(1) The charge to corporation tax on income applies to income treated under subsection (2) as arising from foreign holdings.
(2) Income is treated as arising from such holdings in the following cases.
(3) The first case is where a bank's office in the United Kingdom—
(a) pays over the proceeds of a sale or other realisation of taxable dividend coupons in respect of the holdings which has been effected by the bank, or
(b) carries such proceeds into an account.
(4) The second case is where proceeds of sale arise from a sale of taxable dividend coupons in respect of the holdings by a person who is not a bank or a dealer to a person dealing in coupons in the United Kingdom.
(4A) For the purposes of subsections (3) and (4) a dividend coupon is “taxable” if the associated dividend would not have been exempt for the purposes of Part 9A (company distributions) had it been paid to the holder of the shares.
(5) The amount of the income that is treated as arising is equal to the proceeds of the sale or realisation.
(6) In this section “bank” has the meaning given by section 1120 of CTA 2010.
(1) In this Chapter “foreign holdings” means shares outside the United Kingdom that are issued by or on behalf of a non-UK resident body of persons.
(2) In section 974 “dividend coupons” means coupons for dividends payable in respect of foreign holdings.
(3) In this Chapter “coupons” includes—
(a) warrants, and
(b) bills of exchange that purport to be drawn or made in payment of dividends payable in respect of foreign holdings.
(1) This Chapter—
(a) applies the charge to corporation tax on income to annual payments not otherwise charged to corporation tax (see section 977), ...
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) The following are also relevant to the tax treatment of annual payments within this Chapter—
(a) section 687A(3) of ICTA (discretionary payments by trustees to companies),
(b) section 494 of ITA 2007 (grossing up of discretionary payment and payment of income tax),
(c) section 848 of ITA 2007 (under which a sum representing income tax deducted under Chapter 6 or 7 of Part 15 of that Act (deduction from annual payments, patent royalties and other payments connected with intellectual property) from an annual payment within this Chapter is treated as income tax paid by the recipient), and
(d) Chapter 8 of Part 15 of ITA 2007 (special provision in relation to royalties).
977 Charge to tax on annual payments not otherwise charged
(1) The charge to corporation tax on income applies to annual payments that are not otherwise within the application of that charge under the Corporation Tax Acts.
(2) Subsection (1) does not apply to annual payments in respect of which no liability to corporation tax arises because of an exemption.
(3) The frequency with which payments are made is ignored in determining whether they are annual payments for the purposes of this Chapter.
(1) The charge to corporation tax on income applies to income that is not otherwise within the application of that charge under the Corporation Tax Acts.
(2) Subsection (1) does not apply to—
(a) annual payments,
(b) income in respect of which no liability to corporation tax arises because of an exemption, or
(c) deemed income.
980 Exemption for commercial occupation of woodlands in UK
(1) No liability to corporation tax arises under this Chapter in respect of income arising from the commercial occupation of woodlands in the United Kingdom.
(2) For this purpose the occupation of woodlands is commercial if the woodlands are managed—
(a) on a commercial basis, and
(b) with a view to the realisation of profits.
(1) No liability to corporation tax arises under this Chapter in respect of a gain arising to a company in the course of dealing in—
(a) financial futures,
(b) traded options, or
(c) financial options.
(2) The reference in subsection (1) to a gain arising in the course of dealing in financial futures includes a gain regarded as so arising under section 143(3) of TCGA 1992 (gains arising from transactions otherwise than in the course of dealing on a recognised futures exchange, involving authorised persons).
(3) In this section—
“financial futures” means financial futures which are for the time being dealt in on a recognised futures exchange,
“financial option” has the meaning given by section 144(8)(c) of TCGA 1992,
“recognised futures exchange” means the London International Financial Futures Exchange and any other futures exchange which is for the time being designated for the purposes of that Act by order made by the Commissioners for Her Majesty's Revenue and Customs under section 288(6) of that Act, and
“traded option” has the meaning given by section 144(8)(b) of that Act.
982 Provisions which must be given priority over this Part
(1) Any income, so far as it falls within—
(a) Chapter ... ... 6, and
(b) Chapter 2 of Part 3,
is dealt with under Part 3.
(2) Any income, so far as it falls within—
(a) Chapter ... ... 6, and
(b) Chapter 3 of Part 4 so far as the Chapter relates to a UK property business,
is dealt with under Part 4.
(1) This Chapter is about deductions relating to Schedule 2 share incentive plans.
(2) Section 984 relates to the interpretation of this Chapter.
(3) Sections 985 and 986 set out—
(a) how effect is given to deductions allowed under this Chapter, and
(b) how amounts treated as received under this Chapter are dealt with.
(4) Sections 987 and 988 deal with deductions allowed for the costs of setting up plans and their running expenses.
(5) Sections 989 to 993 deal with deductions allowed for payments used to acquire shares for plan trusts.
(6) Sections 994 to 997 deal with other deductions relating to free shares, matching shares, partnership shares and dividend shares.
(7) Section 998 deals with the withdrawal of deductions if a plan ceases to be a Schedule 2 share incentive plan.
(1) This Chapter forms part of the SIP code (see section 488 of ITEPA 2003).
(2) Therefore expressions used in this Chapter and contained in the index at the end of Schedule 2 to ITEPA 2003 have the meaning indicated by that index.
(3) Subsection (4) applies if any of a participant's plan shares are forfeited.
(4) For the purposes of this Chapter the shares are treated as acquired by the trustees—
(a) when the forfeiture occurs, and
(b) for no consideration.
985 References to a deduction being allowed to a company
(1) References in this Chapter to a deduction being allowed to a company are to be read in accordance with this section (and references to a deduction being made are to be read in that light).
(2) If a deduction is allowed to a company, the deduction is made in calculating for corporation tax purposes the profits of a trade or property business carried on by the company.
This is subject to subsections (3) and (4).
(3) If the company is a company with investment business (as defined in section 1218B), the amount of the deduction is treated as expenses of management of the company.
But this subsection does not apply if the company's business is a property business (in which case subsection (2) applies instead).
(4) If—
(a) the company is a company in relation to which the I - E rules apply, and
(b) the expenses are referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the company's basic life assurance and general annuity business,
the expenses are treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company.
(5) So far as this Chapter provides for a deduction to be allowed, it has effect despite section 53 (no deduction for items of a capital nature in calculating trading profits), including that section as applied by section 210 to the calculation of profits of a property business.
(1) This section applies if a company is treated under this Chapter as receiving an amount.
(2) If the company is carrying on a trade or property business in respect of which it is within the charge to corporation tax, the amount is treated as a receipt of that trade or business.
(3) If the company has permanently ceased to carry on a trade or property business in respect of which it was within the charge to corporation tax, the amount is treated as a post-cessation receipt of that trade or business (see Chapter 15 of Part 3).
(4) Otherwise, the amount is treated as a receipt chargeable under the charge to corporation tax on income.
987 Deduction for costs of setting up a Schedule 2 share incentive plan
(1) This section applies if a company incurs expenses in setting up a share incentive plan that is a Schedule 2 share incentive plan.
(2) A deduction for the expenses is allowed to the company.
(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4) If the relevant date falls more than 9 months after the end of the period of account in which the expenses are incurred, the deduction is allowed for the period of account in which the relevant date falls.
(4A) In subsection (4) “the relevant date”, in relation to a share incentive plan, has the meaning given in paragraph 81A(6) of Schedule 2 to ITEPA 2003.
(5) No other deduction is allowed in respect of expenses for which a deduction is allowed under this section.
988 Deductions for running expenses of a Schedule 2 share incentive plan
(1) This section applies if a company incurs expenses in contributing to the expenses of the trustees in running a Schedule 2 share incentive plan.
(2) This Chapter does not affect the deductions that, apart from this Chapter, are allowed to the company in relation to those expenses incurred by it.
(3) For the purposes of this section expenses of the trustees in running a Schedule 2 share incentive plan do not include expenses incurred in acquiring shares for the purposes of the plan other than expenses within subsection (4).
(4) The expenses within this subsection are—
(a) interest paid on money borrowed by the trustees for the purpose of acquiring the shares, and
(b) any of the following—
(i) fees,
(ii) commission,
(iii) stamp duty,
(iv) stamp duty reserve tax, and
(v) other incidental costs similar to any mentioned in sub-paragraphs (i) to (iv).
(1) A deduction is allowed to a company (“the paying company”) if—
(a) the paying company makes a payment to the trustees of a Schedule 2 share incentive plan to enable them to acquire shares in the paying company or a company that controls it,
(aa) the payment is not made pursuant to tax avoidance arrangements,
(b) the trustees apply the payment to acquire such shares,
(c) the trustees do not acquire the shares from a company, and
(d) at the end of the interim period the condition in subsection (2) is met in relation to the company in which the trustees acquire the shares.
(2) The condition is that the trustees hold shares in the company for the plan trust that—
(a) constitute at least 10% of the ordinary share capital of the company, and
(b) carry rights to at least 10% of—
(i) any profits available for distribution to shareholders of the company, and
(ii) any assets of the company available for distribution to shareholders on a winding up.
(3) For the purposes of subsection (2) shares that have been appropriated to, and acquired on behalf of, an employee under the plan are to be treated as held by the trustees for the plan trust so long as the shares are still subject to the plan.
(4) The deduction is allowed for the period of account in which the interim period ends.
(5) The amount of the deduction is an amount equal to the payment mentioned in subsection (1)(a).
(6) If the deduction is made, no other deduction is allowed in relation to the payment (except as specified in section 991).
(6A) For the purposes of this section the payment mentioned in subsection (1)(a) is made pursuant to tax avoidance arrangements if—
(a) it is made pursuant to arrangements entered into by the paying company, and
(b) the main purpose, or one of the main purposes, of the paying company in entering into the arrangements was to obtain a deduction or an increased deduction.
(6B) In subsection (6A) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.
(7) In this section “the interim period” means the period of 12 months beginning with the date on which the trustees acquire the shares as mentioned in subsection (1)(b).
(1) If—
(a) a deduction is made under section 989, and
(b) condition A or B is met,
an officer of Revenue and Customs may by notice direct that the deduction is withdrawn.
(2) Condition A is that less than 30% of the acquired shares have been awarded under the plan before the end of the period of 5 years beginning with the date on which the trustees acquire them.
(3) Condition B is that not all the acquired shares have been awarded under the plan before the end of the period of 10 years beginning with the date on which the trustees acquire them.
(4) If a direction is made, the paying company is treated as receiving an amount equal to the deduction.
(5) The amount is treated as received when the direction is made.
(6) For the purposes of this section and sections 991 to 993—
(a) “the acquired shares” means the shares acquired by the trustees as mentioned in section 989(1)(b), and
(b) if the trustees acquire shares on different days, assume that shares acquired on an earlier day are awarded under the plan before those acquired on a later day.
991 Another deduction to be allowed if all acquired shares are awarded
(1) This section applies if—
(a) a direction is made under section 990, and
(b) at any time after the making of the direction the condition in subsection (2) is met.
(2) The condition is that all the acquired shares are awarded under the plan.
(3) A deduction is allowed to the paying company for the period of account in which the condition is first met.
(4) The amount of the deduction is an amount equal to the payment mentioned in section 989(1)(a).
(1) This section applies if—
(a) a deduction is made under section 989 or 991, and
(b) a number of the acquired shares are awarded under the plan to an excluded employee.
(2) An employee is excluded if, at the time the shares are awarded to the employee, the earnings from the relevant employment are not (or would not be if there were any) general earnings—
(a) to which section 15 of ITEPA 2003 applies, or
(b) to which a section listed in section 20(1) of ITEPA 2003 applies.
(3) “The relevant employment” means the employment because of which the shares are awarded to the employee.
(4) The paying company is treated as receiving an amount equal to the relevant proportion of the deduction.
(5) The relevant proportion is the proportion that the number of shares awarded to the excluded employee bears to the total number of the acquired shares.
(6) The amount is treated as received when the shares are awarded to the excluded employee.
(1) This section applies if—
(a) a deduction has been made under section 989,
(b) the deduction has not been withdrawn under section 990,
(c) the paying company issues a plan termination notice under paragraph 89 of Schedule 2 to ITEPA 2003 in relation to the plan, and
(d) not all the acquired shares have been awarded under the plan before the issue of that notice.
(2) The paying company is treated as receiving an amount equal to the relevant proportion of the deduction.
(3) The relevant proportion is the proportion that the number of the acquired shares not awarded bears to the total number of the acquired shares.
(4) The amount is treated as received when the paying company issues the plan termination notice.
994 Deduction for providing free or matching shares
(1) This section applies if, under a Schedule 2 share incentive plan, shares are awarded to employees as free or matching shares because of their employment with a company (“the employing company”).
(2) A deduction is allowed to the employing company for the period of account in which the shares are awarded to the employees.
(3) The amount of the deduction is an amount equal to the market value of the shares awarded to the employees.
(4) But if the shares are awarded to the employees under a group plan, the amount of the deduction is an amount equal to the relevant proportion of the total market value of the shares included in the award.
(5) The relevant proportion is the proportion that the number of shares awarded to the employees bears to the total number of shares included in the award.
(6) For the purposes of this section—
(a) the market value of shares is their market value when they are acquired by the trustees of the plan trust, and
(b) if the trustees acquire shares on different days, assume that shares acquired on an earlier day are awarded before those acquired on a later day.
(7) No deduction, other than one under this section, is allowed to the employing company or any associated company in relation to the provision of the shares awarded to the employees.
(8) But subsection (7)—
(a) does not prevent a deduction being allowed under section 987 in relation to expenses incurred by a company in setting up a share incentive plan, and
(b) is subject to section 988.
(9) If the shares are awarded to the employees because of their employment with two or more companies, only one of those companies can make a deduction under this section in relation to the award.
(10) This section is subject to section 996.
995 Deduction for additional expense in providing partnership shares
(1) This section applies if—
(a) under a Schedule 2 share incentive plan, partnership shares are awarded to employees because of their employment with a company (“the employing company”), and
(b) the market value of the shares when they were acquired by the trustees of the plan trust exceeds the partnership share money paid by the participants to acquire those shares.
(2) A deduction is allowed to the employing company for the period of account in which the shares are awarded.
(3) The amount of the deduction is an amount equal to the excess mentioned in subsection (1)(b).
(4) No deduction, other than one under this section, is allowed to the employing company or any associated company in relation to the provision of the shares.
(5) But subsection (4)—
(a) does not prevent a deduction being allowed under section 987 in relation to expenses incurred by a company in setting up a share incentive plan, and
(b) is subject to section 988.
(6) If the shares are awarded to the employees because of their employment with two or more companies, only one of those companies may make a deduction under this section in relation to the award.
(7) This section is subject to section 996.
(1) No deduction is allowed under section 994 or 995 in relation to shares to which any of exclusions 1 to 5 applies.
(2) Exclusion 1 applies to shares awarded to an excluded employee.
(3) For the purposes of subsection (2) an employee is excluded if, at the time the shares are awarded to the employee, the earnings from the employee's employment with the employing company are not (or would not be if there were any) chargeable earnings—
(a) to which section 15 of ITEPA 2003 applies, or
(b) to which a section listed in section 20(1) of ITEPA 2003 applies.
(4) Exclusion 2 applies to shares in a company that are liable to depreciate substantially in value for reasons that do not apply generally to shares in that company.
(5) Exclusion 3 applies to shares in relation to which a deduction has been made by the employing company or an associated company in relation to the provision of the shares for the plan trust or for another trust.
(6) For the purposes of subsection (5)—
(a) it does not matter upon what basis that deduction was made or what the nature or purpose of the other trust is, and
(b) if the trustees of the plan trust acquire shares on different days, in determining whether the same shares have been provided to more than one trust, assume that shares acquired on an earlier day are awarded under the plan trust before those acquired on a later day.
(7) Exclusion 4 applies to shares acquired by the trustees of the plan trust as a result of a payment in relation to which a deduction is made under section 989 or 991.
(8) Exclusion 5 applies to shares awarded after having been forfeited by a participant.
997 No deduction for expenses in providing dividend shares
(1) No deduction is allowed to a company for expenses in providing shares that are acquired on behalf of employees under a Schedule 2 share incentive plan as dividend shares.
(2) This is subject to section 988.
998 Withdrawal of deductions if share incentive plan ceases to be a Schedule 2 share incentive plan
(1) This section applies if—
(a) a deduction is made by a company under section 987, 989, 991, 994 or 995 in relation to a Schedule 2 share incentive plan, and
(b) by virtue of paragraph 81H or 81I of Schedule 2 to ITEPA 2003 the plan is not to be a Schedule 2 share incentive plan.
(2) An officer of Revenue and Customs may by notice direct that the deduction is withdrawn.
(3) If a direction is made, the company is treated as receiving an amount equal to the deduction.
(4) The amount is treated as received when the direction is made.
999 Deduction for costs of setting up SAYE option scheme or CSOP scheme
(1) This section applies if—
(a) a company incurs expenses in setting up a scheme within subsection (2) ... ...
(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2) The schemes within this subsection are—
(a) Schedule 3 SAYE option schemes within the meaning of the SAYE code (see section 516(4) of ITEPA 2003), and
(b) Schedule 4 CSOP schemes within the meaning of the CSOP code (see section 521(4) of ITEPA 2003).
...
(3) A deduction for the expenses is to be made in calculating for corporation tax purposes the profits of a trade or property business carried on by the company.
This is subject to subsections (4) and (5).
(4) If the company is a company with investment business (as defined in section 1218B), the expenses are treated as expenses of management of the company.
But this subsection does not apply if the company's business is a property business (in which case subsection (3) applies instead).
(5) If—
(a) the company is a company in relation to which the I - E rules apply, and
(b) the expenses are referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the company's basic life assurance and general annuity business,
the expenses are treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company.
(6) If the relevant date falls more than 9 months after the end of the period of account in which the expenses are incurred—
(a) for the purposes of subsection (3) the deduction is to be made for the period of account in which the relevant date falls, or
(b) for the purposes of subsection (4) or (5) the expenses are treated as referable to the accounting period in which the relevant date falls.
(6A) In subsection (6) “the relevant date”—
(a) in relation to a Schedule 3 SAYE option scheme, has the meaning given in paragraph 40A(6) of Schedule 3 to ITEPA 2003, and
(b) in relation to a Schedule 4 CSOP scheme, has the meaning given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.
(7) So far as this section provides for a deduction to be allowed, it has effect despite section 53 (no deduction for items of a capital nature in calculating trading profits), including that section as applied by section 210 to the calculation of profits of a property business.
1000 Deduction for costs of setting up employee share ownership trust
(1) This section applies if a company incurs expenses in setting up a qualifying employee share ownership trust (within the meaning of Schedule 5 to FA 1989).
(2) A deduction for the expenses is to be made in calculating for corporation tax purposes the profits of a trade or property business carried on by the company.
This is subject to subsection (3).
(3) If the company is a company with investment business (as defined in section 1218B), the expenses are treated as expenses of management of the company.
But this subsection does not apply if the company's business is a property business (in which case subsection (2) applies instead).
(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5) If the trust is established more than 9 months after the end of the period of account in which the expenses are incurred—
(a) for the purposes of subsection (2) the deduction is to be made for the period of account in which the trust is established, or
(b) for the purposes of subsection (3) or (4) the expenses are treated as referable to the accounting period in which the trust is established.
(6) For the purposes of subsection (5) a trust is established when the deed under which it is established is executed.
(7) So far as this section provides for a deduction to be allowed, it has effect despite section 53 (no deduction for items of a capital nature in calculating trading profits), including that section as applied by section 210 to the calculation of profits of a property business.
(1) This Part provides for corporation tax relief in relation to employee share acquisitions.
(2) Sections 1002 to 1005 relate to the interpretation of this Part.
(3) Chapter 2 provides for relief if shares are acquired by an employee or another person because of the employee's employment by a company.
(4) Chapter 3 provides for relief if—
(a) an employee or another person obtains an option to acquire shares because of the employee's employment by a company, and
(b) shares are acquired pursuant to the option.
(5) Chapter 4 provides for additional relief in cases involving restricted shares.
(6) Chapter 5 provides for additional relief in cases involving convertible shares or convertible securities that are not shares.
(7) Chapter 6 deals with the relationship between the reliefs under this Part and other reliefs.
(1) This section explains how references in this Part to employment (and related expressions) are to be read.
(2) “Employment” includes a former or prospective employment.
(3) References to employment by a company include references to holding an office with that company.
(4) Members of a company whose affairs are managed by its members are treated as holding an office with the company.
(5) See also sections 1007A(2), 1015B(2), 1025B(2) and 1030B(2) (deemed employment for the purposes of Chapters 2, 3, 4 and 5 of certain employees of overseas companies who work for companies in the UK).
(1) In this Part “shares” includes—
(a) an interest in shares, and
(b) stock or an interest in stock.
(2) For the purposes of this Part shares are acquired by a person when the person acquires a beneficial interest in them (and not, if different, when they are conveyed or transferred).
1004 Groups, consortiums and commercial associations of companies
(1) This section applies for the purposes of this Part.
(2) Two companies are members of the same group if one is a 51% subsidiary of the other or both are 51% subsidiaries of a third company.
(3) “Group transfer” means a transfer of a business, or a part of a business, from one company that is a member of a group to another company that is, or two or more companies that are, members of the group.
(4) A company is a parent company of another company if that other company is its 51% subsidiary.
(5) A company (“the consortium company”) is owned by a consortium if—
(a) five or fewer companies (“the shareholding companies”) between them beneficially own at least 75% of the consortium company's ordinary share capital, and
(b) each of the shareholding companies beneficially owns at least 10% of that capital.
(6) Each shareholding company is a member of the consortium.
(7) For the purposes of subsection (5) the shareholdings of members of a group of companies are to be treated as held by a single company.
(8) And, in such a case, a member of the group of companies is a member of the consortium if the member beneficially owns some of the consortium company's ordinary share capital.
(9) “Commercial association of companies” means a company together with such of its associated companies (as defined in section 449 of CTA 2010) as carry on businesses that are of such a nature that the businesses of the company and the associated companies, taken together, may be reasonably considered to make up a single composite undertaking.
In this Part—
“convertible securities” has the same meaning as in Chapter 3 of Part 7 of ITEPA 2003 (see section 436 of that Act),
“convertible shares” means shares that are—
convertible securities, or
an interest in convertible securities,
“the employee” has the meaning given by section 1007(1)(a) or 1015(1)(a) (as the case may be) (see also sections 1025A(7) and 1030A(8)),
...
“the employing company” has the meaning given by section 1007(1) or 1015(1) (as the case may be),
“listed company” means a company—
whose shares are listed on a recognised stock exchange, and
which is neither a close company nor a company that would be a close company if it were UK resident,
“market value” has the same meaning as in TCGA 1992 (see sections 272 and 273 of that Act),
“option” includes any right to acquire shares,
“ordinary shares” means shares forming part of a company's ordinary share capital,
“the qualifying business” has the meaning given by section 1007(1)(b), 1015(1)(b), 1025A(1)(d)(i) or 1030A(1)(d)(ii) (as the case may be),
“the recipient” has the meaning given by section 1007(1) or 1015(1) (as the case may be),
“the relevant employment” has the meaning given by section 1007(1)(b) or 1015(1)(b) (as the case may be), and
“restricted shares” means shares that are—
restricted securities, or
a restricted interest in securities,
for the purposes of Chapter 2 of Part 7 of ITEPA 2003 (see sections 423 and 424 of that Act).
(1) This Chapter provides for relief if shares are acquired by an employee or another person because of the employee's employment by a company.
(2) Sections 1007 to 1009 set out the requirements that must be met for relief to be available.
(3) Sections 1010 to 1012 set out how the amount of relief is calculated.
(4) Section 1013 sets out how the relief is given.
1007 Basic requirements for relief under Chapter 2
(1) Relief under this Chapter is available to a company (“the employing company”) if—
(a) a person (“the employee”) has employment with the employing company,
(b) that employment (“the relevant employment”) is in relation to a business within subsection (2) (“the qualifying business”),
(c) the employee or another person acquires shares because of the relevant employment,
(d) the conditions set out in sections 1008 and 1009 are met as mentioned in those sections, and
(e) relief under Chapter 3 is not available to the employing company in relation to the acquisition of the shares.
The person who acquires the shares is, in that capacity, called “the recipient”.
(2) A business is within this subsection so far as—
(a) the business is carried on by the employing company, and
(b) the employing company is within the charge to corporation tax in relation to the profits of the business or would be but for section 18A.
1007A Application of Chapter in relation to employees of overseas companies who work for companies in the UK
(1) This section applies if—
(a) a person has an employment (“the actual employment”) with a non-UK resident company not within the charge to corporation tax (“the overseas employer”),
(b) in performing any of the duties of the actual employment, the person works in the United Kingdom for, but is not employed by, another company (“the host employer”), and
(c) the host employer is—
(i) a UK resident company, or
(ii) a non-UK resident company within the charge to corporation tax.
(2) For the purposes of this Chapter, the person is to be treated as having an employment with the host employer (“the deemed employment”), the duties of which consist of the work the person does for the host employer.
(3) Subsection (4) applies if—
(a) shares (“relevant shares”) are acquired because of the actual employment, and
(b) because of the work the person does for the host employer, an amount of employment income of the person is charged to tax under ITEPA 2003 in relation to the acquisition of the relevant shares.
(4) For the purposes of section 1007(1)(c) (requirement that shares are acquired because of employment) the relevant shares are (regardless of when the acquisition takes place) to be treated, so far as would not otherwise be the case, as if they are acquired because of the deemed employment.
(5) In section 1008 (conditions relating to the shares acquired) references to the employing company are to be read as including references to the overseas employer.
(6) If, in relation to an acquisition of shares, the amount of relief would otherwise be more than the total amount of employment income of the person charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.
(7) If relief is available to more than one company in respect of the same acquisition of shares, relief may only be given to one of them in respect of that acquisition.
(8) For the purposes of this section a person works for another person if the person provides, and is obliged to provide, personal service to the other person.
(1) Each of the following conditions must be met in relation to the shares acquired.
Condition 1
The shares are ordinary shares that are fully paid-up and not redeemable.
Condition 2
The shares are—
(a) shares of a class listed on a recognised stock exchange,
(b) shares in a company that is not under the control of another company, or
(c) shares in a company that is under the control of a listed company.
Condition 3
The shares are shares in—
(a) the employing company,
(b) a company that, when the shares are acquired, is a parent company of the employing company,
(c) a company that, when the shares are acquired, is a member of a consortium that owns the employing company,
(d) a company that, when the shares are acquired, is a member of a consortium that owns a parent company of the employing company, or
(e) a company within subsection (2).
(2) A company (“company A”) is within this subsection if when the shares are acquired—
(a) the employing company or a parent company of the employing company is a member of a consortium that owns another company (“company B”), and
(b) company A is—
(i) a member of that consortium or a parent company of a member of that consortium, and
(ii) a member of the same commercial association of companies as company B.
1009 Conditions relating to employee's income tax position
(1) If the shares acquired are not restricted shares, the following conditions must be met in relation to the income tax position of the employee.
Condition 1
The employee is subject to a charge under ITEPA 2003 in relation to the acquisition of the shares.
Condition 2
Section 446UA of ITEPA 2003 does not apply in relation to the shares.
(2) If the shares acquired are restricted shares, the following condition must be met in relation to the income tax position of the employee.
The Condition
The employee—
(a) has, as a result of the acquisition of the shares, relevant earnings from the relevant employment that are subject to the charge under Part 2 of that Act, or
(b) is not within paragraph (a) but will be subject to a charge under ITEPA 2003 as a result of section 426 of that Act if an event occurs in relation to the shares that is a chargeable event for the purposes of that section.
(2A) Relevant earnings” means—
(a) earnings within Chapter 1 of Part 3 of ITEPA 2003, and
(b) any amount that is treated as earnings by virtue of section 226A of that Act (employee shareholder shares).
(3) Subsection (4) applies if—
(a) the conditions are, or the condition is, not met, but
(b) the conditions or the condition would be met if at all material times the employee had been a UK employee.
(4) This Chapter applies as if the employee had been a UK employee as mentioned in subsection (3)(b).
(5) The employee is a UK employee if—
(a) the employee is UK resident ..., and
(b) the duties of the relevant employment are performed in the United Kingdom.
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1010 Calculation of relief if shares are neither restricted nor convertible
(1) If the shares acquired are neither restricted shares nor convertible shares, the amount of relief to be given is an amount equal to—
(a) the market value of the shares when they are acquired, less
(b) the total amount or value of any consideration given by any person in relation to the acquisition of the shares.
This is subject to section 1012 ... .
(2) The consideration mentioned in subsection (1)(b) does not include the performance of any duties of, or in connection with, the relevant employment.
(3) A just and reasonable apportionment is to be made of any consideration given partly in relation to the acquisition of the shares and partly in relation to other matters.
1011 Calculation of relief if shares are restricted or convertible
(1) If the shares acquired are restricted shares or convertible shares (or both), the amount of relief to be given is calculated as follows.
This is subject to section 1012.
(2) If the shares are restricted shares, the amount of relief is equal to the amount that, as a result of the acquisition of the shares, is relevant earnings of the employee from the relevant employment.
(3) If the shares are convertible shares, the amount of relief is equal to the amount that, as a result of the acquisition of the shares, is relevant earnings of the employee from the relevant employment.
In calculating the employee's earnings for this purpose the market value of the shares is to be determined as if they were not convertible shares.
(4) For the purposes of subsections (2) and (3) “relevant earnings” means—
(a) earnings within Chapter 1 of Part 3 of ITEPA 2003, and
(b) any amount that is treated as earnings by virtue of section 226A of that Act (employee shareholder shares) ... ,
except that it does not include any amount of exempt income (within the meaning of section 8 of ITEPA 2003).
(5) If the shares are both restricted and convertible, the total amount of relief is whichever is the greater of the amounts of relief given by subsections (2) and (3) (or, if the amount is the same in each case, that amount).
(1) This section applies if the relevant employment is in relation to both the qualifying business and a business (or part of a business) that is not within section 1007(2).
(2) The amount of relief is to be reduced by a just and reasonable amount.