Office of Public Sector Information

(3) At the appropriate places insert—

(4) So far as relating to—

(a) Chapters 8 and 9 of Part 3 (which are repealed and replaced by provisions inserted in Part 7),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(c) each of the Chapters of that Part as originally enacted for which new provisions are substituted,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 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.

(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.”.

(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),”.

(2) Sub-paragraph (1) has effect in accordance with the provision made for the substitution of Chapter 4 of Part 7.

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, 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—

“(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, 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

(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.

(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—

“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 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”.”.

(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.

(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,”.

(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.”

(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 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 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—

(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 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

(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—

(a) sub-paragraphs (2) and (19) have effect in relation to securities, and interests in securities, disposed of on or after 16th April 2003,

(b) sub-paragraphs (5) and (13) to (17) have effect on and after 16th April 2003,

(c) sub-paragraphs (6) to (8), (10), (11), (20), (23) and (24) have effect on the day appointed under paragraph 3(2), and

(d) sub-paragraphs (21) and (22) have effect in accordance with the provision made for the substitution of Chapter 5 of Part 7.

Consequential amendments of other enactments

47 (1) In section 98 of the Taxes Management Act 1970 (c. 9) (penalties for failure to furnish information etc)—

(a) in the first column of the Table, at the appropriate place insert “Section 421J(4) of ITEPA 2003.”, and

(b) in the second column of the Table, for the entries relating to sections 432, 433, 445, 465, 466 and 486 of the Income Tax (Earnings and Pensions) Act 2003 (c. 1) substitute “Section 421J(3) of ITEPA 2003.”.

(2) Sub-paragraph (1) has effect in accordance with the provision made for the substitution of Chapter 1 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003.

48 (1) In section 4(4)(a) of—

(a) the Social Security Contributions and Benefits Act 1992 (c. 4) (payments treated as earnings), and

(b) the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7) (corresponding provision for Northern Ireland),

for the words after “479” substitute “of ITEPA 2003 in respect of which an amount counts as employment income of the earner under section 476 of that Act (charge on acquisition of securities pursuant to option etc), reduced by any amounts deducted under section 480(1) to (6) of that Act in arriving at the amount counting as such employment income;”.

(2) Sub-paragraph (1) has effect in accordance with the provision made for the substitution of Chapter 5 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003.

49 The Taxation of Chargeable Gains Act 1992 (c. 12) is amended as follows.

50 (1) After section 119 insert—

“119A Increase in expenditure by reference to tax charged in relation to employment-related securities

(1) This section applies to a disposal of an asset consisting of employment-related securities if the disposal—

(a) is an event giving rise to a relevant income tax charge, or

(b) is the first disposal after an event, other than a disposal, giving rise to a relevant income tax charge.

(2) Section 38(1)(a) applies as if the relevant amount had formed part of the consideration given by the person making the disposal for his acquisition of the employment-related securities.

(3) For the purposes of this section an event gives rise to a relevant income tax charge if it results in an amount counting as employment income—

(a) under section 426 of ITEPA 2003 (restricted securities),

(b) under section 438 of ITEPA 2003 by virtue of section 439(3)(a) of that Act (conversion of convertible securities),

(c) under section 446U of ITEPA 2003 (securities acquired for less than market value: discharge of notional loan), or

(d) under section 476 of ITEPA 2003 by virtue of section 477(3)(a) of that Act (acquisition of securities pursuant to employment-related securities option),

in respect of the employment-related securities.

(4) For the purposes of this section “the relevant amount” is the aggregate of the amounts counting as employment income as mentioned in subsection (3) above by reason of events occurring—

(a) not later than the disposal, and

(b) where this section has applied to an earlier disposal of the employment-related securities, after the last disposal to which this section applied.

(5) But where the relevant amount consists of or includes an amount counting as employment income under section 476 of ITEPA 2003, it is to be increased by the aggregate of any amounts deducted under section 480(5)(a) or (b), 481 or 482 of that Act in arriving at the amount of that employment income.

(6) Where securities or interests in securities cease to be employment-related securities—

(a) by reason of subsection (6) of section 421B of ITEPA 2003 in circumstances in which, immediately before the employee’s death, the employment-related securities are held otherwise than by the employee, or

(b) by reason of subsection (7) of that section,

they are to be regarded for the purposes of this section as remaining employment-related securities until the next occasion on which they are disposed of.

(7) In this section—

• “employment-related securities”, and

• “employee”, in relation to employment-related securities,

have the same meaning as in Chapters 1 to 4 of Part 7 of ITEPA 2003.

(8) References in this section to ITEPA 2003 are to that Act as amended by Schedule 22 to the Finance Act 2003.”.

(2) Sub-paragraph (1) has effect in relation to disposals on or after 16th April 2003.

51 In section 120 (increase in expenditure by reference to tax charged in relation to shares etc), after subsection (8) insert—

“(9) References in this section to ITEPA 2003 are to that Act as originally enacted.”.

52 (1) After section 149A insert—

“149AA Restricted and convertible employment-related securities

(1) Where an individual has acquired an asset consisting of employment-related securities which are—

(a) restricted securities or a restricted interest in securities, or

(b) convertible securities or an interest in convertible securities,

the consideration for the acquisition shall (subject to section 119A) be taken to be equal to the aggregate of the actual amount or value given for the employment-related securities and any amount that constituted earnings under Chapter 1 of Part 3 of ITEPA 2003 (earnings) in respect of the acquisition.