the employment was held.

              (4)             Chapters 2 to 4 do not apply in the case of a prospective employment

20

if they would not apply if the acquisition had taken place in the first

tax year in which the employment is held.

              (5)             Where the employment-related securities are replacement securities

or additional securities (within the meaning of section 421D), the

references in this section to the acquisition are to the acquisition of

25

the original securities (within the meaning of that section).

       421F                                    Exclusions: public offers

              (1)             Chapters 2 to 4 do not apply in relation to employment-related

securities that are shares acquired under the terms of an offer to the

public or an interest in shares so acquired.

30

              (2)             In a case within subsection (1) of section 544 (exemption for priority

share allocations where offer to employees separate from public

offer), any acquisition made under the terms of either the public offer

or the employee offer within the meaning of that subsection is to be

treated for the purposes of this section as made under the terms of an

35

offer to the public.

              (3)             Subsection (2) applies whether or not there is any benefit within

section 544(2) (benefit derived from entitlement to priority allocation

exempt from income tax).

       421G            Exclusions: approved plan or scheme securities

40

                                                Chapters 2 to 4 do not apply to—

                    (a)                      shares awarded or acquired under an approved share

incentive plan (within the meaning of Chapter 6 of this Part),

                    (b)                      shares acquired by the exercise of a share option granted

under an approved SAYE option scheme (within the

45

meaning of Chapter 7 of this Part), or

 

 

Finance Bill
Schedule 22 — Employee securities and options

    265

 

                    (c)                      shares acquired by the exercise of a share option granted

under an approved CSOP scheme (within the meaning of

Chapter 8 of this Part).

       421H Meaning of “employee-controlled” etc

              (1)             For the purposes of Chapters 2 to 4 a company is “employee-

5

controlled” by virtue of shares of a class if—

                    (a)                   the majority of the company’s shares of that class (other than

any held by or for the benefit of an associated company) are

held by or for the benefit of employees of the company or a

company controlled by the company, and

10

                    (b)                   those employees are together able as holders of the shares to

control the company.

                              In this subsection “employee” includes a person who is to be or has

been an employee.

              (2)             In this section and Chapters 2 to 4 “associated company” has the

15

same meaning as, by virtue of section 416 of ICTA, it has for the

purposes of Part 11 of ICTA.

       421I            Consideration for acquisition of employment-related securities

              (1)             This section applies for determining for the purposes of Chapters 2

to 3A the amount of the consideration given for the acquisition of

20

employment-related securities.

              (2)             References to consideration given for the acquisition of the

employment-related securities are to consideration given by—

                    (a)                   the employee, or

                    (b)                   (if not the employee) the person by whom the employment-

25

related securities were acquired.

              (3)             The amount of the consideration given by a person for the

acquisition of the employment-related securities includes the

amount of any consideration given for a right to acquire the

employment-related securities.

30

              (4)             If the right to acquire the employment-related securities (“the new

option”) is the whole or part of the consideration for the assignment

or release of another right to acquire them (“the old option”), the

amount of the consideration given for the new option is to be treated

as being the sum of—

35

                    (a)                   the amount by which the amount of the consideration given

for the old option exceeds the amount of any consideration

for the assignment or release of the old option, apart from the

new option, and

                    (b)                   any valuable consideration given for the new option, apart

40

from the old option.

              (5)             Two or more transactions are to be treated for the purposes of

subsection (4) as a single transaction by which a right to acquire the

employment-related securities is assigned for a consideration which

consists of or includes another right to acquire the employment-

45

related securities if—

 

 

Finance Bill
Schedule 22 — Employee securities and options

    266

 

                    (a)                   the transactions result in a person ceasing to hold a right to

acquire the employment-related securities and that person or

a connected person coming to hold another right to acquire

them, and

                    (b)                   one or more of the transactions is effected under

5

arrangements to which two or more persons who hold rights

to acquire the employment-related securities, in respect of

which there may be a liability to tax under Chapter 5 of this

Part (securities options), are parties.

              (6)             Subsection (5) applies regardless of the order in which the

10

assignment and the acquisition occur.

              (7)             In this section “release”, in relation to a right to acquire the

employment-related securities, includes agreeing to the restriction of

the exercise of the right.

Information

15

       421J            Duty to provide information

              (1)             This section applies in relation to reportable events.

              (2)             Section 421K explains what are reportable events for the purposes of

this section.

              (3)             Each person who is a responsible person in relation to a reportable

20

event must provide the Inland Revenue with particulars in writing

of the reportable event before 7th July in the tax year following that

in which the reportable event takes place.

              (4)             The Inland Revenue may by notice require any person to provide

them with such particulars of any reportable events—

25

                    (a)                   which take place in a period specified in the notice, and

                    (b)                   in relation to which that person is a responsible person,

                              as are required by the notice or, if no reportable event in relation to

which that person is a responsible person has taken place in that

period, to state that fact.

30

              (5)             A notice under subsection (4) must specify a date by which it must

be complied with.

              (6)             That date must not be less than 30 days after the date when the notice

is given.

              (7)             Once one person complies with the duty imposed by subsection (3)

35

in relation to a reportable event, that subsection ceases to impose a

duty on any other person in relation to the reportable event.

              (8)             Once a person complies with the duty imposed by a notice under

subsection (4) by providing the required particulars of a reportable

event, subsection (3) ceases to impose a duty on that person or any

40

other person in relation to that reportable event.

              (9)             Section 421L explains who are the responsible persons in relation to

a reportable event.

 

 

Finance Bill
Schedule 22 — Employee securities and options

    267

 

              (10)            The particulars required by, or by a notice under, this section must

be provided in a form specified by the Board of Inland Revenue.

              (11)            A person need not provide particulars required by, or by a notice

under, this section if they have been given in a notice under

paragraph 44 of Schedule 5 (enterprise management incentives:

5

notice of option to be given to Inland Revenue).

                              In other respects the obligations imposed by, or by a notice under,

this section and by that paragraph are independent of each other.

              (12)            Paragraph 52 of that Schedule contains a duty to deliver annual

returns where a company’s shares are subject to a qualifying option

10

within the meaning of that Schedule.

       421K            Reportable events

              (1)             This section applies for the purposes of section 421J (duty to provide

information).

              (2)             Each of the events mentioned in subsection (3) is a reportable event.

15

              (3)             The events are—

                    (a)                   an acquisition (or an event treated as an acquisition) of

securities, an interest in securities or a securities option

pursuant to a right or opportunity available by reason of the

employment of the person who acquires the securities,

20

interest in securities or securities option or of any other

person,

                    (b)                   an event which is a chargeable event in relation to securities,

or an interest in securities, for the purposes of section 426

(chargeable events in relation to restricted securities and

25

restricted interests in securities),

                    (c)                   an event which is a chargeable event in relation to securities,

or an interest in securities, for the purposes of section 438

(chargeable events in relation to convertible securities and

interests in convertible securities),

30

                    (d)                   the doing of anything which gives rise to a taxable amount

counting as employment income under section 446L

(artificial enhancement of market value of securities),

                    (e)                   an event which discharges a notional loan relating to

securities, or an interest in securities, under section 446U

35

(securities and interests in securities acquired for less than

market value),

                    (f)                   a disposal of securities, or an interest in securities, by virtue

of which Chapter 3D of this Part applies (securities and

interests in securities disposed of for more than market

40

value),

                    (g)                   the receipt of a benefit which gives rise to a taxable amount

counting as employment income under section 447 (charge

on benefit from securities or interest in securities),

                    (h)                   the assignment or release of a securities option acquired

45

pursuant to a right or opportunity available by reason of the

employment of the person who acquires the securities option

or any other person, and

 

 

 
previous section contents continue
 
House of Lords home page Houses of Parliament home page House of Commons home page search page enquiries

© Parliamentary copyright 2003
Revised 2 July 2003