Office of Public Sector Information
PART III continued I continued
(2) The scheme may provide that, if sub-paragraph (3) below applies, scheme shares may be acquired by the exercise of a right obtained under the scheme at a price which is not manifestly less than 85 per cent. of the market value of shares of the same class at the material time.
(3) This sub-paragraph applies if the conditions specified in sub-paragraph (4)(a) and, as the case may be, (b) or (c) below, are met—
(a) where at the time the right is obtained the scheme is not a group scheme, as respects the grantor;
(b) where at the time the right is obtained the scheme is a group scheme, as respects each company to which the scheme is expressed to extend at that time.
(4) The conditions are—
(a) that the company has established, or is at the time the right is obtained a participating company in relation to, a scheme which is at that time an approved savings-related share option scheme or an approved profit sharing scheme (a “qualifying scheme”);
(b) where there is only one qualifying scheme, that every employee eligible to participate in that scheme at the time the right is obtained has, in the twelve months immediately preceding that time, been informed by an appropriate person of the scheme’s existence;
(c) where there is more than one qualifying scheme, that, in the case of each of those schemes, every employee eligible to participate in that scheme at the time the right is obtained has, in the twelve months immediately preceding that time, been informed by an appropriate person of the scheme’s existence.
(5) In determining whether the condition specified in sub-paragraph (4)(a) above is met, the withdrawal of approval under paragraph 3 above with effect from a time before the right is obtained shall be disregarded if the withdrawal takes place retrospectively from a time after the right is obtained.
(6) For the purposes of sub-paragraph (4)(b) and (c) above, an employee has been informed of the existence of a scheme by an appropriate person if he has been informed by one or more of the following—
(a) a company by virtue of employment with which the employee is eligible to participate in the scheme,
(b) the grantor, and
(c) where the scheme under which the right to acquire the shares is obtained is a group scheme, any other company which is a participating company in relation to that scheme.
(7) The scheme may provide for such variation of the price at which scheme shares may be acquired as may be necessary to take account of any variation in the share capital of which the scheme shares form part.
(8) In this paragraph, references to the material time are to the time the right to acquire the scheme shares is obtained or, if the Board and the grantor agree in writing, such earlier time or times as may be provided in the agreement.”
(2) Section 185 of that Act (tax reliefs for approved share option schemes) shall be amended as mentioned in subsections (3) to (6) below.
(3) In subsection (2) (exemption from tax in respect of receipt under approved scheme of right to acquire shares) for “Subject to subsections (4) and (6) below” there shall be substituted “Subject to subsections (6) to (6B) below”.
(4) In subsection (4) (which relates to certain rights to acquire shares obtained under a savings-related share option scheme) for “Subsections (2) and (3) above” there shall be substituted “Subsection (3) above”.
(5) For subsection (6) there shall be substituted—
“(6) Subsection (6A) below applies where—
(a) a person obtains a right to acquire shares under a scheme which is not a savings-related share option scheme, and
(b) the price at which he may acquire shares by exercising the right is not applicable by virtue of provision included in the scheme pursuant to paragraph 29(2) of Schedule 9.
(6A) Where the aggregate of—
(a) the amount or value of any consideration given by him for obtaining the right, and
(b) the price at which he may acquire the shares by exercising the right,
is less than the market value, at the time he obtains the right, of the same quantity of issued shares of the same class, he shall be chargeable to tax under Schedule E for the year of assessment in which he obtains the right on the amount of the difference; and the amount so chargeable shall be treated as earned income, whether or not it would otherwise fall to be so treated.
(6B) Subsection (6A) above shall also apply where—
(a) a person obtains a right to acquire shares under a scheme which is not a savings-related share option scheme, and
(b) the price at which he may acquire shares by exercising the right is applicable by virtue of provision included in the scheme pursuant to paragraph 29(2) of Schedule 9;
but with the substitution for “the market value” of “85 per cent. of the market value”.”
(6) In subsections (7) and (8), for “(6)” there shall be substituted “(6A)”.
(7) Subsections (1), (5) and (6) above shall come into force on 1st January 1992.
(8) Subsections (3) and (4) above shall apply in relation to rights obtained on or after 1st January 1992.
(1) In Part III of Schedule 9 to the Taxes Act 1988 (requirements applicable to savings-related share option schemes) in paragraph 24(2)(a) (scheme not to permit monthly amount of contributions linked to schemes to exceed £150) for “£150” there shall be substituted “£250”.
(2) This section shall come into force on such day as the Treasury may by order made by statutory instrument appoint.
(1) In section 187(2) of the Taxes Act 1988, in the definition of “relevant amount” (limit on the value of shares that may be appropriated to a participant in a year of assessment) for “not less than £2,000 and not more than £6,000” there shall be substituted “not less than £3,000 and not more than £8,000”.
(2) This section shall apply for the year 1991-92 and subsequent years of assessment.
The following section shall be inserted after section 84 of the Taxes Act 1988—
(1) Subsection (2) below applies where—
(a) a company incurs expenditure on establishing a share option scheme which the Board approve and under which no employee or director obtains rights before such approval is given, or
(b) a company incurs expenditure on establishing a profit sharing scheme which the Board approve and under which the trustees acquire no shares before such approval is given.
(2) In such a case the expenditure—
(a) shall be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or
(b) if the company is an investment company or a company in the case of which section 75 applies by virtue of section 76, shall be treated as expenses of management.
(3) In a case where—
(a) subsection (2) above applies, and
(b) the approval is given after the end of the period of nine months beginning with the day following the end of the period of account in which the expenditure is incurred,
for the purpose of applying subsection (2) above the expenditure shall be treated as incurred in the period of account in which the approval is given (and not the period of account mentioned in paragraph (b) above).
(4) References in this section to approving are to approving under Schedule 9.
(5) This section applies where the expenditure is incurred on or after 1st April 1991.”
The following section shall be inserted after section 85 of the Taxes Act 1988—
(1) Subsection (2) below applies where a company incurs expenditure on establishing a qualifying employee share ownership trust.
(2) In such a case the expenditure—
(a) shall be deducted in computing for the purposes of Schedule D the profits or gains of a trade carried on by the company, or
(b) if the company is an investment company or a company in the case of which section 75 applies by virtue of section 76, shall be treated as expenses of management.
(3) In a case where—
(a) subsection (2) above applies, and
(b) the trust is established after the end of the period of nine months beginning with the day following the end of the period of account in which the expenditure is incurred,
for the purpose of applying subsection (2) above the expenditure shall be treated as incurred in the period of account in which the trust is established (and not the period of account mentioned in paragraph (b) above).
(4) In this section “qualifying employee share ownership trust” shall be construed in accordance with Schedule 5 to the [1989 c. 26.] Finance Act 1989.
(5) For the purposes of this section the trust is established when the deed under which it is established is executed.
(6) This section applies where the expenditure is incurred on or after 1st April 1991.”
(1) In relation to offers made on or after 16th January 1991, section 68 of the [1988 c. 39.] Finance Act 1988 (which provides for the benefits derived from priority rights in share offers to be disregarded in certain circumstances) shall have effect, and be deemed at all times on and after that date to have had effect, with the amendments specified in subsections (2) to (8) below.
(2) In paragraph (a) of subsection (1), for the words “an offer” there shall be substituted the words “a bona fide offer”.
(3) After that subsection there shall be inserted—
“(1ZA) A case falls within this subsection if—
(a) there is a bona fide offer to the public of a combination of shares in two or more companies at a fixed price or by tender (“the public offer”);
(b) there is at the same time an offer (“the employee offer”) of shares, or of a combination of shares, in any one or more, but not all, of those companies—
(i) to directors or employees, or
(ii) to directors or employees and to other persons,
(whether the directors or employees are directors or employees of any of those companies, or of any other company or person); and
(c) any of those directors or employees is entitled, by reason of his office or employment, to an allocation of shares under the employee offer in priority to any allocation to members of the public under the public offer.
(1ZB) In any case falling within subsection (1ZA) above—
(a) the public offer and the employee offer shall be regarded for the purposes of subsection (1) above as together constituting a single offer of shares to the public, notwithstanding the difference in the shares to which each offer relates;
(b) the reference to “the shares” in paragraph (b) of that subsection shall be taken as a reference to any of the shares which, in consequence of paragraph (a) above, are to be regarded as subject to that single offer; and
(c) in the following provisions of this section references to the offer or to shares subject to the offer shall be construed accordingly.”
(4) For subsection (1A) there shall be substituted—
“(1A) Where, disregarding the amount or value of any registrant discount made to the director or employee in respect of the shares of the company (or, in a case falling within subsection (1ZA) above, of the company in question), the price payable by him for the shares of that company which are allocated to him under the offer—
(a) in a case not falling within subsection (1ZA) above, is less than the fixed price or the lowest price successfully tendered, or
(b) in a case falling within that subsection, is not the same as, or as near as reasonably practicable to, the appropriate notional price for the shares of that company,
subsection (1) above shall not apply to the benefit (if any) represented by the difference in price.”
(5) After subsection (2B) there shall be inserted—
“(2C) In a case falling within subsection (1ZA) above, the condition in paragraph (a) of subsection (2) above shall be taken to be satisfied in relation to the offer if, and only if, it is separately satisfied with respect to the shares in each one of the companies which are subject to that offer; and for this purpose only, any reference in that paragraph or in subsection (2A) or (2B) above to shares is a reference to shares in the particular company in question.”
(6) In subsection (3A) (saving where the allocations of directors or employees are larger than those of other persons) after the words “the company”, where first occurring, there shall be inserted the words “(or, in a case falling within subsection (1ZA) above, any one or more of the companies to which the offer relates)”.
(7) At the end of subsection (5) (definitions) there shall be added—
““the public offer” and “the employee offer” have the meaning given by paragraphs (a) and (b) of subsection (1ZA) above.”
(8) After that subsection there shall be inserted—
“(5A) For the purposes of this section, there is a “registrant discount” in respect of the shares of a company in any case where—
(a) in connection with the offer, members of the public who comply with such requirements as may be imposed in that behalf are, or may become, entitled to a discount in respect of the whole or some part of the shares of that company which are allocated to them; and
(b) at least 40 per cent. of the shares of that company which are allocated to members of the public other than employees and directors are allocated to individuals who are or become entitled either to that discount or to some other benefit of similar value for which they may elect as an alternative to the discount; and
(c) directors or employees who either—
(i) subscribe for shares under the offer (or, in a case falling within subsection (1ZA) above, under the public offer) as members of the public, or
(ii) subscribe for shares under the employee offer, as directors or employees,
and who comply (or, in the case of a requirement to register, are taken under the terms of the offer to comply) with the same requirements as are mentioned in paragraph (a) above, are, or may become, entitled to the same discount in respect of the shares of the company as any other members of the public to whom shares of that company are allocated under the offer;
and any reference in this section to the amount or value of the registrant discount made to a director or employee is a reference to the amount of any such discount made to him as is mentioned in paragraph (c) above or, as the case may be, the value of any such other benefit as is mentioned in paragraph (b) above which is conferred upon him as an alternative to the discount.
(5B) For the purposes of this section, in a case falling within subsection (1ZA) above “the appropriate notional price” for the shares of any of the companies subject to the offer is such price as—
(a) had the shares of that company, and of each of the other companies, instead of being subject to the offer, been subject to separate offers to the public in respect of each company at fixed prices, and
(b) had those separate offers been made at the time at which the public offer was in fact made,
might reasonably have been expected to be the fixed price for the shares of that company under the separate offer of those shares; but where subsection (5C) below applies, the amount determined in accordance with this subsection as the notional price for the shares of any company shall be varied in accordance with that subsection.
(5C) If the amounts determined in accordance with subsection (5B) above as the appropriate notional prices for the shares of each of the companies subject to the public offer are such that, had the price for the combination of shares subject to the public offer been determined by aggregating the appropriate notional price (as so determined) for each one of the shares comprised in the combination, the price for the combination would have been different from the actual fixed price or (as the case may be) lowest successfully tendered price, then those amounts shall each be varied by multiplying them by the fraction of which—
(a) the numerator is the actual fixed or lowest successfully tendered price for the combination of shares subject to the public offer; and
(b) the denominator is the different price mentioned above;
and those amounts, as so varied, shall be the appropriate notional prices for the purposes of this section.”
(9) In section 77 of that Act (scope of provisions about unapproved employee share schemes) in subsection (1), for the words “Subject to subsections (2) and (3) below” there shall be substituted the words “Subject to subsections (2) to (4) below”, and after subsection (3) (exemption where the acquisition is made in pursuance of an offer to the public) there shall be added—
“(4) Where, in a case falling within subsection (1ZA) of section 68 above, subsection (1) of that section—
(a) applies or applied in relation to such a benefit as is there mentioned, or
(b) would so apply or have applied, had there been any such benefit,
any acquisition made on or after 16th January 1991 in pursuance of any of the offers which, in that case, fall to be regarded by virtue of subsection (1ZB) of that section as together constituting a single offer of shares to the public for the purposes of subsection (1) of that section shall be regarded for the purposes of subsection (3) above as an acquisition made in pursuance of an offer to the public.”
(10) The amendments made by subsection (9) above shall be deemed to have come into force on 16th January 1991.
(1) In Schedule 12 to the Taxes Act 1988 (foreign earnings) in paragraph 3(2A) (seafarers) for “90” there shall be substituted “183” and for “one quarter” there shall be substituted “one half”.
(2) Subject to subsection (3) below, this section shall apply for the purpose of deciding whether the relevant period and the earlier qualifying period referred to in paragraph 3(2) of Schedule 12 to the Taxes Act 1988 are to be treated as a single period in a case where at least one of the intervening days falls after 5th April 1991.
(3) This section shall apply for the purpose of charging tax for the year 1991-92 or any later year of assessment.
(1) This section applies if—
(a) a person was in Kuwait or Iraq at any time in the period of 62 days ending with 2nd August 1990,
(b) he was at that time engaged in performing the duties of an office or employment which were to be performed to a substantial extent in Kuwait or Iraq,
(c) he returned to the United Kingdom after that time,
(d) the period of absence from the United Kingdom which ends with his return is not, and is not part of, a qualifying period consisting of at least 365 days, and
(e) he satisfies the Board (or the Commissioners on appeal) that, having regard to the circumstances, it is likely that that period of absence would have been part of such a qualifying period but for events leading up to or arising from the invasion of Kuwait on 2nd August 1990.
(2) In such a case, so much of the period before the day of his return to the United Kingdom as the Board are satisfied would have been part of a qualifying period consisting of at least 365 days (but for those events) shall be treated as a qualifying period consisting of at least 365 days.
(3) All such adjustments shall be made, whether by way of discharge or repayment of tax or otherwise, as may be required in consequence of the provisions of this section.
(4) In the case of employment as a seafarer, this section shall have effect as if “62 days” read “90 days”.
(5) In this section—
(a) “qualifying period” means a qualifying period for the purposes of section 193(1) of the Taxes Act 1988 (foreign earnings);
(b) “employment as a seafarer” has the same meaning as in paragraph 3(2A) of Schedule 12 to that Act (further provisions about foreign earnings).
(1) In section 76 of the Taxes Act 1988, in subsection (7) (which treats certain levies as expenses of management of insurance companies) after the word “under” there shall be inserted “(a)” and after the words “Policyholders Protection Act 1975” there shall be inserted the words “or
(b) a levy imposed in pursuance of a scheme established by rules under section 54 of the 1986 Act (compensation fund for unsatisfied claims),”.
(2) After that subsection there shall be inserted—
“(7A) The Treasury may by regulations make provision for any sums paid by a company under a prescribed levy imposed under a prescribed investor protection scheme established under the rules of a prescribed recognised self-regulating organisation to be treated for the purposes of this section as part of the company’s expenses of management; and, without prejudice to the generality of the foregoing, regulations under this subsection may, in particular—
(a) provide for only a prescribed part of any sums so paid to be so treated;
(b) provide for sums paid before, as well as after, the coming into force of the regulations to be so treated; and
(c) make different provision for different cases or in relation to different levies, schemes or organisations.”
(3) For subsection (8) of that section (definitions) there shall be substituted—
“(8) In this section—
“the 1986 Act” means the [1986 c. 60.] Financial Services Act 1986;
“acquisition expenses” means expenses falling within paragraphs (a) to (c) of subsection (1) of section 86 of the [1989 c. 26.] Finance Act 1989;
“authorised person” has the same meaning as it has in the 1986 Act by virtue of section 207(1) of that Act;
“investment business” has the same meaning as it has in the 1986 Act by virtue of section 1(2) of that Act;
“investor” includes a person who is an investor for the purposes of the 1986 Act;
“investor protection scheme” means a scheme established under the rules of a recognised self-regulating organisation for purposes which consist of or include the compensating of investors in cases where persons, or persons of some class or description, who are or have been authorised persons, are, or are likely to be, unable to satisfy claims in respect of any description of civil liability incurred by them in connection with their investment businesses;
“prescribed” means specified in regulations made by the Treasury under subsection (7A) above;
“recognised self-regulating organisation” has the same meaning as it has in the 1986 Act;
and other expressions have the same meaning as in Chapter I of Part XII.”
(4) The amendments made by subsection (1) above shall have effect in relation to levies imposed, and sums paid, before or after the coming into force of that subsection.
Schedule 7 to this Act shall have effect.
(1) After section 438 of the Taxes Act 1988 (pension business: exemption from tax) there shall be inserted—
Schedule 19AB shall have effect.”
(2) Schedule 8 to this Act (which makes provision for and in connection with the making of payments to insurance companies on account of tax borne by deduction and tax credits in respect of income from assets referable to their pension business) shall have effect.
(3) This section shall have effect in relation to accounting periods beginning on or after such day as the Treasury may by order made by statutory instrument appoint.
Schedule 9 to this Act (which makes provision about friendly societies) shall have effect.
Schedule 10 to this Act (which makes provision about certain kinds of building society share) shall have effect.
(1) Schedule 11 to this Act (which makes provision about the deduction of income tax in the case of marketable securities issued by building societies) shall have effect.
(2) In section 477A of the Taxes Act 1988 (corporation tax treatment of payments by building societies) after subsection (3) there shall be inserted—
“(3A) Subsection (3B) below applies in the case of a dividend or interest payable in respect of any security (other than a qualifying certificate of deposit) which is quoted, or capable of being quoted, on a recognised stock exchange at the time the dividend or interest becomes payable.
(3B) Where the amount payable by way of dividend or interest represents more than a reasonable commercial return for the use of the principal to which the security relates, the amount deductible in respect of the dividend or interest under subsection (3)(a) above shall not exceed an amount equal to the amount which would have represented a reasonable commercial return for the use of that principal.
(3C) For the purposes of subsection (3B) above, no amount shall be regarded as representing the principal to which a security relates in so far as it exceeds any new consideration which has been received by the society for the issue of the security.”
(3) Subsection (2) above shall apply in relation to dividends or interest becoming payable on or after the day on which this Act is passed.
(1) Section 343(1A) of the [1970 c. 10.] Income and Corporation Taxes Act 1970 (building societies) shall be deemed to have conferred power to make all the provisions in fact contained in the [S.I. 1986/482.] Income Tax (Building Societies) Regulations 1986 (the regulations).
(2) Where a provision of the regulations requires a building society to pay to the Board a sum calculated by reference to the reduced rate and the basic rate, subsection (3) below shall apply to the extent that the sum is one in respect of payments or credits made in the period beginning with 1st March in any year and ending with 5th April in the same year.
(3) The provision shall be deemed always to have had effect as if the reduced and basic rates concerned were those for the year of assessment in which the period falls.
(4) In relation to a building society which commenced proceedings to challenge the validity of the regulations before 18th July 1986, this section shall not have effect to the extent that the regulations apply (or purport to apply) to payments or credits made before 6th April 1986.
Schedule 12 to this Act (which contains provisions about securities issued after an issue of securities of the same kind) shall have effect.
(1) In section 731 of the Taxes Act 1988 (scope of bondwashing provisions) the following subsections shall be inserted after subsection (4)—
“(4A) For the purposes of subsection (3) above, where a purchase or sale is effected as a direct result of the exercise of a qualifying option, it shall be treated as effected at the current market price if the terms under which the first buyer acquired the option, or, as the case may be, became subject to it, were arm’s length terms.
(4B) For the purposes of subsection (4A) above an option is a “qualifying option” if it would be a traded option or financial option as defined in subsection (9) of section 137 of the 1979 Act were the reference in paragraph (b) of that subsection to the time of the abandonment or other disposal a reference to the time of exercise.
(4C) In subsection (4A) above the reference to arm’s length terms is to terms—
(a) agreed between persons dealing at arm’s length, or
(b) not so agreed, but nonetheless such as might reasonably be expected to have been agreed between persons so dealing.”
(2) This section shall apply where the subsequent sale by the first buyer takes place on or after the day on which this Act is passed.
(1) In section 732 of the Taxes Act 1988, after subsection (2) (exemption for market makers) there shall be inserted—
“(2A) Subsection (1) above shall not apply in prescribed circumstances if—
(a) the first buyer is—
(i) a prescribed recognised clearing house, or
(ii) a member, of a prescribed class or description, of a prescribed recognised investment exchange, and
(b) the subsequent sale is carried out by the first buyer after a prescribed date and in the ordinary course of his business.”
(2) At the end of that section there shall be added—
“(7) For the purposes of subsection (2A) above—
“prescribed” means prescribed in regulations made by the Treasury;
“recognised clearing house” means a recognised clearing house within the meaning of the [1986 c. 60.] Financial Services Act 1986;
“recognised investment exchange” means a recognised investment exchange within the meaning of that Act.”
(1) Section 129 of the Taxes Act 1988 (stock lending) shall be amended as mentioned in subsections (2) and (3) below.
(2) The following subsection shall be inserted after subsection (2)—
“(2A) Subject to subsection (4) below—
(a) this section also applies where an arrangement in addition to those mentioned in subsections (1) and (2) above, and similar to that mentioned in subsection (2) above, is entered into as part of a chain of arrangements all having the effect of enabling A to fulfil his contract, and
(b) it is immaterial how many separate arrangements there are in the chain.”
(3) In subsection (3) after “(2)” there shall be inserted “or (2A)”.
(4) In section 149B(9) of the [1979 c. 14.] Capital Gains Tax Act 1979 (which refers to section 129 of the Taxes Act 1988) after “(2)” there shall be inserted “or (2A)”.
(5) This section shall apply to transfers made after such date as is specified for this purpose by regulations under section 129 of the Taxes Act 1988.
Finance Act 1991