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Finance Bill
Schedule 22 — Employee securities and options

    306

 

any consideration given for the assignment or release of the

old option, apart from the new option, and

                    (b)                   any valuable consideration given for the acquisition of the

new option, apart from the old option.

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

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subsection (1) as a single transaction by which one option is assigned

for a consideration which consists of or includes another option if—

                    (a)                   the transactions result in—

                           (i)                          a person ceasing to hold an option, and

                           (ii)                         that person or a connected person coming to hold

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another option, and

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

arrangements to which two or more persons holding options,

in respect of which there may be liability to tax under this

Chapter, are parties.

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

assignments and the acquisition occur.

       484            Definitions

              (1)             In this Chapter—

                                      “securities”, and

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                                      “securities option”,

                              have the meaning indicated in section 420.

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

421(1).

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

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determining the amount of consideration given for anything.

              (4)             In this Chapter “employment-related securities” has the same

meaning as in Chapter 1 of this Part (see section 421B(8)).

              (5)             In this Chapter—

                                      “the acquisition”,

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                                      “the employee”,

                                      “the employer”,

                                      “the employment”, and

                                      “employment-related securities option”,

                              have the meaning indicated in section 471(5).

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

section 472.

              (7)             In this Chapter—

                                      “secondary Class 1 contributions” has the same meaning as in

the Contributions and Benefits Act (see section 1 of that Act),

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and

                                      “the Contributions and Benefits Act” means SSCBA 1992 or

SSCB(NI)A 1992.”.

          (2)      Sub-paragraph (1) has effect—

 

 

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Schedule 22 — Employee securities and options

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              (a)             on and after 16th April 2003 in relation to employment-related

securities options which are not share options, and

              (b)             on and after the day appointed under paragraph 3(2) in relation to

employment-related securities options which are share options;

                   and for this purpose “share options” means rights to acquire shares in a

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company or securities as defined in section 254(1) of the Taxes Act 1988

issued by a company.

PAYE

  11      (1)      Section 509 (modification of section 696 where charge on shares ceasing to

be subject to plan) is amended as follows.

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          (2)      In subsection (4), for “subsection (5)” substitute “subsections (5) and (6)”.

          (3)      After subsection (5) insert—

              “(6)                In determining for the purposes of this section (and of section 696 in

its application in accordance with this section) whether the shares are

readily convertible assets, section 702 has effect with the omission of

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subsections (5A) to (5D).”.

  12      (1)      For sections 698 and 699 (PAYE: conditional interests in shares and

convertible shares) substitute—

       “698            PAYE: special charges on employment-related securities

              (1)             This section applies where by reason of the operation of—

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                    (a)                   section 426 (chargeable events in relation to restricted

securities and restricted interests in securities),

                    (b)                   section 438 (chargeable events in relation to convertible

securities and interests in convertible securities),

                    (c)                   section 446B (charge on acquisition where market value of

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securities or interest artificially depressed),

                    (d)                   section 446L (charge where market value of securities

artificially enhanced),

                    (e)                   section 446U (securities or interest acquired for less than

market value: charge on discharge of notional loan),

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                    (f)                   section 446Y (charge where securities or interest disposed of

for more than market value), or

                    (g)                   section 447 (chargeable benefit from securities or interest),

                              in relation to employment-related securities, an amount counts as

employment income of an employee.

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              (2)             Sections 684 to 691 and 696 have effect as if—

                    (a)                   the employee were provided with PAYE income in the form

of the employment-related securities by the employer on the

relevant date, and

                    (b)                   the reference in subsection (2) of section 696 to the amount of

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income likely to be PAYE income in respect of the provision

of the asset were to the amount likely to count as employment

income.

              (3)             In a case in which the employment-related securities are not readily

convertible assets, if—

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Schedule 22 — Employee securities and options

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                    (a)                   the amount counts as income by virtue of section 427(3)(c),

439(3)(b), (c) or (d), 446Y or 447, and

                    (b)                   the whole or any part of the consideration or benefit

concerned takes the form of a payment or consists in the

provision of an asset,

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                              subsection (4) applies.

              (4)             Sections 684 to 691 and 696 have effect —

                    (a)                   to the extent that the consideration or benefit takes the form

of a payment, as if it were a payment of PAYE income of the

employee by the employer, and

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                    (b)                   to the extent that the consideration or benefit consists in the

provision of an asset, as if the provision of the asset were the

provision of PAYE income in the form of the asset by the

employer on the relevant date.

              (5)             Section 696 as applied by subsection (4)(b) has effect as if the

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reference in subsection (2) of that section to the amount of income

likely to be PAYE income were to the same proportion of the amount

likely to count as employment income as so much of the

consideration or benefit as consists in the provision of the asset bears

to the whole of the consideration or benefit.

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              (6)             In this section “the relevant date” means—

                    (a)                   in relation to an amount counting as employment income

under section 426 or 438, the date on which the chargeable

event in question occurs,

                    (b)                   in relation to an amount counting as employment income

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under section 446B, the date of the acquisition of the

securities or interest in securities in question,

                    (c)                   in relation to an amount counting as employment income

under section 446L, the valuation date in question,

                    (d)                   in relation to an amount counting as employment income

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under section 446U, the date on which the notional loan in

question is treated as discharged,

                    (e)                   in relation to an amount counting as employment income

under section 446Y, the date of the disposal of the securities

or interest in securities in question, and

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                    (f)                   in relation to an amount counting as employment income

under section 447, the date on which the benefit in question

is received.

              (7)             In this section “employment-related securities” has the same

meaning as in Chapters 1 to 4 of Part 7.”.

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          (2)      Sub-paragraph (1) has effect on and after the day appointed under

paragraph 3(2) but does not affect the operation of section 698 as originally

enacted in relation to any securities, or interests in securities, acquired before

16th April 2003.

  13      (1)      For section 700 (PAYE: gains from share options) substitute—

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       “700            PAYE: gains from securities options

              (1)             This section applies where by reason of the operation of section 476

(acquisition of securities pursuant to securities option etc) in relation

 

 

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Schedule 22 — Employee securities and options

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to an employment-related securities option an amount counts as

employment income of an employee.

              (2)             In a case where the amount counts as employment income by virtue

of section 477(3)(a) (acquisition of securities), sections 684 to 691 and

696 have effect as if—

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                    (a)                   the employee were provided with PAYE income in the form

of the securities by the employer on the relevant date, and

                    (b)                   the reference in subsection (2) of section 696 to the amount of

income likely to be PAYE income in respect of the provision

of the asset were to the amount likely to count as employment

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income.

              (3)             In a case where the amount counts as income by virtue of section

477(3)(b) or (c) (assignment or release for consideration or receipt of

benefit), sections 684 to 691 and 696 have effect —

                    (a)                   to the extent that the consideration or benefit takes the form

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of a payment, as if it were a payment of PAYE income of the

employee by the employer, and

                    (b)                   to the extent that the consideration or benefit consists in the

provision of an asset, as if the provision of the asset were the

provision of PAYE income in the form of the asset by the

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employer on the relevant date.

              (4)             Section 696 as applied by subsection (3)(b) has effect as if the

reference in subsection (2) of that section to the amount of income

likely to be PAYE income were to the same proportion of the amount

likely to count as employment income as so much of the

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consideration or benefit as consists in the provision of the asset bears

to the whole of the consideration or benefit.

              (5)             In this section “the relevant date” means the date on which the

chargeable event in question occurs.

              (6)             In this section—

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                                      “employment-related securities option”, and

                                      “securities”,

                              have the same meaning as in Chapter 5 of Part 7.”.

          (2)      Sub-paragraph (1) has effect on and after the day appointed under

paragraph 3(2).

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  14      (1)      In section 701(2)(b) (“asset” not to include vouchers or credit-tokens), omit

“subject to section 700(6),”.

          (2)      Sub-paragraph (1) has effect on and after the day appointed under

paragraph 3(2).

  15      (1)      Section 702 (meaning of “readily convertible asset”) is amended as follows.

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          (2)      After subsection (5) insert—

              “(5A)                An asset consisting in securities which is not a readily convertible

asset apart from this subsection is to be treated as a readily

convertible asset unless the securities are shares that are corporation

tax deductible.

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Finance Bill
Schedule 22 — Employee securities and options

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              (5B)                For the purposes of subsection (5A) shares are corporation tax

deductible if they are acquired by a person—

                    (a)                   by reason of that, or another person’s, employment with a

company, or

                    (b)                   pursuant to an option granted by reason of that, or another

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person’s, employment with a company,

                              and the company is entitled to corporation tax relief in respect of the

shares under Schedule 23 to the Finance Act 2003 (corporation tax

relief for employee share acquisition).

              (5C)                If a person acquires additional shares by virtue of holding shares that

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are corporation tax deductible, the additional shares are to be treated

for the purposes of subsection (5A) as if they were corporation tax

deductible.

              (5D)                If—

                    (a)                   on a person ceasing to be beneficially entitled to shares that

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are corporation tax deductible, that person acquires other

shares, and

                    (b)                   the circumstances are such that the shares to which the

person ceases to be beneficially entitled constitute “original

shares” and the other shares constitute a “new holding” for

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the purposes of sections 127 to 130 of TCGA 1992,

                              the shares that constitute the new holding are to be treated for the

purposes of subsection (5A) as if they were corporation tax

deductible.”.

          (3)      In subsection (6), after the definition of “money debt” insert—

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                                      ““securities” has the same meaning as in Chapters 1 to 5 of Part

7 (employment income from securities) (see section 420),

                                                          “shares” includes—

                           (a)                          an interest in shares, and

                           (b)                                                       stock or an interest in stock,”.

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          (4)      For the purposes of section 702, shares are to be treated as corporation tax

deductible during an accounting period which began before 1st January

2003 if they would have been corporation tax deductible had the accounting

period begun on or after that date.

Consequential amendments

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  16      (1)      In section 3(1) (structure of employment income Parts), in the entry relating

to Part 7, for “share-related income and exemptions” substitute “income and

exemptions relating to securities and securities options acquired in

connection with an employment”.

          (2)      Sub-paragraph (1) has effect on and after 16th April 2003.

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  17      (1)      In section 7(6)(b) (employment income), for “(share-related income and

exemptions)” substitute “(income and exemptions relating to securities and

securities options)”.

          (2)      Sub-paragraph (1) has effect on and after 16th April 2003.

  18      (1)      In section 19(2) (year in which earnings treated as received), omit the entries

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relating to Chapters 8 and 9 of Part 3.

 

 

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Schedule 22 — Employee securities and options

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          (2)      Sub-paragraph (1) has effect—

              (a)             so far as relating to Chapter 8 of Part 3, in accordance with the

provision made for the repeal of that Chapter, and

              (b)             so far as relating to Chapter 9 of Part 3, in accordance with the

provision made for the repeal of that Chapter.

5

  19      (1)      In section 32(2) (receipt of non-money earnings), omit the entries relating to

Chapters 8 and 9 of Part 3.

          (2)      Sub-paragraph (1) has effect—

              (a)             so far as relating to Chapter 8 of Part 3, in accordance with the

provision made for the repeal of that Chapter, and

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              (b)             so far as relating to Chapter 9 of Part 3, in accordance with the

provision made for the repeal of that Chapter.

  20      (1)      In section 63(1) (the benefits code), omit the entries relating to Chapters 8

and 9 of Part 3.

          (2)      Sub-paragraph (1) has effect—

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              (a)             so far as relating to Chapter 8 of Part 3, in accordance with the

provision made for the repeal of that Chapter, and

              (b)             so far as relating to Chapter 9 of Part 3, in accordance with the

provision made for the repeal of that Chapter.

  21      (1)      In section 64 (relationship between earnings and benefits code), omit

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subsections (5) and (6).

          (2)      Sub-paragraph (1) has effect in accordance with the provision made for the

repeal of Chapter 8 of Part 3.

  22      (1)      Omit Chapter 8 of Part 3.

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

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acquired on or after 16th April 2003.

  23      (1)      Omit Chapter 9 of Part 3.

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

disposed of on or after 16th April 2003.

  24      (1)      Section 216 (provisions not applicable to lower-paid employments) is

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amended as follows.

          (2)      In subsection (4), omit the entries relating to Chapters 8 and 9 of Part 3.

          (3)      In subsection (6), omit the entries relating to section 195(3) and section

199(4).

          (4)      Sub-paragraphs (1) to (3) have effect—

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              (a)             so far as relating to Chapter 8 of Part 3, in accordance with the

provision made for the repeal of that Chapter, and

              (b)             so far as relating to Chapter 9 of Part 3, in accordance with the

provision made for the repeal of that Chapter.

  25      (1)      Section 227(4) (employment income: exemptions) is amended as follows.

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          (2)      For paragraphs (a) and (b) substitute—

                    “(a)                      section 425 (restricted securities: no charge in respect of

acquisition in certain circumstances),

                    (b)                      section 475 (no charge in respect of acquisition of securities

option),”.

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Schedule 22 — Employee securities and options

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          (3)      Omit paragraphs (d), (f) and (h).

          (4)      This paragraph has effect—

              (a)             so far as relating to section 425, in accordance with the provision

made for the substitution of Chapter 2 of Part 7, and

              (b)             otherwise, in accordance with the provision made for the

5

substitution of Chapter 5 of Part 7.

  26      (1)      Omit section 491 (no charge under Chapter 8 of Part 3 in respect of

acquisition of approved share incentive plan shares).

          (2)      Sub-paragraph (1) has effect in accordance with the provision made for the

repeal of Chapter 8 of Part 3.

10

  27      (1)      Omit section 494 (no charge on removal of restrictions applying to approved

share incentive plan shares).

          (2)      Sub-paragraph (1) has effect—

              (a)             so far as relating to section 427, in accordance with the provision

made for the substitution of Chapter 2 of Part 7, and

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              (b)             so far as relating to section 449, in accordance with the provision

made for the substitution of Chapter 4 of Part 7.

  28      (1)      Omit section 495 (approved share incentive plan shares: value of shares in

dependent subsidiary).

          (2)      Sub-paragraph (1) has effect on 16th April 2003.

20

  29      (1)      Omit section 518 (no charge in respect of acquisition of approved SAYE

share scheme option).

          (2)      Sub-paragraph (1) has effect on the day appointed under paragraph 3(2).

  30      (1)      In section 519 (no charge in respect of exercise of approved SAYE share

scheme option), omit subsection (4).

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          (2)      Sub-paragraph (1) has effect on the day appointed under paragraph 3(2).

  31      (1)      Omit section 520 (approved SAYE option schemes: no charge in respect of

post-acquisition benefits).

          (2)      Sub-paragraph (1) has effect in accordance with the provision made for the

substitution of Chapter 4 of Part 7.

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  32      (1)      Omit section 523 (no charge in respect of acquisition of approved CSOP

scheme option).

          (2)      Sub-paragraph (1) has effect on the day appointed under paragraph 3(2).

  33      (1)      In section 524 (no charge in respect of exercise of approved CSOP scheme

option), omit subsection (4).

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          (2)      Sub-paragraph (1) has effect on the day appointed under paragraph 3(2).

  34      (1)      Omit section 525 (approved CSOP schemes: no charge in respect of post-

acquisition benefits).

          (2)      Sub-paragraph (1) has effect in accordance with the provision made for the

substitution of Chapter 4 of Part 7.

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  35      (1)      In section 526(4) (charge where approved CSOP scheme option granted at a

discount: deductions of charge from amount chargeable under other

provisions), for the words from the beginning to “deductions” substitute

“Section 480(4) (gain realised on acquisition of securities pursuant to option

etc) provides for a deduction”.

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