Office of Public Sector Information
PART V continued CHAPTER II continued
(1) Nothing in section 331 shall be construed as conferring on any person other than the person holding the scholarship in question any exemption from the charge to tax under section 154.
(2) For the purposes of this Chapter, any scholarship provided for a member of a person’s family or household shall, without prejudice to any other provision of this Chapter, be taken to have been provided by reason of that person’s enployment if it is provided under arrangements entered into by, or by any person connected with, his employer (whether or not those arrangements require the employer or connected person to contribute directly or indirectly to the cost of providing the scholarship).
(3) Section 154 does not apply to a benefit consisting in a payment in respect of a scholarship—
(a) provided from a trust fund or under a scheme; and
(b) held by a person receiving full-time instruction at a university, college, school or other educational establishment; and
(c) which would not be regarded, for the purposes of this Chapter, as provided by reason of a person’s employment were subsection (2) above and section 168(3) to be disregarded;
if, in the year in which the payment is made, not more than 25 per cent. of the total amount of the payments made from that fund, or under that scheme, in respect of scholarships held as mentioned in paragraph (b) above is attributable to relevant scholarships.
(4) This section does not have effect in relation to any payment if—
(a) it is made in respect of a scholarship awarded before 15th March 1983, and
(b) the first payment in respect of the scholarship was made before 6th April 1984; and
(c) in relation to payments made after 5th April 1989, the person holding the scholarship is receiving full-time instruction at the university, college, school or other educational establishment at which he was receiving such instruction on—
(i) 15th March 1983, in a case where the first payment in respect of the scholarship was made before that date; or
(ii) the date on which the first such payment was made, in any other case.
(5) For the purposes of subsection (4)(c) above, a payment made before 6th April 1989 in respect of any period beginning on or after that date shall be treated as made at the beginning of that period.
(6) In this section—
(a) “scholarship” includes an exhibition, bursary or other similar educational endowment;
(b) “relevant scholarship” means a scholarship which is provided by reason of a person’s employment (whether or not that employment is director’s or higher-paid employment); and for the purposes of this definition
“employment” includes an office or employment whose emoluments do not fall to be assessed under Schedule E but would fall to be so assessed if the employee were resident, and ordinarily resident, and all the duties of the employment were performed wholly, in the United Kingdom;
and section 839 applies for the purposes of this section.
(1) If a person furnishes to the inspector a statement of the cases and circumstances in which payments of a particular character are made, or benefits or facilities of a particular kind are provided, for any employees (whether his own or those of anyone else), and the inspector is satisfied that no additional tax is payable under this Chapter by reference to the payments, benefits or facilities mentioned in the statement, the inspector shall notify the person accordingly; and then nothing in this Chapter applies to those payments, or to the provision of those benefits or facilities, or otherwise for imposing any additional charge to income tax.
(2) The inspector may, if in his opinion there is reason to do so, by notice served on the person to whom notification under subsection (1) above was given, revoke the notification, either as from the date of its making or from such later date as may be specified in the notice under this subsection; and then all such income tax becomes chargeable, and all such returns are to be made by that person and by the employees in question as would have been chargeable or would have had to be made in the first instance if the notification under subsection (1) had never been given or, as the case may be, it had ceased to have effect on the specified date.
(3) In relation to a notification given before 6th April 1988, the reference in subsection (2) above to income tax includes a reference to income tax chargeable under the corresponding enactments in force before that date, and accordingly, where the notification is revoked for any period before that date, that subsection has effect in relation to years of assessment before the year 1988-89.
(4) The validity of any notification given under section 199 of the 1970 Act which was continued in force by paragraph 14 of Schedule 9 to the [1976 c. 40.] Finance Act 1976 shall not be affected by the repeal of that paragraph by this Act but shall continue in force as if made under subsection (1) above in relation to tax liability under sections 153 to 156; and subsection (2) above shall apply accordingly.
(1) In this Chapter “director’s or higher-paid employment” means—
(a) subject to subsection (5) below, employment as a director of a company; or
(b) employment with emoluments at the rate of £8,500 a year or more.
(2) For this purpose emoluments are to be calculated—
(a) on the basis that they include all such amounts as come or would but for section 157(3) come into charge under this Chapter or section 141, 142, 143 or, in the case of those in director’s or higher-paid employment, 145; and
(b) without any deduction under section 198, 201 or 332(3).
(3) Where a person is employed in two or more employments by the same employer and either—
(a) the total of the emoluments of those employments (applying this section) is at the rate of £8,500 a year or more; or
(b) one or more of those employments is (apart from this subsection) director’s or higher-paid,
all the employments are to be treated as director’s or higher-paid.
(4) All employees of a partnership or body over which an individual or another partnership or body has control are to be treated for the purposes of this section (but not for any other purpose) as if the employment were an employment by the individual or by that other partnership or body as the case may be.
(5) A person’s employment is not director’s or higher-paid by reason only of its being employment as a director of a company (without prejudice to its being so under subsection (1)(b) or (3) above) if he has no material interest in the company and either—
(a) his employment is as a full-time working director; or
(b) the company is non-profit-making (meaning that neither does it carry on a trade nor do its functions consist wholly or mainly in the holding of investments or other property) or is established for charitable purposes only.
(1) The following provisions of this section apply for the interpretation of expressions used in this Chapter.
(2) Subject to section 165(6)(b), “employment” means an office or employment the emoluments of which fall to be assessed under Schedule E; and related expressions shall be construed accordingly.
(3) For the purposes of this Chapter—
(a) all sums paid to an employee by his employer in respect of expenses, and
(b) all such provision as is mentioned in this Chapter which is made for an employee, or for members of his family or household, by his employer,
are deemed to be paid to or made for him or them by reason of his employment, except any such payment or provision made by the employer, being an individual, as can be shown to have been made in the normal course of his domestic, family or personal relationships.
(4) References to members of a person’s family or household are to his spouse, his sons and daughters and their spouses, his parents and his servants, dependants and guests.
(5) As respects cars, the following definitions apply—
(a) “car” means any mechanically propelled road vehicle except—
(i) a vehicle of a construction primarily suited for the conveyance of goods or burden of any description,
(ii) a vehicle of a type not commonly used as a private vehicle and unsuitable to be so used,
(iii) a motor cycle as defined in section 190(4) of the [1972 c. 20.] Road Traffic Act 1972, and
(iv) an invalid carriage as defined in section 190(5) of that Act;
(b) the age of a car at any time is the interval between the date of its first registration and that time;
(c) “business travel” means travelling which a person is necessarily obliged to do in the performance of the duties of his employment;
(d) the date of a car’s first registration is the date on which it was first registered—
(i) in Great Britain, under the [1971 c. 10.] Vehicles (Excise) Act 1971 or corresponding earlier legislation; or
(ii) elsewhere, under the corresponding legislation of any country or territory;
(e) the original market value of a car is the inclusive price which it might reasonably have been expected to fetch if sold in the United Kingdom singly in a retail sale in the open market immediately before the date of its first registration (“inclusive price” meaning the price inclusive of customs or excise duty, of any tax chargeable as if it were a duty of customs, and of value added tax and car tax); and
(f) “private use”, in relation to a car made available to any person, or to others being members of his family or household, means any use otherwise than for his business travel.
(6) For the purposes of this Chapter—
(a) a car made available in any year to an employee, or to others being members of his family or household, by reason of his employment is deemed to be available in that year for his or their private use unless the terms on which the car is made available prohibit such use and no such use is made of the car in that year;
(b) a car made available to an employee, or to others being members of his family or household, by his employer is deemed to be made available to him or them by reason of his employment (unless the employer is an individual and it can be shown that the car was made so available in the normal course of his domestic, family or personal relationships).
(7) For the purposes of section 156, the market value of an asset at any time is the price which it might reasonably have been expected to fetch on a sale in the open market at that time.
(8) Subject to subsection (9) below, “director” means—
(a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that board or similar body;
(b) in relation to a company whose affairs are managed by a single director or similar person, that director or person; and
(c) in relation to a company whose affairs are managed by the members themselves, a member of the company,
and includes any person in accordance with whose directions or instructions the directors of the company (as defined above) are accustomed to act.
(9) A person is not under subsection (8) above to be deemed to be a person in accordance with whose directions or instructions the directors of the company are accustomed to act by reason only that the directors act on advice given by him in a professional capacity.
(10) “Full-time working director” means a director who is required to devote substantially the whole of his time to the service of the company in a managerial or technical capacity.
(11) A person shall be treated as having a material interest in a company—
(a) if he, either on his own or with any one or more of his associates, or if any associate of his with or without such other associates, is the beneficial owner of, or able, directly or through the medium of other companies or by any other indirect means, to control, more than 5 per cent. of the ordinary share capital of the company; or
(b) if, in the case of a close company, on an amount equal to the whole distributable income of the company falling to be apportioned under Part XI for the purpose of computing total income, more than 5 per cent. of that amount could be apportioned to him together with his associates (if any), or to any associate of his, or any such associates taken together.
In this subsection “associate” has the same meaning as in section 417(3), except that for this purpose “relative” in that subsection has the meaning given by section 160(6).
(12) “Control”, in relation to a body corporate or partnership, has the meaning given to it by section 840; and the definition of “control” in that section applies (with the necessary modifications) in relation to an unincorporated association as it applies in relation to a body corporate.
(13) “Year” means year of assessment (except where the expression is used with reference to the age of a car).
(1) In this Chapter—
“employment” means an office or employment whose emoluments fall to be assessed under Schedule E, and related expressions have corresponding meanings;
“employment unit” means an undertaking, or that part of an undertaking, to which a profit-related pay scheme relates;
“pay” (except in the expression “profit-related pay”) means emoluments paid under deduction of tax pursuant to section 203, reduced by any amounts included in them by virtue of Chapter II of Part V;
“profit period” means an accounting period by reference to which any profit-related pay is calcuated;
“profit-related pay” means emoluments from an employment which are paid in accordance with a profit-related pay scheme;
“profit-related pay scheme” means a scheme providing for the payment of emoluments calculated by reference to profits;
“profits”, or “losses”, in relation to a profit period, means the amount shown in the account prepared for that period in accordance with the relevant profit-related pay scheme as the profit, or as the case may be the loss, on ordinary activities after taxation;
“registered scheme” means a profit-related pay scheme registered under this Chapter;
“scheme employer” means the person on whose application a profit-related pay scheme is or may be registered under this Chapter.
(2) References in this Chapter to the employees to whom a profit-related pay scheme relates are references to the employees who will receive any payments of profit-related pay under the scheme.
Any charge to income tax on profit-related pay paid in accordance with a registered scheme shall be made for the year of assessment in which it is paid (rather than the period for which it is paid).
(1) One half of any profit-related pay to which this section applies shall be exempt from income tax.
(2) This section applies to any profit-related pay paid to an employee by reference to a profit period and in accordance with a registered scheme, but only so far as it does not exceed the lower of the two limits specified in the following provisions of this section.
(3) The first of the limits referred to in subsection (2) above is one fifth of the aggregate of—
(a) the pay (but not any profit-related pay) paid to the employee in the profit period in respect of his employment in the employment unit concerned (or, if the employee is eligible to receive profit-related pay by reference to part only of the period, so much of his pay, but not any profit-related pay, as is paid in that part); and
(b) the profit-related pay paid to him by reference to that period in respect of that employment.
(4) The second of the limits referred to in subsection (2) above is £3000 (or, if the profit period is less than 12 months, or the employee is eligible to receive profit-related pay by reference to part only of the profit period, a proportionately reduced amount).
(1) Profit-related pay shall not be exempt from income tax by virtue of section 171 if—
(a) it is paid to an employee in respect of his employment in an employment unit during a time when he also has another employment; and
(b) he receives in respect of that other employment during that time profit-related pay which is exempt from income tax by virtue of that section.
(2) Subject to subsection (3) below, profit-related pay in respect of which no secondary Class 1 contributions under Part I of the [1975 c. 14.] Social Security Act 1975 or Part I of the [1975 c. 15.] Social Security (Northern Ireland) Act 1975 are payable shall not be exempt from income tax by virtue of section 171.
(3) Subsection (2) above shall not apply to profit-related pay in respect of which no Class 1 contributions are payable only because the employee’s earnings are below the lower earnings limit for such contributions.
(1) Where the emoluments of all the employees to whom a profit-related pay scheme relates are paid by the same person, an application to register the scheme under this Chapter may be made to the Board by that person.
(2) Where subsection (1) above does not apply to a profit-related pay scheme, no application to register it may be made unless all the persons who pay emoluments to employees to whom the scheme relates are bodies corporate which are members of the same group; and in that case an application may be made by the parent company of the group.
(3) In subsection (2) above—
“group” means a body corporate and its 51 per cent. subsidiaries, and
“parent company” means that body corporate; and
in applying for the purposes of this section the definition of “51 per cent. subsidiary” in section 838, any share capital of a registered industrial and provident society (within the meaning of section 486) shall be treated as ordinary share capital.
(1) No application may be made to register a scheme under this Chapter if any employment to which the scheme relates is—
(a) employment in an office under the Crown or otherwise in the service of the Crown; or
(b) employment by an excluded employer.
(2) For the purposes of this section “excluded employer” means—
(a) a person in an employment within subsection (1) above;
(b) a body under the control of the Crown, or of one or more persons acting on behalf of the Crown;
(c) a local authority;
(d) a body under the control of one or more local authorities, or of the Crown (or one or more persons acting on behalf of the Crown) and one or more local authorities.
(3) For the purposes of this section a person has control of a body only if one or more of the following conditions is satisfied—
(a) in the case of a body whose affairs are managed by its members, he has the power to appoint more than half of the members;
(b) in the case of a body having a share capital, he holds more than half of its issued share capital;
(c) in the case of a body whose members vote in general meeting, he has the power to exercise more than half of the votes exercisable in general meeting;
(d) the articles of association or other rules regulating the body give him the power to secure that the affairs of the body are conducted in accordance with his wishes.
(4) For the purposes of this section a person shall be taken to possess rights and powers possessed by—
(a) a person appointed by him to an office by virtue of which the rights or powers are exercisable; or
(b) a body which he controls;
including rights and powers which such an officer or body is taken to possess by virtue of this subsection.
(5) Subsections (3) and (4) above apply with the necessary modifications for the purpose of determining whether persons together have control of a body.
(1) An application for the registration of a profit-related pay scheme under this Chapter—
(a) shall be in such form as the Board may prescribe;
(b) shall contain a declaration by the applicant that the scheme complies with the requirements of Schedule 8;
(c) shall contain an undertaking by the applicant that the emoluments paid to any employee to whom the scheme relates and to whom minimum wage legislation applies will satisfy that legislation without taking account of profit-related pay;
(d) shall specify the profit period or periods to which the scheme relates;
(e) shall be supported by such information as the Board may require.
(2) An application for the registration of a profit-related pay scheme under this Chapter shall be accompanied by a report by an independent accountant, in a form prescribed by the Board, to the effect that in his opinion—
(a) the scheme complies with the requirements of Schedule 8;
(b) the books and records maintained and proposed to be maintained by the applicant are adequate for the purpose of enabling the documents required by section 180(1) to be produced.
(3) An application for the registration of a profit-related pay scheme under this Chapter shall be made within the period of six months ending immediately before the beginning of the profit period, or the first of the profit periods, to which the scheme relates.
(4) In subsection (1) above “minimum wage legislation” means the provisions relating to remuneration in Part II of the [1986 c. 48.] Wages Act 1986, the [S.I. 1982/1840 (N.I. 23).] Wages Councils (Northern Ireland) Order 1982, the [1948 c. 47.] Agricultural Wages Act 1948, the [1949 c. 30.] Agricultural Wages (Scotland) Act 1949 and the [S.I. 1977/2151 (N.I. 22).] Agricultural Wages (Regulation) (Northern Ireland) Order 1977.
(1) If an application for registration of a profit-related pay scheme under this Chapter is made more than three months (but not more than six months) before the beginning of the profit period, or the first of the profit periods, to which the scheme relates, then subject to subsection (2) below, the Board shall register the scheme before the beginning of that period.
(2) If the Board are not satisfied that an application made as mentioned in subsection (1) above complies with the requirements of this Chapter, they may within 30 days after the day on which they receive the application—
(a) refuse the application; or
(b) by notice to the applicant either require him to amend the application or require him to give them such further information as may be specified in the notice, and in either case to do so within such time, not exceeding 30 days after the day on which the notice is given, as may be so specified.
(3) If a notice under subsection (2) above is complied with and the Board are satisfied that the application complies with the requirements of this Chapter, the Board shall register the scheme before the beginning of the profit period.
(4) If a notice under subsection (2) above is complied with but the Board remain not satisfied that the application complies with the requirements of this Chapter, the Board shall refuse the application.
(5) If a notice under subsection (2) above is not complied with but the Board are before the beginning of the profit period satisfied that the application complies with the requirements of this Chapter, the Board may register the scheme before the beginning of the period; but if they do not do so, the application shall be regarded as having been refused.
(6) If an application for registration of a profit-related pay scheme under this Chapter is made within the period of three months before the beginning of the profit period, or the first of the profit periods, to which the scheme relates, then—
(a) if before the beginning of the profit period the Board are satisfied that the application complies with the requirements of this Chapter, they shall register the scheme before the beginning of the period; but
(b) in any other case, the application shall be regarded as having been refused.
(7) After registering a scheme under this Chapter, the Board shall by notice inform the applicant that they have done so.
(8) The Board shall give notice to the applicant if they refuse his application under subsection (2) or (4) above.
(9) For the purposes of this section an application does not comply with the requirements of this Chapter if the scheme to which it relates does not comply with the requirements of Schedule 8.
(1) Where—
(a) a scheme employer ceases to fulfil the conditions which section 173 requires to be fulfilled by an applicant for registration of the scheme; and
(b) he is succeeded by a person who would be eligible to apply for registration to the scheme; and
(c) there is otherwise no other material change in the employment unit or in the circumstances relating to the scheme;
the scheme employer and his successor may make a joint written application to the Board under this section for the amendment of the registration of the scheme.
(2) If on receiving an application under this section the Board are satisfied—
(a) that the conditions in subsection (1)(a), (b) and (c) above are fulfilled; and
(b) that, apart from the change of scheme employer, there would be no grounds for cancelling the registration of the scheme,
the Board shall amend the registration of the scheme by substituting the successor for the previous scheme employer.
(3) An application under this section shall be made before the end of the period of one month beginning with the date of the succession.
(4) Where the Board amend the registration of a scheme under this section, this Chapter shall (subject to any necessary modifications) have effect as if the successor had been the scheme employer throughout.
(5) The Board shall give notice to the applicants if they refuse an application under this section.
(1) If after a scheme has been registered under this Chapter it appears to the Board—
(a) that the scheme has not been or will not be administered in accordance with this Chapter in relation to a profit period; or
(b) that the circumstances relating to the scheme have during a profit period become such that (if it were not registered) an application to register it under this Chapter would be excluded by section 174; or
(c) in the case of a scheme which employs (as the method of determining the distributable pool for a profit period) the method described as method B in paragraph 14 of Schedule 8, that losses were incurred in a profit period or in the preceding period of 12 months; or
(d) that the undertaking given in compliance with section 175(1)(c) has not been complied with in relation to employment at any time during a profit period;
the Board may cancel the registration and, subject to subsection (5) below, the cancellation shall have effect from the beginning of that profit period.
(2) If after a scheme has been registered under this Chapter it appears to the Board—
(a) that at the time of registration the scheme did not comply with the requirements of Schedule 8 or that the application did not comply with the requirements of this Chapter; or
(b) in the case of a scheme which employs (as the method of determining the distributable pool for a profit period) the method described as method A in paragraph 13 of Schedule 8, that losses were incurred in the base year specified in the scheme;
the Board may cancel the registration with effect from the beginning of the profit period (or first profit period) to which the scheme related.
(3) If after a scheme has been registered under this Chapter the scheme employer fails to comply with the requirements of section 180 in relation to a profit period, the Board may cancel the registration with effect from the beginning of that profit period.
(4) If the scheme employer by notice requests the Board to cancel the registration of the scheme with effect from the beginning of a profit period specified in the notice, the Board shall comply with the request.
(5) Where—
(a) the scheme employer has given to the Board in accordance with section 181(3) notice of a change in the employment unit, or in the circumstances relating to the scheme, which is a ground for cancellation of the registration of the scheme by virtue of subsection (1)(a) or (b) above, and
(b) the Board are satisfied that the change is not brought about with a view to the registration of a new scheme, and
(c) in the notice the scheme employer requests the Board to cancel the registration of the scheme with effect from the date of the change,
then, if the notice is given before the end of the period of one month beginning with that day, the Board shall comply with the request.
(6) The Board shall give notice to the scheme employer of the cancellation of a scheme’s registration.
(1) This section applies where—
(a) payments of profit-related pay are made to an employee in accordance with a registered scheme; and
(b) in consequence of the relief given by this Chapter in respect of registered schemes, less income tax is deducted from the payments in accordance with section 203 than would have been deducted if the scheme had not been registered; and
(c) the registration of the scheme is subsequently cancelled with effect from a time before that relevant for the purposes of the relief.
(2) Where this section applies, an amount equal to the shortfall in the deductions made in accordance with section 203 shall be payable by the scheme employer to the Board; and regulations under that section may include provision as to the collection and recovery of any such amount.
(1) After every profit period of a registered scheme, the scheme employer shall, within the period allowed by subsection (2) below, send to the Board—
(a) a return in such form and containing such information as the Board may prescribe; and
(b) a report by an independent accountant in such form and containing such information as the Board may prescribe and stating that in his opinion the terms of the scheme have been complied with in respect of the profit period.
(2) Subject to subsection (3) below, the period allowed for complying with subsection (1) above is—
(a) seven months from the end of the profit period if the employment unit to which the scheme relates is an undertaking or part of an undertaking of a public company; and
(b) ten months from the end of the profit period in any other case.
(3) If before the end of the period allowed by subsection (2) above the scheme employer gives the Board notice that an extension of three months has been allowed under section 242(3) of the [1985 c. 6.] Companies Act 1985, or under Article 250(3) of the [S.I. 1986/1032 (N.I. 6).] Companies (Northern Ireland) Order 1986, in relation to a financial year of the employer which corresponds with the profit period in question, then the period allowed by subsection (2) above shall be correspondingly extended.
(4) In subsection (2)(a) above, “public company” has the meaning given by section 1(3) of the Companies Act 1985 or Article 12(3) of the Companies (Northern Ireland) Order 1986.
(1) The Board may by notice require any person to give them, within a period of 30 days or such longer period as may be specified in the notice, any information which is so specified and which—
(a) that person has or can reasonably be required to obtain; and
(b) the Board consider they need to have in order to perform their functions under this Chapter.
(2) Without prejudice to the generality of subsection (1)(b) above, the Board may in particular require a person under subsection (1) to give them—
(a) information to enable them to determine whether the registration of a scheme should be cancelled;
(b) information to enable them to determine the liability to tax of any person who is or has been an employee to whom a registered scheme relates or who pays or has paid emoluments to such an employee;
(c) information about the administration of a profit-related pay scheme which is or has been a registered scheme;
(d) information about any change of person paying emoluments to employees to whom a registered scheme relates.
(3) The scheme employer of a registered scheme shall by notice inform the Board without delay if he becomes aware of anything that is or may be a ground for cancellation of the registration of the scheme.
Income and Corporation Taxes Act 1988