Office of Public Sector Information
SCHEDULE 6 continued PART 2 continued
(4) If the shares are acquired by the trustees by virtue of a payment in respect of which a deduction is allowed under paragraph 9 of Schedule 4AA to the Taxes Act (deduction for contribution to plan trust), the relevant period is the period of ten years beginning with the date of acquisition.
(5) For the purposes of determining whether shares are awarded to a participant within the relevant period, shares acquired by the trustees at an earlier time are taken to be awarded to a participant before shares of the same class acquired by the trustees at a later time.
(6) Sub-paragraph (5) is subject to paragraph 78(1) of Schedule 2 to ITEPA 2003 (acquisition by trustees of shares from employee share ownership trust).
(7) For the purposes of this paragraph “readily convertible assets” has the meaning given by sections 701 and 702 of that Act (readily convertible assets).
This is subject to sub-paragraph (8).
(8) In determining for the purposes of this paragraph whether shares are readily convertible assets any market for the shares that—
(a) is created by virtue of the trustees acquiring shares for the purposes of the plan, and
(b) exists solely for the purposes of the plan,
shall be disregarded.
(9) In relation to shares acquired by the trustees before 11th May 2001 this paragraph has effect with the substitution—
(a) in sub-paragraph (2), of “If the shares are readily convertible assets at the time they” for the words before “are acquired”, and
(b) in sub-paragraph (3)—
(i) of “If at the time of their acquisition by the trustees the shares are not readily convertible assets” for the words before “the relevant period”, and
(ii) in paragraph (b), of “the shares in question” for “any of the shares in that company”.
3 (1) Sub-paragraph (2) applies to any shares awarded to a participant under the plan.
(2) The participant is treated for capital gains tax purposes as absolutely entitled to those shares as against the trustees.
(3) Sub-paragraph (2) applies notwithstanding anything in the plan or the trust instrument.
4 (1) For the purposes of Chapter 1 of Part 4 of this Act (shares, securities, options etc: general) a participant’s plan shares are treated, so long as they are subject to the plan, as of a different class from any shares (which would otherwise be treated as of the same class) that are not plan shares.
(2) For the purposes of that Chapter, any shares to which sub-paragraph (3) applies shall be treated as of a different class from any shares to which sub-paragraph (4) applies, even if they would otherwise fall to be treated as of the same class.
(3) This sub-paragraph applies to any shares transferred to the trustees of the plan trust by a qualifying transfer that have not been awarded to participants under the plan.
(4) This sub-paragraph applies to any shares held by the trustees that were not transferred to them by a qualifying transfer.
(5) In this paragraph “qualifying transfer” has the meaning given in paragraph 78(2) of Schedule 2 to ITEPA 2003 (acquisition by trustees of shares from employee share ownership trust).
(6) For the purposes of Chapter 1 of Part 4 of this Act any shares which—
(a) were acquired by the trustees by virtue of a payment in respect of which a deduction is allowed under paragraph 9 of Schedule 4AA to the Taxes Act (deduction for contribution to plan trust), and
(b) have not been awarded under the plan,
shall be treated as of a different class from any shares held by the trustees that were not so acquired by them, even if they would otherwise fall to be treated as of the same class.
5 (1) Shares which cease to be subject to the plan are treated as having been disposed of and immediately reacquired by the participant at market value.
(2) Any gain accruing on that disposal is not a chargeable gain.
6 (1) If at any time the participant’s beneficial interest in any of his shares is disposed of, the shares in question shall be treated for the purposes of the SIP code as having been disposed of at that time by the trustees for the like consideration as was obtained for the disposal of the beneficial interest.
(2) For this purpose there is no disposal of the participant’s beneficial interest if and at the time when—
(a) in England and Wales or Northern Ireland, that interest becomes vested in any person on the insolvency of the participant or otherwise by operation of law, or
(b) in Scotland, that interest becomes vested in a judicial factor, in a trustee of the participant’s sequestrated estate or in a trustee for the benefit of the participant’s creditors.
(3) If a disposal of shares falling within this paragraph is not at arm’s length, the proceeds of the disposal shall be taken for the purposes of the SIP code to be equal to the market value of the shares at the time of the disposal.
7 (1) If any of the participant’s plan shares are forfeited, they are treated as having been disposed of by the participant and acquired by the trustees at market value at the date of forfeiture.
(2) Any gain accruing on that disposal is not a chargeable gain.
8 (1) Any gain accruing on the disposal of rights under paragraph 77 of Schedule 2 to ITEPA 2003 (power of trustees to raise funds to subscribe for rights issue) is not a chargeable gain.
(2) Sub-paragraph (1) does not apply to a disposal of rights unless similar rights are conferred in respect of all ordinary shares in the company.
9 (1) This Part of this Schedule forms part of the SAYE code (see section 516 of ITEPA 2003 (approved SAYE option schemes)).
(2) Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 3 to that Act (approved SAYE option schemes) have the meaning indicated by the index.
10 (1) This paragraph applies where—
(a) a share option (“the option”) has been granted to an individual—
(i) in accordance with the provisions of an approved SAYE option scheme, and
(ii) by reason of the individual’s office or employment as a director or employee of a company,
(b) the individual exercises the option in accordance with the provisions of the SAYE option scheme at a time when the scheme is approved, and
(c) condition A or condition B in section 519(2) or (3) of ITEPA 2003 (no charge in respect of exercise of option) is met.
(2) The company mentioned in sub-paragraph (1)(a)(ii) may be—
(a) the company whose shares are the subject of the option, or
(b) some other company.
(3) If the option—
(a) was granted under the SAYE option scheme before the withdrawal of approval under paragraph 42 of Schedule 3 to ITEPA 2003, but
(b) is exercised after the withdrawal of approval,
then, for the purposes of sub-paragraph (1)(b) above in its application to the option, the scheme is to be treated as if it were still approved at the time of the exercise.
(4) Section 17(1) (disposals and acquisitions treated as made at market value) shall not apply in calculating the consideration for—
(a) the individual’s acquisition of shares by the exercise of the option, or
(b) any corresponding disposal of those shares to the individual.
(5) References in sub-paragraphs (1)(b) and (4) above to the individual include references to a person exercising the option in accordance with provision included in the scheme by virtue of paragraph 32 of Schedule 3 to ITEPA 2003 (exercise of options: death); and sub-paragraph (1)(c) above does not apply in relation to a person so exercising the option.
11 (1) This Part of this Schedule forms part of the CSOP code (see section 521 of ITEPA 2003 (approved CSOP schemes)).
(2) Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 4 to that Act (approved CSOP schemes) have the meaning indicated by the index.
(3) This Part of this Schedule applies where—
(a) a share option (“the option”) has been granted to an individual—
(i) in accordance with the provisions of an approved CSOP scheme, and
(ii) by reason of the individual’s office or employment as a director or employee of a company, and
(b) shares (“the relevant shares”) are acquired by the exercise of the option.
(4) The company mentioned in sub-paragraph (3)(a)(ii) may be—
(a) the company whose shares are the subject of the option, or
(b) some other company.
12 (1) This paragraph applies where an amount (the “employment income amount”) counted as employment income of the individual under section 526 of ITEPA 2003 (charge where option granted at a discount) in respect of the option.
(2) For the purposes of section 38(1)(a) (acquisition and disposal costs etc.), that part of the employment income amount which is attributable to the relevant shares shall be treated as consideration given for the acquisition of the relevant shares.
(3) This paragraph also applies where the individual was chargeable to income tax on an amount in respect of the option under—
(a) subsection (6) of section 185 of ICTA (as it had effect before 1st January 1992),
(b) subsection (6A) of that section (as it had effect in relation to options obtained on or after 1st January 1992 but before 29th April 1996), or
(c) subsection (6) of that section (as it had effect in relation to options obtained on or after 29th April 1996);
and in such a case the “employment income amount” means the amount on which the individual was so chargeable.
(4) This paragraph applies whether or not—
(a) the exercise of the option is in accordance with the provisions of the CSOP scheme, or
(b) the CSOP scheme is approved at the time of the exercise.
13 (1) This paragraph applies where—
(a) the individual exercises the option in accordance with the provisions of the CSOP scheme at a time when the scheme is approved, and
(b) the condition in section 524(2) of ITEPA 2003 (no charge in respect of exercise of option) is met.
(2) Section 17(1) (disposals and acquisitions treated as made at market value) shall not apply in calculating the consideration for—
(a) the individual’s acquisition of the relevant shares by the exercise of the option, or
(b) any corresponding disposal of the relevant shares to the individual.
(3) Sub-paragraph (2) also applies where the option is exercised at a time when the scheme is approved in accordance with provision included in the scheme by virtue of paragraph 25 of Schedule 4 to ITEPA 2003 (exercise of options: death); and references in that sub-paragraph to the individual are to be read accordingly.
14 (1) This Part of this Schedule forms part of the EMI code (see section 527 of ITEPA 2003 (enterprise management incentives: qualifying options)).
(2) Accordingly, expressions used in this Part of this Schedule and contained in the index at the end of Schedule 5 to that Act (enterprise management incentives) have the meaning indicated by the index.
(3) In this Part of this Schedule, “qualifying shares”—
(a) means shares acquired by the exercise of a qualifying option, subject to sub-paragraphs (4) and (5), and
(b) includes shares (“replacement shares”) which—
(i) are treated under section 127 (equation of original shares and new holding) as the same asset as a holding of qualifying shares, and
(ii) meet the requirements of paragraph 35 of Schedule 5 to ITEPA 2003 (type of shares that may be acquired).
(4) If a disqualifying event occurs in relation to a qualifying option (whether the original option or a replacement option), shares acquired by the exercise of that option are qualifying shares only if the option is exercised within 40 days of that event.
(5) References in this Part of this Schedule to “the original option”, where there has been one or more replacement options, are to the option that the replacement option (or, if there has been more than one, the first of them) replaced.
15 For the purposes of computing taper relief on a disposal of qualifying shares, the shares are treated as if they had been acquired when the original option was granted.
16 Where—
(a) an individual holds qualifying shares, and
(b) there is, by virtue of any such allotment for payment as is mentioned in section 126(2)(a) (allotment in proportion to shareholdings), a reorganisation affecting that holding,
sections 127 to 130 (which relate to reorganisation or reduction of share capital) shall not apply in relation to that holding.”
222 In section 181(1) of the Pension Schemes Act 1993 (general interpretation), in the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)”.
223 In section 176(1) of the Pension Schemes (Northern Ireland) Act 1993 (general interpretation), in the definition of “employee” for “emoluments chargeable to income tax under Schedule E” substitute “general earnings (as defined by section 7 of the Income Tax (Earnings and Pensions) Act 2003)”.
224 (1) In the Finance Act 1994, paragraph 27 of Schedule 24 (provisions relating to the Railways Act 1993 — employee benefits: transport vouchers) is amended as follows.
(2) In sub-paragraph (3) for “Subsection (6) of section 141 of the Taxes Act 1988” substitute “Section 86 of ITEPA 2003 (exception for certain transport vouchers)”.
(3) In sub-paragraph (3)(c) for “paragraphs (a) to (d) of that subsection” substitute “section 86(2)(a) to (d) of ITEPA 2003”.
(4) In sub-paragraph (12) after the definition of “the former transport voucher benefits for comparable employees” insert—
““ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003.”
(5) For sub-paragraph (13) substitute—
“(13) Subject to paragraph 1(1) and sub-paragraph (12) above, expressions used in this paragraph and in section 86 of ITEPA 2003 have the same meaning in this paragraph as in that section.
This does not apply in relation to the reference to a transport voucher in sub-paragraph (1) above.”
225 The Finance Act 1995 is amended as follows.
226 (1) Amend section 128 (limit on income chargeable on non-residents: income tax) as follows.
(2) For subsection (3)(c) substitute—
“(cc) it is chargeable to tax under Part 9 of ITEPA 2003 (pension income) because section 577 or 605 of that Act applies to it (UK social security pensions and retirement annuity contracts);
(cd) it arises from a source in the United Kingdom and is chargeable to tax under Part 9 of ITEPA 2003 because section 609, 610 or 611 of that Act applies to it (certain employment-related annuities);
(ce) it is a taxable benefit listed in Table A in section 660 of ITEPA 2003, other than income support or jobseeker’s allowance, chargeable to tax under Part 10 of that Act (social security income);”.
(3) In subsection (3)(d) for “paragraphs (a) to (c)” substitute “paragraphs (a) to (ce)”.
(4) For subsection (11) substitute—
“(11) In this section—
“investment transaction” has the same meaning as in section 127 above;
“ITEPA 2003” means the Income Tax (Earnings and Pensions) Act 2003.”
227 In section 137(7) (part-time workers: miscellaneous provisions) for “Subsections (2) to” substitute “Subsection”.
228 The Jobseekers Act 1995 is amended as follows.
229 In section 15(2)(c)(i) (effect on other claimants) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003) under PAYE regulations”.
230 In section 26(3) (the back to work bonus) for the words from “Subject to section 617” to “not to be taxable)” substitute “Subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable)”.
231 For section 10(4) of the Child Support Act 1995 (child maintenance bonus) substitute—
“(4) Subsection (3) is subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable).”
232 For Article 4(4) of the Child Support (Northern Ireland) Order 1995 (child maintenance bonus) substitute—
“(4) Paragraph (3) is subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable).”
233 The Jobseekers (Northern Ireland) Order 1995 is amended as follows.
234 In Article 17(2)(c)(i) (effect on other claimants) for “emoluments in pursuance of section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “taxable earnings (as defined by section 10 of the Income Tax (Earnings and Pensions) Act 2003 under regulations made under section 684 of that Act (PAYE regulations)”.
235 In Article 28(3) (the back to work bonus) for the words from “Subject to section 617” to “not to be taxable)” substitute “Subject to section 677 of the Income Tax (Earnings and Pensions) Act 2003 (which provides for a back to work bonus not to be taxable)”.
236 In section 22 of the Teaching and Higher Education Act 1998 (new arrangements for giving financial support to students)—
(a) in subsection (5)(g) for “regulations under section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “PAYE regulations”; and
(b) in subsection (6)(a) for “income assessable to income tax under Schedule E” substitute “PAYE income”.
237 In section 79(3) of the Scotland Act 1998 (supplemental powers to modify enactments) for “section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “PAYE regulations”.
238 In Article 3 of the Education (Student Support) (Northern Ireland) Order 1998 (new arrangements for giving financial support to students)—
(a) in paragraph (5)(g) for “section 203 of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “section 684 of the Income Tax (Earnings and Pensions) Act 2003 (PAYE regulations)”; and
(b) in paragraph (6)(a) for “income assessable to income tax under Schedule E” substitute “PAYE income (as defined in section 683 of the Income Tax (Earnings and Pensions) Act 2003”.
239 The Tax Credits Act 1999 is amended as follows.
240 In section 6(1) (payment of tax credit by employers etc.) for “income assessable to income tax under Schedule E” substitute “PAYE income”.
241 In paragraph 10(1) of Schedule 2 (transfer of functions), in paragraph (b) of the subsection which, in any case where the overpayment was made in respect of tax credit, is treated as substituted for—
(a) subsection (8) of section 71 of the Social Security Administration Act 1992 (c. 5), and
(b) subsection (8) of section 69 of the Social Security Administration (Northern Ireland) Act 1992 (c. 8),
for “section 203(2)(a) of the Income and Corporation Taxes Act 1988 (PAYE)” substitute “PAYE regulations”.
242 The Finance Act 2000 is amended as follows.
243 (1) Amend section 38 (payroll deduction scheme) as follows.
(2) In subsection (1)—
(a) for “under section 202 of the Taxes Act 1988” substitute “for the purposes of section 714 of the Income Tax (Earnings and Pensions) Act 2003”,
(b) for “an employer” substitute “a person”,
(c) for “employee” substitute “individual”, and
(d) for “employer”, in the second place where it occurs, substitute “person”.
(3) In subsection (4) for the definitions of “agent”, “employee” and “employer” substitute—
““agent” means an agent approved for the purposes of section 714 of the Income Tax (Earnings and Pensions) Act 2003;”.
244 (1) Amend Schedule 12 (provision of services through an intermediary) as follows.
(2) In paragraph 17—
(a) for “deemed Schedule E payment”, in each place, substitute “deemed employment payment”; and
(b) after sub-paragraph (3) insert—
“(4) In this paragraph and paragraph 18 expressions that are also used in Chapter 8 of Part 2 of the Income Tax (Earnings and Pensions) Act 2003 have the same meaning as in that Chapter.”
(3) In paragraph 18—
(a) in sub-paragraph (1) for “deemed Schedule E payment” substitute “deemed employment payment”; and
(b) in sub-paragraph (3)(a) for “Schedule E” substitute “the employment income Parts of the Income Tax (Earnings and Pensions) Act 2003”.
245 (1) In Schedule 20 (tax relief for expenditure of research and development), amend paragraph 5 as follows.
(2) For sub-paragraph (1)(a) substitute—
“(a) the earnings paid by the company to directors or employees of the company;”.
(3) After sub-paragraph (1) insert—
“(1ZA) In sub-paragraph (1)(a) “earnings” means earnings or amounts treated as earnings which constitute employment income (see section 7(2)(a) or (b) of the Income Tax (Earnings and Pensions) Act 2003).”
246 The Capital Allowances Act 2001 is amended as follows.
247 (1) Amend section 4 (capital expenditure) as follows.
(2) For subsection (2)(b) substitute—
“(b) any expenditure or sum that may be allowed as a deduction under a relevant provision from the taxable earnings from an employment or office held by the person.”
(3) After subsection (2) insert—
“(2A) In subsection (2)—
“relevant provision” means any of the following—
section 262;
section 232 of ITEPA 2003 (giving effect to mileage allowance relief);
Chapters 2 to 6 of Part 5 of that Act (general deductions allowed from earnings); and
sections 613(1), 619 and 639 of ICTA (contributions to pensions funds etc.), and
“taxable earnings” has the meaning given by section 10 of ITEPA 2003.”
(4) In subsection (3) for “emoluments” substitute “earnings”.
248 (1) Amend section 20 (employments and offices) as follows.
(2) In subsection (2)—
(a) for “emoluments” substitute “earnings”; and
(b) for “do not fall within Case I or II of Schedule E” substitute “fall within section 22 or 26 of ITEPA 2003”.
(3) In subsection (3)—
(a) for “those emoluments” substitute “those earnings”; and
(b) for “other emoluments” substitute “other taxable earnings (as defined by section 10 of ITEPA 2003)”.
249 In section 61(2) (disposal events and disposal values), in entry 2(b) of the Table, for “Schedule E” substitute “ITEPA 2003”.
250 In section 63(1) (cases in which disposal value is nil) for “Schedule E” substitute “ITEPA 2003”.
251 In section 72(3) (disposal values), in entry 2(b) of the Table, for “Schedule E” substitute “ITEPA 2003”.
252 In section 88(c) (sales at under-value) for “Schedule E” substitute “ITEPA 2003”.
253 In section 262 (employments and offices)—
(a) in paragraph (a) for “an amount to be deducted from the emoluments of” substitute “a deduction from the taxable earnings from”; and
(b) in paragraph (b) for “an emolument” substitute “earnings”.
254 In section 423(1) (disposal value for sections 421 and 422), in entry 2(b) of the Table, for “Schedule E” substitute “ITEPA 2003”.
255 At the end of Part 1 of Schedule 1 (abbreviations) insert—
| “ITEPA 2003 | The Income Tax (Earnings and Pensions) Act 2003”. |
256 In Part 2 of Schedule 1 (defined expressions used in the Act), in the entry relating to “United Kingdom”, after “section 830 of ICTA” insert “and section 41 of ITEPA 2003”.
Income Tax (Earnings and Pensions) Act 2003