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Finance Bill
Schedule 22 — Employee securities and options

    292

 

                    (b)                   the person is connected with a person who so acquired the

shares or with the employee and acquired the shares

otherwise than by or under a disposal made by way of a

bargain at arm’s length from the employee or another person

who is related to the employee.

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       446S Notional loan

              (1)             Where this Chapter applies an interest-free loan (“the notional loan”)

is to be treated as having been made to the employee by the

employer at the time of the acquisition.

              (2)             The provisions listed in subsection (3) apply as though the notional

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loan were an employment-related loan as defined in section 174 if

and for so long as the employment has not terminated.

              (3)             The provisions are—

                                      section 175 (benefit of taxable cheap loan treated as earnings),

                                      section 178 (exception for loans where interest qualifies for tax

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relief),

                                      section 180 (threshold for benefit of loan to be treated as

earnings),

                                      section 182 (normal method of calculation: averaging),

                                      section 183 (alternative method of calculation),

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                                      section 184 (interest treated as paid),

                                      section 185 (apportionment of cash equivalent in case of joint

loan etc), and

                                      section 187 (aggregation of loans by close company to director).

       446T                                    Amount of notional loan

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              (1)             The amount of the notional loan initially outstanding is—equation: plus[times[char[M],char[V]],minus[times[char[D],char[A]]]]

where—

                      MV is the market value of the employment-related securities at

the time of the acquisition, and

                      DA is the total of any deductible amounts.

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              (2)             Where the employment-related securities are, or are an interest in,

securities which are not fully paid up, the reference in subsection (1)

to the market value of the employment-related securities is to what

it would be if the securities were fully paid up.

              (3)             For the purposes of subsection (1) each of the following is a

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“deductible amount”—

                    (a)                   any payment made for the employment-related securities by

the employee, and any payment so made by the person by

whom they were acquired (if not the employee), at or before

the time of the acquisition,

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                    (b)                   any amount that constitutes earnings from the employee’s

employment under Chapter 1 of Part 3 (earnings) in respect

of the acquisition of the employment-related securities,

                    (c)                   if section 425(2) (no charge on acquisition of certain restricted

securities or restricted interests in securities) applies in

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Schedule 22 — Employee securities and options

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relation to the employment-related securities, any amount

that counts as employment income of the employee under

section 426 by reason of the first event which is a chargeable

event for the purposes of that section in relation to the

employment-related securities,

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                    (d)                   if the employment-related securities were acquired on a

conversion of other employment-related securities, any

amount that counts as employment income of the employee

under section 438 (charge on conversion) by reason of the

conversion, and

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                    (e)                   if the acquisition is pursuant to a securities option, any

amount that counted as employment income of the employee

under section 476 (acquisition of securities pursuant to

securities option) in respect of the acquisition.

              (4)             The amount of the notional loan outstanding at any subsequent time

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is the difference between—

                    (a)                   the amount initially outstanding, and

                    (b)                   the amount of any payments or further payments made for

the employment-related securities after the acquisition but

before that time.

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       446U            Discharge of notional loan

              (1)             The notional loan is treated as discharged when—

                    (a)                   the employment-related securities are disposed of otherwise

than to an associated person, or

                    (b)                   if the employment-related securities were securities, or an

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interest in securities, not fully paid up at the time of the

acquisition, the outstanding or contingent liability to pay for

them is released, transferred or adjusted so as no longer to

bind any associated person.

              (2)             If the notional loan is discharged as the result of an event specified in

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subsection (1), the amount of the notional loan outstanding

immediately before the occurrence of the event counts as

employment income of the employee for the relevant tax year

(whether or not the employment has terminated before or since the

acquisition).

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              (3)             The “relevant tax year” is the tax year in which the notional loan is

treated as discharged.

              (4)             The notional loan is also treated as discharged when—

                    (a)                   payments or further payments for the employment-related

securities equal to the amount initially outstanding in

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relation to them have been made by an associated person, or

                    (b)                   the employee dies.

       446V            Chapter to be additional to other income tax charges

      This Chapter does not affect any liability to income tax arising in

respect of the acquisition under—

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                    (a)                      Chapter 1 of Part 3 (earnings),

 

 

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Schedule 22 — Employee securities and options

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                    (b)                      Chapter 10 of Part 3 (taxable benefits: residual liability to

charge),

                    (c)                      Chapter 3 of this Part (acquisition by conversion),

                    (d)                      Chapter 3A of this Part (securities with artificially depressed

market value), or

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                    (e)                      Chapter 5 of this Part (acquisition of securities pursuant to

securities option).

       446W            Definitions

              (1)             In this Chapter—

                                      “interest”, in relation to securities,

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                                      “securities”,

                                      “securities option”, and

                                      “shares”,

                              have the meaning indicated in section 420.

              (2)             In this Chapter “market value” has the meaning indicated in section

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421(1).

              (3)             In this Chapter “the acquisition” has the meaning indicated in section

421B(8) (but subject to section 446Q(4)).

              (4)             In this Chapter—

                                      “the employment”,

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                                      “the employee” (except in section 446R),

                                      “the employer”, and

                                      “employment-related securities”,

                              have the meaning indicated in section 421B(8).

              (5)             In this Chapter “associated person” has the meaning indicated in

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section 421C.

              (6)             In this Chapter—

                                      “associated company”, and

                                      “employee-controlled”,

                              have the meaning indicated in section 421H.

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              (7)             In this Chapter “the notional loan” has the meaning indicated in

section 446S(1).”.

          (2)      Sub-paragraph (1) has effect in relation to securities, and interests in

securities, acquired on or after 16th April 2003.

 

 

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Schedule 22 — Employee securities and options

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  8       (1)      After Chapter 3C of Part 7 (inserted by paragraph 7(1)) insert—

“Chapter 3D

Securities disposed of for more than market value

       446X            Application of this Chapter

      This Chapter applies if—

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                    (a)                      employment-related securities are disposed of by an

associated person so that no associated person is any longer

beneficially entitled to them, and

                    (b)                      the disposal is for a consideration which exceeds the market

value of the employment-related securities at the time of the

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disposal.

       446Y            Amount treated as income

              (1)             Where this Chapter applies the amount determined under

subsection (3) counts as employment income of the employee for the

relevant tax year.

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              (2)             The “relevant tax year” is the tax year in which the disposal occurs.

              (3)             The amount is—equation: plus[times[char[C],char[D]],minus[times[char[M],char[V]]],minus[times[char[D],char[

A]]]]

where—

                      CD is the amount of the consideration given on the disposal,

                      MV is the market value of the employment-related securities at

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the time of the disposal, and

                      DA is the amount of any expenses incurred in connection with

the disposal.

       446Z                        Definitions

              (1)             In this Chapter “market value” has the meaning indicated in section

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421(1).

              (2)             For the purposes of this Chapter sections 421(2) and 421A apply for

determining the amount of the consideration given for anything.

              (3)             In this Chapter—

                                      “the employee”, and

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                                      “employment-related securities”,

                              have the meaning indicated in section 421B(8).

              (4)             In this Chapter “associated person” has the meaning indicated in

section 421C.”.

          (2)      Sub-paragraph (1) has effect in relation to securities, and interests in

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securities, disposed of on or after 16th April 2003.

 

 

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Schedule 22 — Employee securities and options

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  9       (1)      For Chapter 4 of Part 7 substitute—

“Chapter 4

Post-acquisition benefits from securities

       447            Charge on other chargeable benefits from securities

              (1)             This Chapter applies if an associated person receives a benefit by

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virtue of the ownership of employment-related securities by that

person or another associated person.

              (2)             The taxable amount determined under section 448 counts as

employment income of the employee for the relevant tax year.

              (3)             The “relevant tax year” is the tax year in which the benefit is received.

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              (4)             This section does not apply if the benefit is otherwise chargeable to

income tax.

              (5)             This section is subject to section 449 (case outside this Chapter).

       448            Amount of charge

The taxable amount for the purposes of section 447 (charge on other

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chargeable benefits) is the amount or market value of the benefit.

       449            Case outside this Chapter

              (1)             This Chapter does not apply if—

                    (a)                   the employment-related securities are shares (or an interest

in shares) in a company of a class,

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                    (b)                   a similar benefit is received by the owners of all the

company’s shares of the class, and

                    (c)                   subsection (2) or (3) is satisfied.

              (2)             This subsection is satisfied if, immediately before the receipt of the

benefit, the company is employee-controlled by virtue of holdings of

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shares of the class.

              (3)             This subsection is satisfied if, immediately before the receipt of the

benefit, the majority of the company’s shares of the class are not held

by or for the benefit of any of the following—

                    (a)                   employees of the company,

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                    (b)                   persons who are related to an employee of the company,

                    (c)                   associated companies of the company,

                    (d)                   employees of any associated company of the company, or

                    (e)                   persons who are related to an employee of any such

associated company.

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              (4)             For the purposes of subsection (3) a person is related to an employee

if—

                    (a)                   the person acquired the shares pursuant to a right or

opportunity available by reason of the employee’s

employment, or

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Schedule 22 — Employee securities and options

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                    (b)                   the person is connected with a person who so acquired the

shares or with the employee and acquired the shares

otherwise than by or under a disposal made by way of a

bargain at arm’s length from the employee or another person

who is related to the employee.

5

       450            Definitions

              (1)             In this Chapter—

                                      “interest”, in relation to shares, and

                                      “shares”,

                              have the meaning indicated in section 420(8).

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              (2)             In this Chapter “market value” has the meaning indicated in section

421(1).

              (3)             In this Chapter—

                                      “the employee” (except in section 449), and

                                      “employment-related securities”,

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                              have the meaning indicated in section 421B(8).

              (4)             In this Chapter “associated person” has the meaning indicated in

section 421C.

              (5)             In this Chapter—

                                      “associated company”, and

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                                      “employee-controlled”,

                              have the meaning indicated in section 421H.”.

          (2)      Subject to sub-paragraph (3), sub-paragraph (1) has effect on and after 16th

April 2003 (so that it applies on and after that date in relation to

employment-related securities irrespective of the date of the acquisition).

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          (3)      The provisions of Chapter 4 as originally enacted which are mentioned in

sub-paragraph (4)—

              (a)             continue to apply in relation to shares, and interests in shares,

acquired before 16th April 2003, and

              (b)             apply in relation to shares, and interests in shares, acquired on or

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after that date until the day appointed under paragraph 3(2).

                   In this sub-paragraph “shares” means shares in a company or securities as

defined in section 254(1) of the Taxes Act 1988 issued by a company.

          (4)      The provisions are—

               section 450(1), (2), (3)(a), (4), (5) and (6)(a), and

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               sections 447 to 449, section 451, section 452(1) to (3), section 461(1) and

(2), section 462, sections 464 to 466 and sections 468 to 470, so far as

relevant for the purposes of those provisions of section 450 (or the

other provisions mentioned in this subsection so far as so relevant).

 

 

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Schedule 22 — Employee securities and options

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  10      (1)      For Chapter 5 of Part 7 substitute—

“Chapter 5

Securities options

Introduction

       471            Options to which this Chapter applies

5

              (1)             This Chapter applies to a securities option acquired by a person

where the right or opportunity to acquire the securities option is

available by reason of an employment of that person or any other

person.

              (2)             For the purposes of subsection (1) “employment” includes a former

10

or prospective employment.

              (3)             A right or opportunity to acquire a securities option made available

by a person’s employer, or a person connected with a person’s

employer, is to be regarded for the purposes of subsection (1) as

available by reason of an employment of that person unless—

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                    (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

course of the domestic, family or personal relationships of

that person.

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              (4)             A right or opportunity to acquire a securities option available by

reason of holding employment-related securities is to be regarded

for the purposes of subsection (1) as available by reason of the same

employment as that by reason of which the right or opportunity to

acquire the employment-related securities was available.

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              (5)             In this Chapter—

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

securities option, means the acquisition of the employment-

related securities option pursuant to the right or opportunity

available by reason of the employment,

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                                      “the employment” means the employment by reason of which

the right or opportunity to acquire the employment-related

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

employer” being construed accordingly), and

                                      “employment-related securities option” means a securities

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option to which this Chapter applies.

       472            Associated persons

              (1)             For the purposes of this Chapter the following are “associated

persons” in relation to an employment-related securities option—

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

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option on the acquisition,

                    (b)                   (if different) the employee, and

                    (c)                   any relevant linked person.

 

 

 
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