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Finance Bill
Schedule 22 — Employee securities and options

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

              (a)             so far as relating to section 194, in accordance with the provision

made for the repeal of Chapter 8 of Part 3, and

              (b)             otherwise, on and after the day appointed under paragraph 3(2).

  36      (1)      Omit section 528 (enterprise management incentives: no charge in respect of

5

acquisition of qualifying option).

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

  37      (1)      In section 531(4) (enterprise management incentives: limitation of charge on

exercise of qualifying option to acquire shares below market value), for the

words after “which” substitute “under section 478 (amount of charge under

10

section 476) is to be regarded as the taxable amount for the purposes of

section 476 in respect of the acquisition of the shares pursuant to the

option.”.

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

paragraph 3(2).

15

  38      (1)      In section 532(5) (enterprise management incentives: modified tax

consequences following disqualifying events), for the words after “which”

substitute “under section 478 (amount of charge under section 476) is to be

regarded as the taxable amount for the purposes of section 476 in respect of

the acquisition of the shares pursuant to the option.”.

20

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

paragraph 3(2).

  39      (1)      In section 538 (share conversions excluded for purposes of section 536), for

subsection (4) substitute—

              “(4)                In this section—

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                                      “associated company” has the same meaning as, by virtue of

section 416 of ICTA, it has for the purposes of Part 11 of ICTA,

                                      “director” has the same meaning as in the benefits code (see

section 67) but also includes a person who is to be or has been

a director,

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                                      “employee” includes a person who is to be or has been an

employee, and

                                      “employee-controlled” has the same meaning as in Chapters 1

to 4 of this Part (see section 421H(1)).”.

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

35

paragraph 3(2).

  40      (1)      In section 540(1) (enterprise management incentives: notional loan

provisions not to apply in relation to acquisition of shares by exercise of

qualifying option), for “Chapter 8 of Part 3” substitute “Chapter 3C of this

Part”.

40

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

repeal of Chapter 8 of Part 3.

  41      (1)      In section 541 (enterprise management incentives: effect on other income tax

charges), for subsections (1) and (2) substitute—

              “(1)                Nothing in the EMI code affects—

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                    (a)                   the operation of Chapters 2 to 4 of this Part in relation to

shares acquired under a qualifying option, or

 

 

Finance Bill
Schedule 22 — Employee securities and options

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                    (b)                   the operation of Chapter 5 of this Part otherwise than in

relation to the acquisition of shares under a qualifying

option.

              (2)                But in calculating the taxable amount for the purposes of section 426

(post-acquisition charge on restricted securities) in respect of shares

5

acquired under a qualifying option, the amount of relief on the

exercise of the option is to be regarded as a deductible amount for the

purposes of section 428 (amount of charge).”.

          (2)      So far as relating to—

              (a)             Chapter 9 of Part 3 (which is repealed and replaced by provisions

10

inserted in Part 7),

              (b)             any of the new Chapters substituted or inserted in Part 7 by this

Schedule, and

              (c)             each of the Chapters of that Part as originally enacted for which new

Chapters are substituted by this Schedule,

15

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

taking effect of the repeal, substitution or insertion.

  42      (1)      Part 2 of Schedule 1 (index of defined expressions) is amended as follows.

          (2)      Omit the entries relating to—

               “acquisition (in Chapter 8 of Part 3)”,

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               “the acquisition (in Chapter 8 of Part 3)”,

               “acquisition (in Chapter 9 of Part 3)”,

               “the acquisition (in Chapter 4 of Part 7)”,

               “as a director or employee, in relation to the acquisition of an interest

in shares (in Chapter 2 of Part 7)”,

25

               “as a director or employee, in relation to the acquisition of shares or an

interest in shares (in Chapter 3 of Part 7)”,

               “as a director or employee, in relation to the acquisition of shares or an

interest in shares (in Chapter 4 of Part 7)”,

               “assign, in relation to a share option (in Chapter 5 of Part 7)”,

30

               “associated company (in Chapter 4 of Part 7)”,

               “company (in Chapter 5 of Part 7)”,

               “the Contributions and Benefits Act (in Chapter 5 of Part 7)”,

               “convertible, in relation to shares (in Chapter 3 of Part 7)”,

               “dependent subsidiary (in Chapter 4 of Part 7)”,

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               “director (in Chapter 2 of Part 7)”,

               “director (in Chapter 3 of Part 7)”,

               “director (in Chapter 4 of Part 7)”,

               “director (in Chapter 5 of Part 7)”,

               “employee (in Chapter 8 of Part 3)”,

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               “employee (in Chapter 9 of Part 3)”,

               “employee (in Chapter 2 of Part 7)”,

               “the employee (in Chapter 2 of Part 7)”,

               “employee (in Chapter 3 of Part 7)”,

               “the employee (in Chapter 3 of Part 7)”,

45

               “employee (in Chapter 4 of Part 7)”,

               “the employee (in Chapter 4 of Part 7)”,

 

 

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Schedule 22 — Employee securities and options

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               “employee (in Chapter 5 of Part 7)”,

               “the employee (in Chapter 5 of Part 7)”,

               “employee-controlled (in relation to a company) (in Chapter 4 of Part

7)”,

               “the employee’s interest (in Chapter 2 of Part 7)”,

5

               “the employer company (in Chapter 2 of Part 7)”,

               “the employer company (in Chapter 3 of Part 7)”,

               “the employer company (in Chapter 4 of Part 7)”,

               “employment-related shares (in Chapter 9 of Part 3)”,

               “the employment-related shares (in Chapter 8 of Part 3)”,

10

               “held by outside shareholders (in Chapter 4 of Part 7)”,

               “interest in shares (in Chapter 8 of Part 3)”,

               “interest in shares (in Chapter 9 of Part 3)”,

               “interest in shares (in Chapter 4 of Part 7)”,

               “market value (in Chapter 8 of Part 3)”,

15

               “market value (in Chapter 9 of Part 3)”,

               “market value (in Chapter 2 of Part 7)”,

               “only conditional (interest in shares) (in Chapter 2 of Part 7)”,

               “payment for the employment-related shares (in Chapter 8 of Part 3)”,

               “release, in relation to a share option (in Chapter 5 of Part 7)”,

20

               “secondary Class 1 contributions (in Chapter 5 of Part 7)”,

               “share option (in Chapter 5 of Part 7)”,

               “the share option (in Chapter 5 of Part 7)”,

               “shares (in Chapter 8 of Part 3)”,

               “shares (in Chapter 9 of Part 3)”,

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               “shares (in Chapter 2 of Part 7)”,

               “the shares (in Chapter 2 of Part 7)”,

               “shares (in Chapter 3 of Part 7)”,

               “the shares (in Chapter 3 of Part 7)”,

               “shares (in Chapter 4 of Part 7)”,

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               “the shares (in Chapter 4 of Part 7)”,

               “shares (in Chapter 5 of Part 7)”,

               “terms (in Chapter 2 of Part 7)”,

               “terms (in Chapter 3 of Part 7)”, and

               “value (in relation to shares) (in Chapter 4 of Part 7)”.

35

          (3)      At the appropriate places insert—

 

“the acquisition (in Chapters 1 to 4 of

section 421B(8) (see

 
 

Part 7)

also section 446Q(4))”,

 
 

“the acquisition (in Chapter 5 of Part 7)

section 471(5)”,

 
 

“associated company (in section

section 421H(2)”,

 

40

 

421H(1) and Chapters 2 to 4 of Part 7)

  
 

“associated person (in Chapters 1 to 4

section 421C”,

 
 

of Part 7)

  
 

 

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Schedule 22 — Employee securities and options

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“associated person (in Chapter 5 of Part

section 472”,

 
 

7)

  
 

“chargeable event (in Chapter 3B of

section 446P(5)”,

 
 

Part 7)

  
 

“the Contributions and Benefits Act (in

section 484(7)”,

 

5

 

Chapter 5 of Part 7)

  
 

“consideration (in Chapters 2 to 5 of

sections 421(2) and

 
 

Part 7)

421A”,

 
 

“consideration given for the acquisition

section 421I”,

 
 

of employment-related securities (in

  

10

 

Chapters 2 to 3A of Part 7)

  
 

“convertible securities (in Chapters 2 to

section 436”,

 
 

3A of Part 7)

  
 

“the employee (in Chapters 1 to 4 of

section 421B(8)”,

 
 

Part 7)

  

15

 

“the employee (in Chapter 5 of Part 7)

section 471(5)”,

 
 

“employee-controlled (in Chapters 2 to

section 421H(1)”,

 
 

4 of Part 7)

  
 

“the employer (in Chapters 1 to 4 of

section 421B(8)”,

 
 

Part 7)

  

20

 

“the employer (in Chapter 5 of Part 7)

section 471(5)”,

 
 

“the employment (in Chapters 1 to 4 of

section 421B(8)”,

 
 

Part 7)

  
 

“the employment (in Chapter 5 of Part

section 471(5)”,

 
 

7)

  

25

 

“employment-related securities (in

section 421B(8) (see

 
 

Chapters 1 to 5 of Part 7)

also section 484(4))”,

 
 

“employment-related securities option

section 471(5)”,

 
 

(in Chapter 5 of Part 7)

  
 

“interest, in relation to securities (or

section 420(8)”,

 

30

 

shares) (in Chapters 1 to 5 of Part 7)

  
 

“market value (in Chapters 1 to 5 of

section 421(1)”,

 
 

Part 7)

  
 

“non-commercial increase (in Chapter

section 446K(4)”,

 
 

3B of Part 7)

  

35

 

“non-commercial reduction (in Chapter

section 446K(4)”,

 
 

3B of Part 7)

  
 

“the notional loan (in Chapter 3C of

section 446S(1)”,

 
 

Part 7)

  
 

 

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Schedule 22 — Employee securities and options

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“recognised stock exchange

section 841 of ICTA”,

 
 

“relevant period (in Chapter 3B of Part

section 446O”,

 
 

7)

  
 

“restricted securities and restricted

sections 423 and 424”,

 
 

interest in securities (in Chapters 2, 3A

  

5

 

and 3B of Part 7)

  
 

“restriction (in Chapters 2, 3A and 3B of

section 432(8)”,

 
 

Part 7)

  
 

“secondary Class 1 contributions (in

section 484(7)”,

 
 

Chapter 5 of Part 7)

  

10

 

“securities (in Chapters 1 to 5 of Part 7)

section 420”,

 
 

“securities option (in Chapters 1 to 5 of

section 420(8)”,

 
 

Part 7)

  
 

“shares (in Chapters 1 to 5 of Part 7)

section 420(8)”,

 
 

“valuation date (in Chapter 3B of Part

section 446O”, and

 

15

 

7)

  
 

“variation, in relation to a restriction (in

section 427(4)”.

 
 

Chapter 2 of Part 7)

  
 

          (4)      So far as relating to—

              (a)             Chapters 8 and 9 of Part 3 (which are repealed and replaced by

20

provisions inserted in Part 7),

              (b)             each of the new Chapters substituted or inserted in Part 7, and

              (c)             each of the Chapters of that Part as originally enacted for which new

provisions are substituted,

                   sub-paragraphs (1) to (3) have effect in accordance with the provision made

25

for the taking effect of the repeal, substitution or insertion.

  43      (1)      In paragraph 35 of Schedule 2 (approved share incentive plans: maximum

annual award), for sub-paragraphs (3) and (4) substitute—

                           “(3)                  For the purposes of this paragraph the market value of restricted

shares is to be determined as if they were not.

30

                           (4)                  Shares are “restricted shares” if there is any contract, agreement,

arrangement or condition which makes provision to which any of

subsections (2) to (4) of section 423 (restricted securities) would

apply if the references in those subsections to the employment-

related securities were to the shares.”.

35

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

substitution of Chapter 2 of Part 7.

  44      (1)      In paragraph 42(3) of Schedule 3 (approved SAYE option schemes:

withdrawal of approval), for paragraph (b) substitute—

                    “(b)                      section 421G(b) (exemption from Chapters 2 to 4 of Part 7),”.

40

          (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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Schedule 22 — Employee securities and options

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  45      (1)      Schedule 5 (enterprise management incentives) is amended as follows.

          (2)      In paragraph 5, for sub-paragraphs (7) and (8) substitute—

                           “(7)                  For the purposes of this paragraph the market value of restricted

shares is to be determined as if they were not.

                           (8)                  Shares are “restricted shares” if there is any contract, agreement,

5

arrangement or condition which makes provision to which any of

subsections (2) to (4) of section 423 (restricted securities) would

apply if the references in those subsections to the employment-

related securities were to the shares.”.

          (3)      In paragraph 37, for sub-paragraphs (4) to (6) substitute—

10

                           “(4)                  Where the shares that may be acquired by the employee are

restricted shares, the agreement must contain details of the

restrictions.

                           (5)                  For the purposes of sub-paragraph (4)—

                      (a)                     shares are “restricted shares” if there is any contract,

15

agreement, arrangement or condition which makes

provision to which any of subsections (2) to (4) of section

423 (restricted securities) would apply if the references in

those subsections to the employment-related securities

were to the shares, and

20

                      (b)                     “restrictions” means that provision.”.

          (4)      Sub-paragraphs (1) to (3) have effect in accordance with the provision made

for the substitution of Chapter 2 of Part 7.

  46      (1)      Schedule 7 (transitionals and savings) is amended as follows.

          (2)      Omit paragraphs 30 and 31.

25

          (3)      In the heading of Part 6, for “share-related” substitute “related to

securities”.

          (4)      In the heading of Part 7, for “share-related income” substitute “income

related to securities”.

          (5)      Before paragraph 44 insert—

30

“Pre–6th April 2003 acquisitions

          43A                 (1)                                                                        This paragraph relates to the operation of section 421E (exclusions

from Chapters 2 to 4 of Part 7: residence) in relation to an

acquisition made before 6th April 2003.

                           (2)                  Section 421E(1) has effect with the substitution of “the employee

35

was not chargeable under Case I of Schedule E in respect of the

employment” for the words from “the earnings”.

                           (3)                  Section 421E(2) has effect with the substitution of “the

emoluments of the employment did not fall to be charged to

income tax under Schedule E” for the words from “the earnings”.”.

40

          (6)      In paragraph 44, after “Part 7” insert “, as originally enacted,”.

          (7)      In paragraph 45(1), at end insert “, as originally enacted.”.

          (8)      In paragraph 46(1), after “disposal)” insert “, as originally enacted,”.

          (9)      Omit paragraphs 47 and 48.

 

 

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Schedule 22 — Employee securities and options

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          (10)     In paragraph 49, for “shares” substitute “securities”.

          (11)     Omit paragraphs 50 to 52.

          (12)     Omit paragraph 53.

          (13)     In paragraph 54, after “Part 7” insert “, both as originally enacted and as

substituted by the Finance Act 2003,”.

5

          (14)     In paragraph 55—

              (a)             after “Part 7” insert “, as originally enacted,”, and

              (b)             omit sub-paragraph (2)(a).

          (15)     In paragraph 56, after “section 449” insert “, as originally enacted,”.

          (16)     In paragraph 58(1), at end insert “, as originally enacted.”

10

          (17)     Omit paragraph 59.

          (18)     Omit paragraphs 60 and 61.

          (19)     After paragraph 61 insert—

“Securities disposed of for more than market value

          61A                  Chapter 3D of Part 7 does not apply in relation to securities, or an

15

interest in securities, acquired on or before 6th April 1976.”.

          (20)     Omit paragraph 62.

          (21)     For paragraph 63 substitute—

                           “63 (1)                                                                                                                              This paragraph relates to the operation of section 474 (exclusions

from Chapter 5 of Part 7: residence) in relation to an acquisition

20

made before 6th April 2003.

                           (2)                  Section 474(1) has effect with the substitution of “the employee

was not chargeable under Case I of Schedule E in respect of the

employment” for the words from “the earnings”.”.

          (22)     In paragraph 64—

25

              (a)             for “share” (in both places) substitute “securities”,

              (b)             for “obtained” substitute “acquired”, and

              (c)             for “receipt” substitute “acquisition”.

          (23)     In paragraph 65—

              (a)             in sub-paragraph (1), for “479 (amount of gain realised by exercising

30

option) in relation to a share option obtained” substitute “478 in

relation to an event that is a chargeable event by virtue of section

477(3)(a) or (b) (acquisition of securities pursuant to an option and

assignment and release of option) in the case of a share option

acquired”, and

35

              (b)             in sub-paragraph (2), for “479(1)” substitute “478(1)” and for “cost”

substitute “amount”.

          (24)     Omit paragraph 66.

          (25)     Omit paragraph 67.

          (26)     In this paragraph—

40

              (a)             sub-paragraphs (2) and (19) have effect in relation to securities, and

interests in securities, disposed of on or after 16th April 2003,

 

 

 
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