(1) This section applies if—
(a) there is a genuine offer to the public of shares in a company at a fixed price or by tender,
(b) a director or employee of the company, or of another company or person, is entitled by reason of the office or employment to an allocation of the shares in priority to members of the public, and
(c) conditions A to C are met.
(2) No liability to income tax in respect of earnings arises by virtue of any benefit derived by the director or employee from the entitlement.
(3) Condition A is that the aggregate number of shares subject to the offer that may be allocated as mentioned in subsection (1)(b) (“priority shares”) does not exceed—
(a) if the offer is part of arrangements which include one or more other offers to the public of shares of the same class, either of the limits in subsection (4), or
(b) in any other case, 10% of the shares subject to the offer (including the priority shares).
(4) The limits referred to in subsection (3)(a) are—
(a) 40% of the shares subject to the offer (including the priority shares), and
(b) 10% of all the shares of the class in question that are subject to any of the offers forming part of the arrangements (including the priority shares).
(5) Condition B is that all the persons entitled to an allocation of priority shares are entitled to it on similar terms (see section 546).
(6) Condition C is that those persons are not restricted wholly or mainly to directors or to those whose remuneration exceeds a particular level.
(7) This section has effect subject to section 543 (discount not covered by exemption in this section).
543 Discount not covered by exemption in section 542
(1) This section applies if the total of—
(a) the price payable by the director or employee for the shares of the company allocated to the director or employee under the offer, and
(b) the amount or value of any registrant discount made to the director or employee in respect of the shares,
is less than the fixed price or the lowest price successfully tendered.
(2) Section 542(2) (exemption: offer made to public and employees) does not apply to the benefit (if any) represented by the difference.
544 Exemption: different offers made to public and employees
(1) This section applies if—
(a) there is a genuine 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 one or more, but not all, of those companies—
(i) to directors or employees of any of those companies, or of any other company or person, or
(ii) to those directors or employees and to other persons,
(c) any of those directors or employees is entitled by reason of the 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, and
(d) conditions A to C are met.
(2) No liability to income tax in respect of earnings arises by virtue of any benefit derived by the director or employee from the entitlement.
(3) Condition A is that for each company whose shares are subject to the employee offer, the aggregate number of shares subject to that offer that may be allocated as mentioned in subsection (1)(c) (“priority shares”) does not exceed—
(a) if the public offer and the employee offer are part of arrangements which include one or more other offers to the public of shares in the company of the same class, either of the limits in subsection (4), or
(b) in any other case, 10% of the shares in the company that are subject to the public offer or the employee offer (including the priority shares).
(4) The limits referred to in subsection (3)(a) are—
(a) 40% of the shares in the company that are subject to the public offer or the employee offer (including the priority shares), and
(b) 10% of all the shares in the company of the class in question that are subject to any of the offers forming part of the arrangements (including the priority shares).
(5) Condition B is that all the persons entitled to an allocation of priority shares are entitled to it on similar terms (see section 546).
(6) Condition C is that those persons are not restricted wholly or mainly to directors or to those whose remuneration exceeds a particular level.
(7) This section has effect subject to section 545 (discount not covered by exemption in this section).
545 Discount not covered by exemption in section 544
(1) This section applies if the total of—
(a) the price payable by the director or employee for the shares of a company allocated to the director or employee under the employee offer, and
(b) the amount or value of any registrant discount made to the director or employee in respect of the shares,
is not the same as, or as near as reasonably practicable to, the appropriate notional price for the shares of the company.
(2) Section 544(2) (exemption: different offers made to public and employees) does not apply to the benefit (if any) represented by the amount by which the appropriate notional price exceeds the total referred to in subsection (1).
(3) The “appropriate notional price” for the shares of a company is—
(a) if subsection (4) applies, the amount given by the formula in subsection (6), and
(b) in any other case, the notional price.
(4) This subsection applies if shares of the company are subject to the public offer and there is a difference between CP and AFP—
(a) CP being the price for the combination of shares subject to the public offer determined by aggregating the notional prices for each one of the shares comprised in the combination, and
(b) AFP being the actual fixed price or (as the case may be) the lowest successfully tendered price for that combination of shares.
(5) The “notional price” for the shares of a company is the price that might reasonably have been expected to be the fixed price for the shares of the company under a separate offer of those shares if—
(a) the shares of the company, and of each of the other companies had, instead of being subject to the public offer and the employee offer, been subject to separate offers to the public in respect of each company at fixed prices, and
(b) those separate offers had been made at the time at which the public offer was in fact made.
(6) The formula referred to in subsection (3)(a) is—
NP
×
AFP
CP
where—
NP is the notional price for the shares of the company, and
AFP and CP have the same meanings as in subsection (4).
(1) This section applies for the purposes of sections 542(5) and 544(5) (condition that entitlements to allocation of priority shares must be on similar terms).
(2) The fact that different provision is made for persons according to—
(a) the levels of their remuneration,
(b) the length of their service, or
(c) similar factors,
does not mean that they are not entitled to an allocation on similar terms.
(3) The fact that the allocations of shares in a company to which non-company employees are entitled are smaller than those to which company employees are entitled does not mean that they are not entitled on similar terms, if conditions A and B are met.
(4) Condition A is that each non-company employee is also entitled by reason of the office or employment and in priority to members of the public, to an allocation of shares in another company or companies which are offered to the public at a fixed price or by tender at the same time as the shares in the company.
(5) Condition B is that in the case of each non-company employee the aggregate value of all the shares included in the allocations to which the non-company employee is entitled is the same, or as nearly the same as is reasonably practicable, as that of the shares in the company included in the entitlement of a comparable company employee.
(6) For the purposes of subsection (5), the value of shares is to be measured by reference to the fixed price or the lowest price successfully tendered.
(7) In this section—
“company employee”, in relation to a company, means a director or employee of the company, and
“non-company employee”, in relation to a company, means a director or employee of another company or person.
547 Meaning and amount or value of “registrant discount”
(1) For the purposes of this Chapter there is a “registrant discount” in respect of the shares of a company if conditions A to C are met.
(2) Condition A is that members of the public who comply with such requirements as may be imposed in connection with the offer or, if section 544 applies, the public offer are, or may become, entitled to a discount in respect of the whole or part of the shares of the company allocated to them.
(3) Condition B is that at least 40% of the shares of the company allocated to members of the public are allocated to individuals who are or become entitled to—
(a) the discount, or
(b) some other benefit of similar value for which they may elect as an alternative to the discount.
(4) Directors and employees who are entitled by reason of their office or employment to an allocation of the shares in priority to members of the public are not to be treated as members of the public for the purposes of subsection (3).
(5) Condition C is that subscribing employees 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 the company are allocated under the offer.
(6) In subsection (5) a “subscribing employee” means a director or employee who—
(a) subscribes for shares—
(i) if section 542 (offer made to public and employees) applies, under the offer as a member of the public, or
(ii) if section 544 (different offers made to public and employees) applies, under the public offer as a member of the public or under the employee offer as a director or employee, and
(b) complies (or, in the case of a requirement to register, is taken under the terms of the offer to comply) with the requirements mentioned in subsection (2).
(7) For the purposes of this Chapter, the “amount or value” of any registrant discount made to a director or employee means—
(a) the amount of any such discount made to the director or employee as is mentioned in subsection (5), or
(b) the value of any such other benefit as is mentioned in subsection (3)(b) which is conferred on the director or employee as an alternative to the discount.
(1) In this Chapter—
“director” means—
in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,
in relation to a company whose affairs are managed by a single director or similar person, that director or person, and
in relation to a company whose affairs are managed by the members themselves, a member of the company, and
includes any person in accordance with whose directions or instructions the directors of the company (as defined in paragraphs (a) to (c)) are accustomed to act and a person who is to be, or has ceased to be, a director (as so defined);
“employee” includes a person who is to be or has been an employee;
“shares” includes stock;
“the employee offer” and “the public offer” have the meanings given by section 544(1).
(2) For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity.
(3) References in this Chapter—
(a) to the employment, in relation to an employee, are to the employment of that employee, and
(b) to the office, in relation to a director, are to the office of that director.
(1) This Chapter applies for the purposes of any listed provision in circumstances where—
(a) an individual (“B”) is interested as a beneficiary of an employee benefit trust in shares or obligations of a particular company (“the company”), and
(b) the question arises under that provision whether the trustees of the trust are, as a result of B’s being so interested, to be regarded as associates of B’s for the relevant purposes.
The relevant purposes are those of the operation, in relation to the company, of the “no material interest” requirement contained in the Schedule to this Act in which the listed provision appears.
(2) In this Chapter “listed provision” means any of the following provisions (under which trustees of an employee benefit trust are not to be regarded as associates if specified limits relating to share ownership are not exceeded)—
(a) paragraph 23(2) of Schedule 2 (... SIPs),
(b) paragraph 15(2) of Schedule 3 (... SAYE option schemes),
(c) paragraph 13(2) of Schedule 4 (... CSOP schemes), or
(d) paragraph 32(2) of Schedule 5 (enterprise management incentives).
(3) The general effect of this Chapter is that if the provisions of—
(a) sections 552 and 553 (attribution of interest in company to beneficiary or associate), or
(b) section 554 (attribution of further interest),
apply in relation to B or an associate of B's, B or the associate is to be treated for the purposes of the listed provision as having been the beneficial owner of a particular percentage of the company’s ordinary share capital on a particular date.
(4) In this Chapter, in relation to an individual, “associate”—
(a) has the meaning given by section 448 of CTA 2010 (close companies: meaning of “associate”), but
(b) does not include the trustees of an employee benefit trust as a result only of the individual’s having (as mentioned in subsection (1)(a)) an interest in shares or obligations of the company which are subject to the trust.
(5) In this Chapter “employee” means the holder of a taxable employment under Part 2 (as defined in section 66(3)), and accordingly includes an office-holder whose office is within the scope of that definition as a result of section 5(1).
(1) In this Chapter “employee benefit trust”, in relation to a company, means a trust where conditions A and B are met.
(2) Condition A is that all or most of the employees of the company are eligible to benefit under the trust.
(3) Condition B is that after 13th March 1989 either—
(a) there has been no disposal of any of the property subject to the trust, or
(b) any disposal of any of that property was a disposal within subsection (4).
(4) The disposals within this subsection are—
(a) disposals in the ordinary management of the trust, or
(b) qualifying disposals (within the meaning given by section 551).
(5) In this section and section 551 “disposal” means disposal by sale, loan or otherwise.
551 “Qualifying disposals” for purposes of section 550
(1) For the purposes of section 550 (meaning of “employee benefit trust”) a “qualifying disposal” is a disposal of property consisting of—
(a) any of the ordinary share capital of the company, or
(b) money paid outright,
where any of conditions 1, 2 and 3 is met.
(2) Condition 1 is that the property has been applied for the benefit of—
(a) individual employees or former employees of the company,
(b) spouses or civil partners , former spouses or civil partners , widows or widowers or surviving civil partners of employees or former employees of the company,
(c) dependants of persons within paragraph (a), or
(d) relatives, or spouses or civil partners of relatives, of persons within paragraph (a) or (b).
(3) In subsection (2) each reference to the company includes a reference to a company controlled by the company.
(4) Condition 2 is that the property has been applied for charitable purposes.
(5) Condition 3 is that the property has been transferred to—
(a) the trustees of another employee benefit trust,
(b) the trustees of a qualifying employee share ownership trust (within the meaning of Schedule 5 to FA 1989), or
(c) the trustees of a profit sharing scheme approved under Schedule 9 to ICTA (approved share option schemes and profit sharing schemes).
(6) In this section “relative” means—
(a) parent, child or remoter relation in the direct line, or
(b) brother, sister, uncle, aunt, nephew or niece.
552 Attribution of interest in company to beneficiary or associate
(1) This section applies if—
(a) after 13th March 1989 B, or an associate of B's, has received a payment (“the relevant payment”) from the trustees of the employee benefit trust, and
(b) at any time during the period of 3 years ending with the day on which the relevant payment was received (“the payment date”), the property subject to the trust consisted of or included any part of the ordinary share capital of the company.
(2) In such a case B or the associate is to be treated for the purposes of the listed provision as having been the beneficial owner of the appropriate percentage of the ordinary share capital of the company on the payment date.
(3) This is in addition to any percentage of that share capital of which B or the associate was actually the beneficial owner on that date.
(4) Section 553 explains what is meant by “the appropriate percentage”.
553 Meaning of “appropriate percentage” for purposes of section 552
(1) For the purposes of section 552 “the appropriate percentage” is—
P
×
100
D
where P and D have the meaning given by the following provisions.
(2) Unless subsection (3) applies, P is the aggregate of the relevant payment and any other payments received by B or associates of B’s from the trustees of the trust during the period of 12 months ending with the payment date.
(3) If—
(a) any distributions were made to the trustees of the trust by the company in respect of its ordinary share capital during the period of 3 years ending with the payment date, and
(b) the aggregate of those distributions is less than the aggregate mentioned in subsection (2),
P is the aggregate of those distributions.
(4) Unless subsection (5) applies, D is the amount determined as follows—
Step 1
Calculate the aggregate of—
(a) any distributions made by the company in respect of its ordinary share capital during the period of 12 months ending with the payment date,
(b) any distributions so made during the period of 12 months immediately preceding that mentioned in paragraph (a), and
(c) any distributions so made during the period of 12 months immediately preceding that mentioned in paragraph (b).
Step 2
Divide the aggregate so calculated by the number of the periods mentioned in paragraphs (a) to (c) in which distributions were so made.
(5) If no distributions were so made during any of those periods, D is 1.
(6) In this section “the payment date” and “the relevant payment” have the meaning indicated in section 552(1).
(1) This section applies if—
(a) B or an associate of B’s is (apart from this section) to be treated by virtue of section 552(2) as having been the beneficial owner of a percentage of the ordinary share capital of the company as a result of receiving the relevant payment from the trustees of an employee benefit trust, and
(b) B or an associate of B’s has, during the period of 12 months ending with the payment date, received one or more payments from the trustees of any other employee benefit trust or trusts connected with the company.
(2) In such a case section 552 applies to B or (as the case may be) the associate mentioned in subsection (1)(a) as if B or the associate had received—
(a) any payment from the trustees of a trust as mentioned in subsection (1)(b), or
(b) where more than one payment has been received from the trustees of a trust, the last of the payments,
on the payment date.
(3) B or the associate is accordingly to be treated for the purposes of the listed provision as having been the beneficial owner on the payment date of both—
(a) the percentage of the ordinary share capital of the company mentioned in subsection (1)(a), and
(b) the appropriate percentage of that share capital as determined in accordance with subsection (2).
(4) This is in addition to any percentage of that share capital of which B or the associate was actually the beneficial owner on that date.
(5) For the purposes of this section a trust is “connected with” the company if, at any time during the period of 3 years ending with the payment date, the property subject to the trust consisted of or included any part of the ordinary share capital of the company.
(6) In this section “the payment date” and “the relevant payment” have the meaning indicated in section 552(1).
(1) Chapter 2 applies if—
(a) a person (“A”) is an employee, or a former or prospective employee, of another person (“B”),
(b) there is an arrangement (“the relevant arrangement”) to which A is a party or which otherwise (wholly or partly) covers or relates to A,
(c) it is reasonable to suppose that, in essence—
(i) the relevant arrangement, or
(ii) the relevant arrangement so far as it covers or relates to A,
is (wholly or partly) a means of providing, or is otherwise concerned (wholly or partly) with the provision of, rewards or recognition or loans in connection with A's employment, or former or prospective employment, with B,
(d) a relevant step is taken by a relevant third person, and
(e) it is reasonable to suppose that, in essence—
(i) the relevant step is taken (wholly or partly) in pursuance of the relevant arrangement, or
(ii) there is some other connection (direct or indirect) between the relevant step and the relevant arrangement.
(2) In this Part “relevant step” means a step within section 554B, 554C or 554D , or paragraph 1 or 1A of Schedule 11 to F(No. 2)A 2017 (including such a step where the taking of the step, or some aspect of the taking of the step, constitutes a breach of trust or is a constituent part of a breach of trust, and even if the step or aspect is void as a result of breach of trust)..
(3) Subsection (1) is subject to subsection (4) and sections 554E to 554Y.
(4) Chapter 2 does not apply by reason of—
(a) a relevant step taken on or after A's death if—
(i) the relevant step is within section 554B, or
(ii) the relevant step is within section 554C by virtue of subsection (1)(ab) of that section,
(b) a relevant step within paragraph 1 of Schedule 11 to F(No.2)A 2017 which is treated as being taken on or after A's death, or
(c) a relevant step within paragraph 1A of Schedule 11 to F(No.2)A 2017 in a case where the initial step (within the meaning given by sub-paragraph (1)(a) of that paragraph) is treated as being taken on or after A's death.
(5) In subsection (1)(b) and (c)(ii) references to A include references to any person linked with A.
(5A) Subsections (5B) and (5C) apply where—
(a) a payment to a person other than A, or to A as a trustee, is of earnings from A's employment with B, and
(b) the earnings are, in whole or part, charged to tax under the employment income Parts otherwise than by virtue of this Part,
and for this purpose it does not matter whether all or some only or none of the tax is paid (but see sections 554Z5 and 554Z11B).
(5B) For the purposes of subsection (5C), an arrangement is a “redirected-earnings arrangement” if it (wholly or partly) covers or relates to redirected earnings; and for the purposes of this subsection and subsection (5C) “redirected earnings” means—
(a) the payment mentioned in subsection (5A)(a), or
(b) any sum or other property which (directly or indirectly)—
(i) represents, or
(ii) is derived from,
that payment.
(5C) The circumstances mentioned in subsection (5A)—
(a) do not prevent a redirected-earnings arrangement being within subsection (1)(b), and
(b) do not prevent rewards or recognition or loans being in connection with A's employment with B for the purposes of subsection (1)(c) where there is use of redirected earnings for the provision of the whole, or part, of the rewards or recognition or loans.
(6) For the purposes of subsection (1)(c) it does not matter if the relevant arrangement does not include details of the steps which will or may be taken in connection with providing, in essence, rewards or recognition or loans as mentioned (for example, details of any sums of money or assets which will or may be involved or details of how or when or by whom or in whose favour any step will or may be taken).
(7) In subsection (1)(d) “relevant third person” means—
(a) A acting as a trustee,
(b) B acting as a trustee, or
(c) any person other than A and B.
(8) If B is a company and is a member of a group of companies at the time the relevant step is taken, in subsection (7) references to B are to be read as including references to any other company which is a member of that group at that time.
(9) If B is a limited liability partnership, in subsection (7) references to B are to be read as including references to any company which is a wholly-owned subsidiary (as defined in section 1159(2) of the Companies Act 2006) of B at the time the relevant step is taken.
(10) Neither subsection (8) nor subsection (9) applies if there is a connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(11) For the purposes of subsection (1)(e)—
(a) the relevant step is connected with the relevant arrangement if (for example) the relevant step is taken (wholly or partly) in pursuance of an arrangement at one end of a series of arrangements with the relevant arrangement being at the other end, and
(b) it does not matter if the person taking the relevant step is unaware of the relevant arrangement.
(12) For the purposes of subsection (1)(c) and (e) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.
(1) Chapter 2 applies if—
(a) there is an arrangement (“the relevant arrangement”) to which an individual (“A”) is a party or which otherwise (wholly or partly) covers or relates to A,
(b) it is reasonable to suppose that, in essence—
(i) the relevant arrangement, or
(ii) the relevant arrangement so far as it covers or relates to A,
is (wholly or partly) a means of providing, or is otherwise concerned (wholly or partly) with the provision of, A-linked payments or benefits or loans,
(c) a close company (“B”) enters into a relevant transaction (see section 554AB),
(d) it is reasonable to suppose that, in essence—
(i) the relevant transaction is entered into (wholly or partly) in pursuance of the relevant arrangement, or
(ii) there is some other connection (direct or indirect) between the relevant transaction and the relevant arrangement,
(e) at the time B enters into the relevant transaction, or at any earlier time in the 3 years ending with the date of the transaction, A is a director or an employee of B,
(f) at the time B enters into the relevant transaction, or at any earlier time in the 3 years ending with the date of the transaction, A has a material interest in B (see section 554AE),
(g) a relevant step is taken by a relevant third person,
(h) it is reasonable to suppose—
(i) that the sum of money or asset which is the subject of the relevant step represents (directly or indirectly), or has arisen or derives from, the sum of money or asset which is the subject of the relevant transaction, or
(ii) that the sum of money or asset which is the subject of the relevant transaction represents (directly or indirectly), or has arisen or derives from, the sum of money or asset which is the subject of the relevant step, and
(i) there is a time in the relevant period when the main purpose, or one of the main purposes, of operating, implementing, maintaining or terminating the relevant arrangement so far as it covers or relates to—
(i) the relevant transaction, and the relevant step so far as related to the relevant transaction, or
(ii) the relevant step, and the relevant transaction so far as related to the relevant step,
is the avoidance of? income tax, national insurance contributions, corporation tax or a charge to tax under section 455 of CTA 2010.
(2) In this section “close company” includes a company that would be a close company but for section 442(a) of CTA 2010 (exclusion of companies not resident in the United Kingdom).
(3) For the purposes of subsection (1)(b), a payment or benefit or loan is “A-linked” if—
(a) it is being provided to A, or a person chosen by A or within a class of persons chosen by A,
(b) it is being provided to a person on A's behalf, or at A's direction or request, or
(c) it is being provided to a person linked with A and it is reasonable to suppose that the main reason, or one of the main reasons, for it being provided is that the person is linked with A.
(4) For the purposes of subsection (1)(i), the “relevant period” consists of the time of the relevant transaction, the time of the relevant step, the times around each of those two times, and any other times between those two times.
(5) Subsections (6) and (7) apply where—
(a) a payment to a person other than A, or to A as a trustee, is of earnings from—
(i) A's employment with B, or
(ii) A's office as a director of B, and
(b) the earnings are, in whole or part, charged to tax under the employment income Parts otherwise than by virtue of this Part,
and for this purpose it does not matter whether all or some only or none of the tax is paid (but see sections 554Z5 and 554Z11B).
(6) For the purposes of subsection (7), an arrangement is a “redirected-earnings arrangement” if it (wholly or partly) covers or relates to redirected earnings; and for the purposes of this subsection and subsection (7) “redirected earnings” means—
(a) the payment mentioned in subsection (5)(a), or
(b) any sum or other property which (directly or indirectly)—
(i) represents, or
(ii) is derived from,
that payment.
(7) The circumstances mentioned in subsection (5)—
(a) do not prevent a redirected-earnings arrangement being within subsection (1)(a),
(b) do not prevent payments or benefits or loans being A-linked for the purposes of subsection (1)(b) where there is use of redirected earnings for the provision of the whole, or part, of the payments or benefits or loans, and
(c) do not prevent the making of the payment mentioned in subsection (5)(a) being entry into a relevant transaction.
(8) In this section and in section 554AB “relevant third person” means—
(a) A acting as a trustee,
(b) B acting as a trustee, or
(c) any person other than A or B.
(9) See also sections 554AD to 554AF (further interpretation and supplementary provision).
(1) For the purposes of section 554AA(1), B enters into a relevant transaction if—
(a) B enters into a transaction within subsection (2), and
(b) the transaction is not an excluded transaction (see section 554AC).
(2) B enters into a transaction within this subsection if B—
(a) pays a sum of money to a relevant third person (see section 554AA(8)),
(b) acquires a right to a payment of a sum of money, or to a transfer of assets, where there is a connection (direct or indirect) between the acquisition of the right and—
(i) a payment made, by way of a loan or otherwise, to a relevant third person, or
(ii) a transfer of assets to a relevant third person,
(c) releases or writes off the whole or a part of—
(i) a loan made to a relevant third person, or
(ii) an acquired right of the kind mentioned in paragraph (b),
(d) transfers an asset to a relevant third person,
(e) takes a step by virtue of which a third person acquires an asset within subsection (4),
(f) makes available a sum of money or asset for use, or makes it available under an arrangement which permits its use—
(i) as security for a loan made or to be made to a relevant third person, or
(ii) otherwise as security for the meeting of any liability, or the performance of any undertaking, which a relevant third person has or will have, or
(g) grants to a relevant third person a lease of any premises the effective duration of which is likely to exceed 21 years.
(3) For the purposes of subsection (2) “loan” includes—
(a) any form of credit, and
(b) a payment that is purported to be made by way of a loan.
(4) The following assets are within this subsection—
(a) securities,
(b) interests in securities, and
(c) securities options,
as defined in section 420 for the purposes of Chapters 1 to 5 of Part 7; and in subsection (2)(e) “acquires” is to be read in accordance with section 421B(2)(a).
(5) For the purposes of subsection (2)(f)—
(a) references to making a sum of money or asset available are references to making it available in any way, however informal,
(b) it does not matter if the relevant third person has no legal right to have the sum of money or asset used as mentioned, and
(c) it does not matter if the sum of money or asset is not actually used as mentioned.
(6) Subsections (7) and (8) apply, for the purposes of subsection (2)(g), for the purpose of determining the likely effective duration of a lease of any premises granted to a relevant third person (“the original lease”).
(7) If there are circumstances which make it likely that the original lease will be extended for any period, the effective duration of the original lease is to be determined on the assumption that the original lease will be so extended.
(8) Further, if—
(a) the relevant third person, A or a person linked with A is, or is likely to become, entitled to a later lease, or the grant of a later lease, of the same premises, or
(b) it is otherwise likely that the relevant third person, A or a person linked with A will be granted a later lease of the same premises,
the original lease is to be treated as continuing until the end of the later lease (and subsection (7) also applies for the purpose of determining the duration of the later lease).
(9) In this section “lease” and “premises” have the same meaning as they have in Chapter 4 of Part 3 of ITTOIA 2005.
(1) In section 554AB “excluded transaction” means—
(a) a distribution made by B,
(b) a transaction that—
(i) is entered into by B in the ordinary course of B's business, and
(ii) is on terms that would have been made between persons not connected with each other dealing at arm's length, or
(c) a transaction entered into in order to facilitate the disposal, on terms that would have been made between persons not connected with each other dealing at arm's length, of shares in B.
(2) But the distribution or transaction is not an “excluded transaction” if the avoidance of tax is the main purpose, or one of the main purposes, of (as the case may be)—
(a) making the distribution, or
(b) the transaction.
(3) Part 23 of CTA 2010 has effect for determining the meaning of “distribution” in this section as if—
(a) section 1000(1) of CTA 2010 included a paragraph specifying any distribution made in a winding up of the company, and
(b) sections 1030 to 1030B of that Act were omitted.
(1) For the purposes of section 554AA(1)(e) “director” means—
(a) in relation to a company whose affairs are managed by a board of directors or similar body, a member of that body,
(b) in relation to a company whose affairs are managed by a single director or similar person, that director or person, and
(c) in relation to a company whose affairs are managed by the members themselves, a member of the company,
and includes any person in accordance with whose directions or instructions the directors of the company (as defined in this subsection) are accustomed to act.
(2) For the purposes of subsection (1) a person is not to be regarded as a person in accordance with whose directions or instructions the directors of the company are accustomed to act merely because the directors act on advice given by that person in a professional capacity.
(3) For the purposes of section 5 as it applies to this Part, a person who is a director within the meaning of subsection (1) is to be treated (where it would not otherwise be the case) as holding an office.
554AE Section 554AA: meaning of “material interest”
(1) Section 68 (meaning of “material interest” in a company) applies for the purposes of section 554AA and, subject to subsection (2), does so as it applies for the purposes of the benefits code.
(2) In section 68 as it applies for the purposes of section 554AA—
(a) each of the following is to be treated as “an associate” of A—
(i) a person (“the promoter”) who, for the purposes of Part 5 of FA 2014, is carrying on business as a promoter in relation to the relevant arrangement, and
(ii) where the promoter is a company, any company which is an associated company of the promoter;
(b) “participator”—
(i) in relation to a close company, means a person who is a participator in relation to the company for the purposes of section 455 of CTA 2010 (see sections 454 and 455(5) of that Act), and
(ii) in relation to a company which would be a close company if it were a UK resident company, means a person who would be such a participator if the company were a close company.
(3) In subsection (2)(a)(ii) “associated company” has the same meaning as it has for the purposes of Part 10 of CTA 2010 (see section 449 of that Act).
(1) Section 554AA(1) is subject to subsection (2) and sections 554E to 554Y.
(2) Chapter 2 does not apply by reason of section 554AA(1) in relation to a relevant step taken on or after A's death if—
(a) the relevant step is within section 554B, or
(b) the relevant step is within section 554C by virtue of subsection (1)(ab) of that section.
(3) In section 554AA(1)(a) and (b) references to A include references to a person linked with A.
(4) For the purposes of section 554AA(1)(b) it does not matter if the relevant arrangement does not include details of the steps which will or may be taken in connection with providing, in essence, payments or benefits or loans as mentioned (for example, details of any sums of money or assets which will or may be involved or details of how or when or by whom or in whose favour any step will or may be taken).
(5) For the purposes of section 554AA(1)(b) and (d) in particular, all relevant circumstances are to be taken into account in order to get to the essence of the matter.
554B Relevant steps: earmarking etc of sum of money or asset
(1) A person (“P”) takes a step within this section if—
(a) a sum of money or asset held by or on behalf of P is earmarked (however informally) by P with a view to a later relevant step being taken by P or any other person (on or following the meeting of any condition or otherwise) in relation to—
(i) that sum of money or asset, or
(ii) any sum of money or asset which may arise or derive (directly or indirectly) from it, or
(b) a sum of money or asset otherwise starts being held by or on behalf of P, specifically with a view, so far as P is concerned, to a later relevant step being taken by P or any other person (on or following the meeting of any condition or otherwise) in relation to—
(i) that sum of money or asset, or
(ii) any sum of money or asset which may arise or derive (directly or indirectly) from it.
(2) For the purposes of subsection (1)(a) and (b) it does not matter—
(a) if details of the later relevant step have not been worked out (for example, details of the sum of money or asset which will or may be the subject of the step or details of how or when or by whom or in whose favour the step will or may be taken),
(b) if any condition which would have to be met before the later relevant step is taken might never be met, or
(c) if A, or any person linked with A, has no legal right to have a relevant step taken in relation to any sum of money or asset mentioned in subsection (1)(a)(i) or (ii) or (b)(i) or (ii) (as the case may be).
(3) For the purposes of subsection (1)(b) it does not matter whether or not the sum of money or asset in question has previously been held by or on behalf of P on a basis which is different to that mentioned in subsection (1)(b).
554C Relevant steps: payment of sum, transfer of asset etc
(1) A person (“P”) takes a step within this section if P—
(a) pays a sum of money to a relevant person,
(aa) acquires a right to a payment of a sum of money, or to a transfer of assets, where there is a connection (direct or indirect) between the acquisition of the right and—
(i) a payment made, by way of a loan or otherwise, to a relevant person, or
(ii) a transfer of assets to a relevant person,
(ab) releases or writes off the whole or a part of—
(i) a loan made to a relevant person, or
(ii) an acquired right of the kind mentioned in paragraph (aa),”.
(b) transfers an asset to a relevant person,
(c) takes a step by virtue of which a relevant person acquires an asset within subsection (4),
(d) makes available a sum of money or asset for use, or makes it available under an arrangement which permits its use—
(i) as security for a loan made or to be made to a relevant person, or
(ii) otherwise as security for the meeting of any liability, or the performance of any undertaking, which a relevant person has or will have, or
(e) grants to a relevant person a lease of any premises the effective duration of which is likely to exceed 21 years.
(2) In subsection (1) “relevant person”—
(a) means A or a person chosen by A or within a class of person chosen by A, and
(b) includes, if P is taking a step on A's behalf or otherwise at A's direction or request, any other person.
(3) In subsection (2) references to A include references to any person linked with A.
(3A) For the purposes of subsection (1) “loan” includes—
(a) any form of credit, and
(b) a payment that is purported to be made by way of a loan.
(3B) Subsection (3C) applies where a person (“T”) acquires from another person (“L”) (whether or not for consideration)—
(a) a right to payment of the whole or part of a loan where T is the person liable (at the time of the acquisition of the right) to repay the loan, or
(b) a right to payment of a sum of money, or to a transfer of assets, where T is the person liable (at the time of the acquisition of the right) to pay the sum, or transfer the assets.
(3C) L is to be treated for the purposes of subsection (1)(ab) as releasing—
(a) in a case within subsection (3B)(a), the loan or the relevant part of it;
(b) in a case within subsection (3B)(b), the right or the relevant part of it.
(4) The following assets are within this subsection—
(a) securities,
(b) interests in securities, and
(c) securities options,
as defined in section 420 for the purposes of Chapters 1 to 5 of Part 7; and in subsection (1)(c) “acquires” is to be read in accordance with section 421B(2)(a).
(5) For the purposes of subsection (1)(d)—
(a) references to making a sum of money or asset available are references to making it available in any way, however informal,
(b) it does not matter if the relevant person has no legal right to have the sum of money or asset used as mentioned, and
(c) it does not matter if the sum of money or asset is not actually used as mentioned.
(6) Subsections (7) and (8) apply for the purpose of determining the likely effective duration of a lease of any premises granted to a relevant person (“the original lease”) for the purposes of subsection (1)(e).
(7) If there are circumstances which make it likely that the original lease will be extended for any period, the effective duration of the original lease is to be determined on the assumption that the original lease will be so extended.
(8) Further, if—
(a) A is, or is likely to become, entitled to a later lease, or the grant of a later lease, of the same premises, or
(b) it is otherwise likely that A will be granted a later lease of the same premises,
the original lease is to be treated as continuing until the end of the later lease (and subsection (7) also applies for the purpose of determining the duration of the later lease).
(9) In subsection (8)—
(a) references to A include references to—
(i) any person linked with A, and
(ii) the person to whom the original lease was granted where the original lease was not granted to A or any person linked with A, and
(b) references to the same premises include references to any premises which include the whole or part of the same premises.
(10) In this section “lease” and “premises” have the same meaning as they have in Chapter 4 of Part 3 of ITTOIA 2005.
(1) A person (“P”) takes a step within this section if, without transferring the asset to the relevant person, P—
(a) at any time, makes an asset available for a relevant person to benefit from in a way which is substantially similar to the way in which the relevant person would have been able to benefit from the asset had the asset been transferred to the relevant person at that time, or
(b) at or after the end of the relevant period, makes an asset available for a relevant person to benefit from.
(2) If—
(a) before the end of the relevant period, P makes available an asset for a relevant person to benefit from, and
(b) at the end of the relevant period, P continues to make the asset available for the relevant person to benefit from,
P is treated as taking a step within this section by virtue of subsection (1)(b) at the end of the relevant period.
(3) For the purposes of subsections (1) and (2)—
(a) references to making an asset available are references to making it available in any way, however informal,
(b) it does not matter if the relevant person has no legal right to benefit from the asset, and
(c) it does not matter if the relevant person does not actually benefit from the asset.
(4) In subsections (1) and (2) “the relevant period” means the period of two years starting with the day on which A's employment with B ceases.
(5) In subsections (1) and (2) “relevant person”—
(a) means A or a person chosen by A or within a class of person chosen by A, and
(b) includes, if P is taking a step on A's behalf or otherwise at A's direction or request, any other person.
(6) In subsection (5) references to A include references to any person linked with A.
(7) The following factors (among others) may be taken into account in determining whether a step within this section is taken by virtue of subsection (1)(a)—
(a) any limitations on the way in which the relevant person may benefit from the asset,
(b) the period over which the asset is being made available and (if relevant) the extent to which that period covers the expected remaining useful life of the asset,
(c) the extent to which the relevant person has, or is to have, a say over the disposal of the asset, and
(d) the extent to which the relevant person may benefit from any proceeds arising from the disposal of the asset or otherwise have a say in the way the proceeds are used.
(1) Chapter 2 does not apply by reason of a relevant step if the step is taken under any of the following—
(a) a Schedule 2 SIP (within the meaning of Chapter 6 of Part 7),
(b) a Schedule 3 SAYE option scheme (within the meaning of Chapter 7 of Part 7),
(c) a Schedule 4 CSOP scheme (within the meaning of Chapter 8 of Part 7),
(d) an arrangement the sole purpose of which is the provision of excluded benefits (as defined in section 393B(3)),
(e) an arrangement the sole purpose of which is the making of payments which are to be disregarded in the calculation mentioned in regulation 25 of the Social Security (Contributions) Regulations 2001 (S.I. 2001/1004) by virtue of paragraph 12 of Part 10 of Schedule 3 to those Regulations (as that paragraph has effect by virtue of regulation 2(3) of the Social Security (Contributions) (Amendment No. 9) Regulations 2007 (S.I. 2007/2905)),
(f) a pension scheme set up by a government outside the United Kingdom for the benefit of its employees or primarily for their benefit,
(g) a registered pension scheme, or
(h) an arrangement the sole purpose of which is the making of payments (within the meaning of Chapter 3 of Part 4 of FA 2004 (see section 161(2) of that Act))—
(i) to which section 161(4) of FA 2004 applies in relation to a registered pension scheme (or a registered pension scheme which has been wound up), and
(ii) which are authorised in relation to that scheme by section 160(1) of FA 2004.
(2) Subject to subsection (4), subsection (3) applies to a relevant step taken by a person (“P”) if—
(a) the relevant step is not taken under an arrangement mentioned in subsection (1)(a) to (c), and
(b) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(3) Chapter 2 does not apply by reason of the relevant step if the step is taken solely for the purpose of—
(a) acquiring or holding shares—
(i) to be awarded under a Schedule 2 SIP, or
(ii) to be provided pursuant to options granted under a Schedule 3 SAYE option scheme or a Schedule 4 CSOP scheme, or
(b) providing shares pursuant to—
(i) an award of shares under a Schedule 2 SIP, or
(ii) an option granted under a Schedule 3 SAYE option scheme or a Schedule 4 CSOP scheme.
(4) Subsection (3) does not apply to the relevant step if, immediately before or after the step is taken—
(a) the total number of shares of any type held, in relation to the Schedule 2 SIP, the Schedule 3 SAYE option scheme or the Schedule 4 CSOP scheme, by P and any other persons for purposes within subsection (3)(a) and (b), exceeds
(b) the maximum number of shares of that type which might reasonably be expected to be required, in relation to the Schedule 2 SIP, the Schedule 3 SAYE option scheme or the Schedule 4 CSOP scheme, for those purposes over the period of ten years starting with the day on which the relevant step is taken.
(5) Terms used in subsections (2) to (4) have the same meaning as they have in Chapter 6, 7 or 8 of Part 7 (as the case may be).
(6) Chapter 2 does not apply by reason of a relevant step taken by a person (“P”) if—
(a) the relevant step is taken for the sole purpose of—
(i) granting qualifying options under an EMI arrangement,
(ii) acquiring or holding shares to be provided pursuant to qualifying options granted under an EMI arrangement, or
(iii) providing shares pursuant to qualifying options granted under an EMI arrangement, and
(b) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(7) But subsection (6) does not apply to the relevant step if, immediately before or after the step is taken—
(a) the total number of shares of any type held, in relation to the EMI arrangement, by P and any other persons for purposes within subsection (6)(a)(i) to (iii), exceeds
(b) the maximum number of shares of that type which might reasonably be expected to be required, in relation to the EMI arrangement, for those purposes over the period of ten years starting with the day on which the relevant step is taken.
(8) In subsections (6) and (7) “EMI arrangement” means an arrangement under which qualifying options are granted.
(9) Terms used in subsections (6) to (8) have the same meaning as in Chapter 9 of Part 7.
(10) Subsection (11) applies if—
(a) a person (“P”) takes a relevant step within section 554B by reason of which Chapter 2 would apply apart from subsection (3) or (6), and
(b) at any time (“the relevant time”) the sum of money or asset (or any part of it) which is the subject of the relevant step—
(i) ceases to be held by or on behalf of P solely for purposes within subsection (3)(a) and (b) or (6)(a)(i) to (iii), but
(ii) continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
(11) This Part has effect as if a relevant step within section 554B were taken at the relevant time—
(a) the subject of which is the sum of money or asset (or the part of it) mentioned in subsection (10)(b), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(12) Chapter 2 does not apply by reason of a relevant step taken by the Independent Parliamentary Standards Authority in relation to a member of the House of Commons.
(1) Chapter 2 does not apply by reason of a relevant step which is the payment of a sum of money by way of a loan if—
(a) the loan is a loan on ordinary commercial terms within the meaning of section 176, ignoring conditions B and C in that section, and
(b) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(2) Chapter 2 does not apply by reason of a relevant step taken by a person (“P”), which is not the payment of a sum of money by way of a loan, if—
(a) the step is taken for the sole purpose of a transaction which P has with A and which P entered into in the ordinary course of P's business,
(b) a substantial proportion of P's business involves similar transactions with members of the public,
(c) the terms on which P entered into the transaction with A are substantially the same as the terms on which P normally enters into similar transactions with members of the public, and
(d) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(3) For the purposes of subsection (2)(b) and (c) a transaction is “similar” if it is of the same or a similar type to the transaction which P has with A.
(4) In subsection (2)(b) and (c) “members of the public” means members of the public at large with whom P deals at arm's length.
(5) In this section references to A include references to any person linked with A.
(6) See paragraph 25 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is made on ordinary commercial terms and the relevant step is within paragraph 1 of that Schedule.
554G Exclusions: transactions under employee benefit packages
(1) Chapter 2 does not apply by reason of a relevant step taken by a person (“P”) if—
(a) the step is not taken under a pension scheme,
(b) the step is taken for the sole purpose of a transaction which P has with A and which P entered into in the ordinary course of P's business,
(c) if the step is the payment of a sum of money by way of a loan—
(i) a substantial proportion of P's business involves making similar loans to members of the public,
(ii) the transaction with A is part of a package of benefits which is available to a substantial proportion of B's employees, and
(iii) subsection (3) does not apply,
(d) if the step is not the payment of a sum of money by way of a loan, the transaction with A is part of a package of benefits which is available—
(i) to a substantial proportion of B's employees, or
(ii) to a substantial proportion of those employees of B whose status as employees of B is comparable with A's status as an employee of B (taking into account (for example) levels of seniority, types of duties and levels of remuneration),
(e) the terms on which similar transactions are offered by P under the package of benefits mentioned in paragraph (c)(ii) or (d) (as the case may be) are generous enough to enable substantially all of the employees of B to whom the package is available to take advantage of what is offered (if they want to),
(f) the terms on which P entered into the transaction with A are substantially the same as the terms on which P normally enters into similar transactions with employees of B under the package of benefits,
(g) if B is a company, a majority of B's employees to whom the package of benefits is available do not have a material interest (as defined in section 68) in B, and
(h) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(2) For the purposes of subsection (1)(c)(i)—
(a) a loan is “similar” if it is made for the same or similar purposes as the loan which is the subject of the relevant step, and
(b) “members of the public” means members of the public at large with whom P deals at arm's length.
(3) This subsection applies if any feature of the package of benefits mentioned in subsection (1)(c)(ii) has or is likely to have the effect that, of the employees of B to whom the package is available, it is employees within subsection (4) on whom benefits under the package will be wholly or mainly conferred.
(4) The employees within this subsection are—
(a) directors,
(b) senior employees,
(c) employees who receive, or as a result of the package of benefits are likely to receive, the higher or highest levels of remuneration, and
(d) if B is a company and is a member of a group of companies, any employees not within paragraph (b) or (c) who—
(i) are senior employees in the group, or
(ii) receive, or as a result of the package of benefits are likely to receive, the higher or highest levels of remuneration in the group.
(5) For the purposes of subsection (1)(e) and (f) a transaction is “similar” if it is of the same or a similar type to the transaction which P has with A.
(6) If the relevant step is not the payment of a sum of money by way of a loan, in this section references to employees of B are references to those employees of B whose duties of employment are performed in the United Kingdom; and for this purpose duties performed outside the United Kingdom the performance of which is merely incidental to the performance of duties in the United Kingdom are to be treated as performed in the United Kingdom.
(7) In this section (apart from subsection (1)(d)(ii)) references to A include references to any person linked with A.
(8) See paragraph 29 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions for transactions under employee benefit packages in a case in which the relevant step is within paragraph 1 of that Schedule.
554H Exclusions: earmarking of deferred remuneration
(1) This section applies if—
(a) on a date (“the award date”) A is awarded remuneration (“the deferred remuneration”) in respect of A's employment with B,
(b) the main purpose of the award is not the provision of relevant benefits (within the meaning of Chapter 2 of Part 6, but ignoring section 393B(2)(a)),
(c) the deferred remuneration is awarded on terms (“the deferred remuneration terms”) the main purpose of which is to defer the provision to A of the deferred remuneration to a specified date (“the vesting date”) which is after the award date, while providing that the award of the deferred remuneration is revoked if specified conditions are not met on or before the vesting date,
(d) the vesting date is not more than five years after the award date,
(e) as at the award date, there is a reasonable chance that the award of the deferred remuneration will be revoked because not all the specified conditions will be met on or before the vesting date,
(f) if the deferred remuneration were to be provided to A by any person on the award date, that action would, for the purposes of Part 11, be a payment of PAYE employment income of A in respect of A's employment with B,
(g) before the end of the vesting date, a person (“P”) takes a relevant step within section 554B by reason of which Chapter 2 would apply apart from this section,
(h) on the taking of the relevant step, the sum of money or asset which is the subject of the step represents the deferred remuneration or any part of it (and nothing else), and
(i) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(2) In addition to the provision relating to revocation required by subsection (1)(c) (which must be included), the deferred remuneration terms may also provide that the award of the deferred remuneration is partly revoked if specified conditions are not met on or before the vesting date.
(3) Chapter 2 does not apply by reason of the relevant step mentioned in subsection (1)(g).
(4) In the following subsections “the earmarked deferred remuneration” means the deferred remuneration so far as, on the taking of the relevant step mentioned in subsection (1)(g), it is represented by the sum of money or asset which is the subject of the step as mentioned in subsection (1)(h).
(5) Subsection (6) applies if, at any time (“the relevant time”)—
(a) any sum of money or asset held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b) which represents any of the earmarked deferred remuneration ceases to represent that earmarked deferred remuneration or a part of it (because the remuneration is to be provided to A in another way or its award has been revoked or for any other reason), but
(b) the sum of money or asset continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
(6) This Part has effect as if a relevant step within section 554B were taken at the relevant time—
(a) the subject of which is—
(i) the sum of money or asset mentioned in subsection (5), and
(ii) a just and reasonable proportion of any relevant income (see subsection (12)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(7) Subsection (8) applies if neither subsection (10) nor subsection (11) applies to the earmarked deferred remuneration or to a part of it.
(8) This Part has effect as if a relevant step within section 554B were taken at the end of the vesting date—
(a) the subject of which is—
(i) a sum of money of the notional PAYE amount, and
(ii) a just and reasonable proportion of any relevant income (see subsection (12)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(9) In subsection (8)(a) “the notional PAYE amount” means the amount which the payment of PAYE employment income would have been had, as the case may be—
(a) the earmarked deferred remuneration, or
(b) the part of it to which neither subsection (10) nor subsection (11) applies,
been provided to A at the end of the vesting date in a way which is, for the purposes of Part 11, a payment of PAYE employment income of A in respect of A's employment with B.
(10) This subsection applies to the earmarked deferred remuneration so far as it is provided to A before the end of the vesting date in a way which is, for the purposes of Part 11, a payment of PAYE employment income of A in respect of A's employment with B.
(11) This subsection applies to the earmarked deferred remuneration so far as, before the end of the vesting date, the award of the earmarked deferred remuneration is revoked in accordance with the deferred remuneration terms.
(12) In subsections (6)(a)(ii) and (8)(a)(ii) “relevant income” means any income—
(a) which, before the relevant time or the end of the vesting date (as the case may be)—
(i) arises (directly or indirectly) from a sum of money or asset held by or on behalf of P representing any of the earmarked deferred remuneration, and
(ii) is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and
(b) which, at the relevant time or the end of the vesting date (as the case may be), continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
554I Exclusions: introduction to sections 554J to 554M
(1) Sections 554J and 554K are about steps within section 554B taken in relation to awards of certain shares or securities or of sums of money determined by reference to the market value of certain shares or securities.
(2) Sections 554L and 554M are about steps within section 554B taken in relation to grants of rights to acquire certain shares or securities or to receive sums of money determined by reference to the market value of certain shares or securities.
(3) Sections 554J to 554M apply only if B is a company.
(4) In those sections—
“relevant benefits” has the same meaning as in Chapter 2 of Part 6, but ignoring section 393B(2)(a),
“relevant shares” means—
shares (including stock) in B,
instruments issued by B which are securities for the purposes of Chapters 1 to 5 of Part 7 within section 420(1)(b), or
units in a collective investment scheme (as defined in section 420(2)) managed by B which are securities for the purposes of Chapters 1 to 5 of Part 7 within section 420(1)(e), and
“trading company” means a company the business of which consists wholly or mainly in the carrying on of a trade.
(5) If B is a member of a group of companies, in the definition of “relevant shares” in subsection (4) references to B are to be read as including references to any other company which is a member of that group.
(6) For the purposes of sections 554K and 554M an exit event occurs if—
(a) shares in the relevant company are admitted to trading on a stock exchange,
(b) all the shares in the relevant company, or a substantial proportion of them, are disposed of to persons none of whom is connected with any of the persons making any disposal,
(c) if the relevant company is a trading company (as defined in subsection (4)), the company's trade, or a substantial proportion of it, is transferred to a person who is not a relevant connected person,
(d) the relevant company's assets, or a substantial proportion of them, are disposed of to a person who is not a relevant connected person,
(e) the winding up of the relevant company starts, or
(f) a person (“P”) who controls the relevant company ceases to control it, so long as no person connected with P starts to control it.
(7) For the purposes of subsection (6)—
(a) “the relevant company” means—
(i) if the relevant shares mentioned in section 554K(1)(a)(i) or (ii) or 554M(1)(a)(i) or (ii) are shares (including stock), the company in which they are shares, or
(ii) if the relevant shares so mentioned are instruments within paragraph (b) of the definition of “relevant shares” in subsection (4), the company by which those instruments are issued,
(b) “relevant connected person” means a person who—
(i) is connected with the relevant company, or
(ii) is a shareholder in the relevant company or is connected with a shareholder in the relevant company,
(c) the relevant company's trade, or a substantial proportion of it, is transferred to another person if—
(i) the relevant company ceases to carry on the trade or the proportion of it, and
(ii) on that occurring, the other person starts to carry on the trade or the proportion of it, and
(d) section 12(7) of CTA 2009 applies for the purpose of determining when the winding up of the relevant company starts.
554J Exclusions: earmarking for employee share schemes (1)
(1) This section applies if—
(a) there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, an award may be made to A of—
(i) relevant shares, or
(ii) a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,
(b) the main purpose of the award of the relevant shares or sum of money would not be the provision of relevant benefits,
(c) the award of the relevant shares or sum of money would be on terms (“the deferred award terms”) the main purpose of which is to defer the receipt of the shares by A, or the payment of the sum of money to A, to a specified date (“the vesting date”) which is after the date (“the award date”) on which the award is made, while providing that the award is revoked if specified conditions are not met on or before the vesting date,
(d) the vesting date would not be more than ten years after the award date, and
(e) as at the award date, there would be a reasonable chance that the award of the relevant shares or sum of money will be revoked because not all the specified conditions will be met on or before the vesting date.
(2) In addition to the provision relating to revocation required by subsection (1)(c) (which must be included), the deferred award terms may also provide that the award of the relevant shares or sum of money is partly revoked if specified conditions are not met on or before the vesting date.
(3) Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if—
(a) the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to the meeting of—
(i) an award of relevant shares or a sum of money made to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or
(ii) an award of relevant shares or a sum of money which is expected to be made to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met,
(b) the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for meeting the award or expected award, and
(c) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(4) If the relevant step mentioned in subsection (3) is taken in relation to an expected award as mentioned in subsection (3)(a)(ii), subsection (5) applies if—
(a) the award is not made before the end of the date (“the final award date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and
(b) as at the end of the final award date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a).
(5) This Part has effect as if a relevant step within section 554B were taken at the end of the final award date—
(a) the subject of which is—
(i) the shares which continue to be held as mentioned in subsection (4)(b), and
(ii) any relevant income in relation to those shares (see subsection (13)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(6) Subsection (7) applies if, at any time (“the relevant time”)—
(a) any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a), but
(b) the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
(7) This Part has effect as if a relevant step within section 554B were taken at the relevant time—
(a) the subject of which is—
(i) the shares mentioned in subsection (6), and
(ii) any relevant income in relation to those shares (see subsection (13)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(8) Subsection (9) applies if—
(a) the relevant step mentioned in subsection (3) is taken in relation to an award which has been made as mentioned in subsection (3)(a)(i), or
(b) the relevant step mentioned in subsection (3) is taken in relation to an expected award as mentioned in subsection (3)(a)(ii) and the award is made before the end of the final award date.
(9) This Part has effect as if a relevant step within section 554B were taken at the end of the vesting date—
(a) the subject of which is—
(i) any of the earmarked shares to which none of subsections (10) to (12) applies, and
(ii) any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (13)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(10) This subsection applies to any earmarked shares if—
(a) A receives the shares before the end of the vesting date, and
(b) the receipt of the shares by A gives rise to employment income of A which is chargeable to income tax or which is exempt income.
(11) This subsection applies to any earmarked shares if—
(a) the sum of money mentioned in subsection (1)(a)(ii) (or a part of it) is paid to A before the end of the vesting date,
(b) the payment of the sum to A gives rise to employment income of A which is chargeable to income tax or which is exempt income, and
(c) the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the award.
(12) This subsection applies to any earmarked shares if—
(a) before the end of the vesting date, the award (or any part of it) is revoked in accordance with the deferred award terms, and
(b) correspondingly, the shares are no longer held by any person in relation to the award.
(13) In subsections (5)(a)(ii), (7)(a)(ii) and (9)(a)(ii) “relevant income”, in relation to any earmarked shares, means any income—
(a) which, before the relevant step is treated as being taken by subsection (5), (7) or (9) (as the case may be)—
(i) arises (directly or indirectly) from the shares, and
(ii) is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and
(b) which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
554K Exclusions: earmarking for employee share schemes (2)
(1) This section applies if—
(a) there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, an award may be made to A of—
(i) relevant shares, or
(ii) a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,
(b) the main purpose of the award would not be the provision of relevant benefits,
(c) the relevant shares would be—
(i) shares (including stock) in, or
(ii) instruments within paragraph (b) of the definition of “relevant shares” in section 554I(4) issued by,
a trading company or a company which controls a trading company,
(d) the award would be on terms the main purpose of which is to ensure—
(i) that the relevant shares are received, or
(ii) that the sum of money is paid,
only if a specified exit event, or an exit event within a specified description, occurs, and
(e) as at the time the award is made, there would be a reasonable chance that the specified exit event, or an exit event within the specified description, will occur.
(2) Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if—
(a) the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to the meeting of—
(i) an award of relevant shares or a sum of money made to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or
(ii) an award of relevant shares or a sum of money which is expected to be made to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met,
(b) the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for meeting the award or expected award, and
(c) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(3) If the relevant step mentioned in subsection (2) is taken in relation to an expected award as mentioned in subsection (2)(a)(ii), subsection (4) applies if—
(a) the award is not made before the end of the date (“the final award date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and
(b) as at the end of the final award date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a).
(4) This Part has effect as if a relevant step within section 554B were taken at the end of the final award date—
(a) the subject of which is—
(i) the shares which continue to be held as mentioned in subsection (3)(b), and
(ii) any relevant income in relation to those shares (see subsection (12)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(5) Subsection (6) applies if, at any time (“the relevant time”)—
(a) any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a), but
(b) the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
(6) This Part has effect as if a relevant step within section 554B were taken at the relevant time—
(a) the subject of which is—
(i) the shares mentioned in subsection (5), and
(ii) any relevant income in relation to those shares (see subsection (12)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(7) Subsection (8) applies if—
(a) the relevant step mentioned in subsection (2) is taken in relation to an award which has been made as mentioned in subsection (2)(a)(i), or
(b) the relevant step mentioned in subsection (2) is taken in relation to an expected award as mentioned in subsection (2)(a)(ii) and the award is made before the end of the final award date,
and the specified exit event, or an exit event within the specified description, occurs.
(8) This Part has effect as if a relevant step within section 554B were taken at the end of the exit period—
(a) the subject of which is—
(i) any of the earmarked shares to which neither subsection (9) nor subsection (10) applies, and
(ii) any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (12)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(9) This subsection applies to any earmarked shares if—
(a) A receives the shares before the end of the exit period, and
(b) the receipt of the shares by A gives rise to employment income of A which is chargeable to income tax or which is exempt income.
(10) This subsection applies to any earmarked shares if—
(a) the sum of money mentioned in subsection (1)(a)(ii) (or a part of it) is paid to A before the end of the exit period,
(b) the payment of the sum to A gives rise to employment income of A which is chargeable to income tax or which is exempt income, and
(c) the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the award.
(11) In subsections (8), (9)(a) and (10)(a) “the exit period” means the period of six months starting with the date on which the exit event occurs.
(12) In subsections (4)(a)(ii), (6)(a)(ii) and (8)(a)(ii) “relevant income”, in relation to any earmarked shares, means any income—
(a) which, before the relevant step is treated as being taken by subsection (4), (6) or (8) (as the case may be)—
(i) arises (directly or indirectly) from the shares, and
(ii) is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and
(b) which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
554L Exclusions: earmarking for employee share schemes (3)
(1) This section applies if—
(a) there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, a right (“a relevant share option”) may be granted to A—
(i) to acquire relevant shares, or
(ii) to receive a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,
(b) the main purpose of the grant of the relevant share option would not be the provision of relevant benefits,
(c) the grant would be made on terms (“the deferred grant terms”) the main purpose of which is to ensure that the relevant share option is not exercisable by A before a specified date (“the vesting date”) which is after the date (“the grant date”) on which the grant is made, while providing that the relevant share option is not to be exercisable at all by A if specified conditions are not met on or before the vesting date,
(d) the vesting date would not be more than ten years after the grant date, and
(e) as at the grant date, there would be a reasonable chance that the relevant share option will not be exercisable at all by A because not all the specified conditions will be met on or before the vesting date.
(2) In addition to the provision relating to revocation required by subsection (1)(c) (which must be included), the deferred grant terms may also provide that the relevant share option may be exercised by A only in part if specified conditions are not met on or before the vesting date.
(3) Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if—
(a) the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to providing relevant shares, or paying a sum of money, pursuant to—
(i) a relevant share option granted to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or
(ii) a relevant share option which is expected to be granted to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met,
(b) the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for providing shares, or paying a sum of money, pursuant to the relevant share option which is granted or expected to be granted, and
(c) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(4) If the relevant step mentioned in subsection (3) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (3)(a)(ii), subsection (5) applies if—
(a) the grant is not made before the end of the date (“the final grant date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and
(b) as at the end of the final grant date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a).
(5) This Part has effect as if a relevant step within section 554B were taken at the end of the final grant date—
(a) the subject of which is—
(i) the shares which continue to be held as mentioned in subsection (4)(b), and
(ii) any relevant income in relation to those shares (see subsection (15)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(6) Subsection (7) applies if, at any time (“the relevant time”)—
(a) any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (3)(a), but
(b) the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
(7) This Part has effect as if a relevant step within section 554B were taken at the relevant time—
(a) the subject of which is—
(i) the shares mentioned in subsection (6), and
(ii) any relevant income in relation to those shares (see subsection (15)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(8) Subsection (9) applies if—
(a) the relevant step mentioned in subsection (3) is taken in relation to a grant of a relevant share option made as mentioned in subsection (3)(a)(i), or
(b) the relevant step mentioned in subsection (3) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (3)(a)(ii) and the grant is made before the end of the final grant date.
(9) This Part has effect as if a relevant step within section 554B were taken at the end of the final exercise date—
(a) the subject of which is—
(i) any of the earmarked shares to which none of subsections (10) to (13) applies, and
(ii) any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (15)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(10) This subsection applies to any earmarked shares if—
(a) the relevant share option becomes exercisable (in whole or in part) by A before the end of the vesting date,
(b) A exercises the option (wholly or partly) before the end of the final exercise date and, as a result, receives the shares, and
(c) the receipt of the shares gives rise to employment income of A—
(i) which is chargeable to income tax or would be chargeable apart from Chapter 5B of Part 2, or
(ii) which is exempt income.
(11) This subsection applies to any earmarked shares if—
(a) the relevant share option becomes exercisable (in whole or in part) by A before the end of the vesting date,
(b) A exercises the option (wholly or partly) before the end of the final exercise date and, as a result, a sum of money is paid to A as mentioned in subsection (1)(a)(ii),
(c) the payment of the sum gives rise to employment income of A—
(i) which is chargeable to income tax or would be chargeable apart from section 474, or
(ii) which is exempt income, and
(d) the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the relevant share option.
(12) This subsection applies to any earmarked shares if—
(a) in accordance with the deferred grant terms, before the end of the vesting date, the relevant share option ceases to be exercisable by A (in whole or in part), and
(b) correspondingly, the shares are no longer held by any person in relation to the relevant share option.
(13) This subsection applies to any earmarked shares if—
(a) the relevant share option becomes exercisable by A (in whole or in part) before the end of the vesting date but the option lapses (in whole or in part) before the end of the final exercise date, and
(b) correspondingly, the shares are no longer held by any person in relation to the relevant share option.
(14) In subsections (9) to (13) “the final exercise date” means the date which is ten years after the grant date.
(15) In subsections (5)(a)(ii), (7)(a)(ii) and (9)(a)(ii) “relevant income”, in relation to any earmarked shares, means any income—
(a) which, before the relevant step is treated as being taken by subsection (5), (7) or (9) (as the case may be)—
(i) arises (directly or indirectly) from the shares, and
(ii) is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and
(b) which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
554M Exclusions: earmarking for employee share schemes (4)
(1) This section applies if—
(a) there is an arrangement (“B's employee share scheme”) under which, in respect of A's employment with B, a right (“a relevant share option”) may be granted to A—
(i) to acquire relevant shares, or
(ii) to receive a sum of money the amount of which is to be determined by reference to the market value of any relevant shares at the time the sum is to be paid,
(b) the main purpose of the grant of the relevant share option would not be the provision of relevant benefits,
(c) the relevant shares would be—
(i) shares (including stock) in, or
(ii) instruments within paragraph (b) of the definition of “relevant shares” in section 554I(4) issued by,
a trading company or a company which controls a trading company,
(d) the grant would be made on terms (“the deferred grant terms”) the main purpose of which is to ensure that the relevant share option is exercisable by A only if a specified exit event, or an exit event within a specified description, occurs, and
(e) as at the time the grant is made, there would be a reasonable chance that the specified exit event, or an exit event within the specified description, will occur.
(2) Chapter 2 does not apply by reason of a relevant step within section 554B (by reason of which it would otherwise apply) taken by a person (“P”) if—
(a) the subject of the relevant step is relevant shares (“earmarked shares”) which are earmarked, or otherwise start being held, solely with a view to providing relevant shares, or paying a sum of money, pursuant to—
(i) a relevant share option granted to A under B's employee share scheme as mentioned in subsection (1)(a) in relation to which the requirements of subsection (1)(b) to (e) are met, or
(ii) a relevant share option which is expected to be granted to A under B's employee share scheme as mentioned in subsection (1)(a) and in relation to which the requirements of subsection (1)(b) to (e) would be met,
(b) the number of relevant shares of any type which are earmarked shares does not exceed the maximum number of relevant shares of that type which might reasonably be expected to be needed for providing shares, or paying a sum of money, pursuant to the relevant share option which is granted or expected to be granted, and
(c) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(3) If the relevant step mentioned in subsection (2) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (2)(a)(ii), subsection (4) applies if—
(a) the grant is not made before the end of the date (“the final grant date”) falling immediately after the period of three months starting with the date on which P takes the relevant step, and
(b) as at the end of the final grant date, any of the earmarked shares continue to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a).
(4) This Part has effect as if a relevant step within section 554B were taken at the end of the final grant date—
(a) the subject of which is—
(i) the shares which continue to be held as mentioned in subsection (3)(b), and
(ii) any relevant income in relation to those shares (see subsection (14)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(5) Subsection (6) applies if, at any time (“the relevant time”)—
(a) any of the earmarked shares cease to be held by or on behalf of P solely on the basis mentioned in subsection (2)(a), but
(b) the shares continue to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
(6) This Part has effect as if a relevant step within section 554B were taken at the relevant time—
(a) the subject of which is—
(i) the shares mentioned in subsection (5), and
(ii) any relevant income in relation to those shares (see subsection (14)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(7) Subsection (8) applies if—
(a) the relevant step mentioned in subsection (2) is taken in relation to a grant of a relevant share option made as mentioned in subsection (2)(a)(i), or
(b) the relevant step mentioned in subsection (2) is taken in relation to an expected grant of a relevant share option as mentioned in subsection (2)(a)(ii) and the grant is made before the end of the final grant date,
and the specified exit event, or an exit event within the specified description, occurs.
(8) This Part has effect as if a relevant step within section 554B were taken at the end of the exit period—
(a) the subject of which is—
(i) any of the earmarked shares to which none of subsections (9) to (11) applies, and
(ii) any relevant income in relation to any of the earmarked shares mentioned in sub-paragraph (i) (see subsection (14)), and
(b) by reason of which Chapter 2 is to apply (subject only to section 554A(4)).
(9) This subsection applies to any earmarked shares if—
(a) A exercises the relevant share option (wholly or partly) before the end of the exit period and, as a result, receives the shares, and
(b) the receipt of the shares gives rise to employment income of A—
(i) which is chargeable to income tax or would be chargeable apart from Chapter 5B of Part 2, or
(ii) which is exempt income.
(10) This subsection applies to any earmarked shares if—
(a) A exercises the relevant share option (wholly or partly) before the end of the exit period and, as a result, a sum of money is paid to A as mentioned in subsection (1)(a)(ii),
(b) the payment of the sum gives rise to employment income of A—
(i) which is chargeable to income tax or would be chargeable apart from Chapter 5B of Part 2, or
(ii) which is exempt income, and
(c) the payment represents the proceeds of the disposal of the shares, or the payment is made from another source and, correspondingly, the shares are no longer held by any person in relation to the relevant share option.
(11) This subsection applies to any earmarked shares if—
(a) the relevant share option becomes exercisable by A before the end of the exit period but the option lapses (in whole or in part) at or before the end of that period, and
(b) correspondingly, the shares are no longer held by any person in relation to the relevant share option.
(12) In subsections (8), (9)(a), (10)(a) and (11)(a) “the exit period” means—
(a) the period of six months starting with the date on which the exit event occurs, or
(b) if it ends earlier, the period during which the relevant share option is exercisable by A in accordance with the deferred grant terms.
(13) If the exit event is an event within section 554I(6)(a), in subsection (12)(a) the reference to six months is to be read as a reference to five years.
(14) In subsections (4)(a)(ii), (6)(a)(ii) and (8)(a)(ii) “relevant income”, in relation to any earmarked shares, means any income—
(a) which, before the relevant step is treated as being taken by subsection (4), (6) or (8) (as the case may be)—
(i) arises (directly or indirectly) from the shares, and
(ii) is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 would apply apart from section 554Q, and
(b) which, at the time the relevant step is treated as being taken, continues to be held by or on behalf of P on the basis mentioned in section 554B(1)(a) or (b).
554N Exclusions: other cases involving employment-related securities etc
(1) Chapter 2 does not apply by reason of a relevant step the subject of which is employment-related securities if—
(a) by virtue of the step, the securities are acquired by a person, and
(b) section 425(2) applies... to the acquisition.
(2) Chapter 2 does not apply by reason of a relevant step the subject of which is an employment-related securities option if—
(a) by virtue of the step, the option is acquired by a person, and
(b) section 475(1) applies... to the acquisition.
(3) Terms used in subsection (1) or (2) have the same meaning as they have in Chapter 2 or 5 of Part 7 (as the case may be).
(4) Chapter 2 does not apply by reason of an event within subsection (5) if by virtue of the event an amount counts as employment income of A in respect of A's employment with B.
(5) The events within this subsection are—
(a) a chargeable event for the purposes of section 426, 438 or 476,
(b) an event which gives rise to the discharge of a notional loan for the purposes of section 446U, or
(c) a disposal to which Chapter 3D of Part 7 applies.
(6) Chapter 2 does not apply by reason of an event to which subsection (4) would apply apart from section 421B(6), ... 429, 430A(5)(b), 443... or 477(2) or apart from an election under section 430 or 431.
(7) Subsection (11) applies if there is an acquisition of an asset within section 554C(4)(a) or (b) (“the relevant asset”) and—
(a) relevant consideration is given by A for the relevant asset of an amount equal to or greater than the market value of the relevant asset at the time of the acquisition, or
(b) ignoring any relevant consideration given for the relevant asset, the acquisition gives rise (or would give rise) to earnings of A within Chapter 1 of Part 3 , or an amount treated under section 226A as earnings of A, from A's employment with B—
(i) the amount of which is equal to or greater than the market value of the relevant asset at the time of the acquisition, and
(ii) which are not exempt income.
(8) In subsection (7) “relevant consideration”—
(a) means consideration—
(i) which is given before, or at or about, the time of the acquisition, and
(ii) which is money or money's worth, but
(b) does not include—
(i) a promise to do anything, or
(ii) the performance of any duties of, or in connection with, an employment.
(9) If section 437(1) or 452(1) applies in relation to the acquisition, or would apply if Chapter 3 or 4A of Part 7 (as the case may be) applied in relation to the acquisition, in subsection (7) references to the market value of the relevant asset are to be read as references to that value determined on the basis mentioned in section 437(1) or 452(1) (as the case may be).
(10) Subsection (11) also applies if—
(a) there is an acquisition of an asset within section 554C(4)(a) or (b) (“the relevant asset”),
(b) the acquisition is pursuant to an employment-related securities option (within the meaning of Chapter 5 of Part 7...) acquired by reason of A's employment, or former or prospective employment, with B, and
(c) the acquisition is a chargeable event for the purposes of section 476 ....
(11) Chapter 2 does not apply by reason of a relevant step taken after the acquisition if—
(a) the subject of the relevant step is the relevant asset, and
(b) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(12) In subsections (7) to (11) “acquisition” is to be read in accordance with section 421B(2)(a).
(13) Chapter 2 does not apply by reason of a relevant step within section 554C(1)(a) taken by a person if—
(a) the payment of the sum of money is by way of a loan (“the relevant loan”),
(b) the relevant loan is made and used solely for the purpose of enabling A to exercise an employment-related securities option (within the meaning of Chapter 5 of Part 7),
(c) the exercise of the option by A gives rise to employment income of A in respect of A's employment with B—
(i) which is chargeable to income tax or would be chargeable apart from Chapter 5B of Part 2, or
(ii) which is exempt income, and
(d) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(14) Subsection (15) applies if—
(a) apart from subsection (13), Chapter 2 would apply by reason of the relevant step mentioned in that subsection, and
(b) by the end of the relevant period, the relevant loan has not been fully repaid.
(15) This Part has effect as if a relevant step within section 554C(1)(a) were taken at the end of the relevant period—
(a) the subject of which is a sum of money of an amount equal to the outstanding amount of the relevant loan as at the end of the relevant period,
(b) in relation to which the relevant person (within the meaning of section 554C(1)) is the person to whom the relevant loan is made, and
(c) by reason of which Chapter 2 is to apply.
(16) In subsections (14) and (15) “the relevant period” means the period of 40 days starting with the day on which the relevant step mentioned in subsection (13) is taken.
(17) See paragraph 31 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is made for the purpose of enabling the exercise of an employment-related securities option and the relevant step is within paragraph 1 of that Schedule.
(1) This section applies if—
(a) there is an arrangement (“the car ownership arrangement”) which—
(i) provides for A to purchase a new car from another person (“P”) using a loan (“the car loan”) to be made to A by an authorised lender ,
(ii) specifies the date (“the repayment date”) by which the car loan must be fully repaid which must be no later than four years after the date on which the car loan is made, and
(iii) permits A, in order to obtain funds to repay the car loan, to sell the car back to P on a specified date at a specified price based on an estimate (made at the time the car ownership arrangement is made) of the likely outstanding amount of the car loan on the specified date, and
(b) as provided for by the car ownership arrangement, A purchases the car using the car loan.
(2) Chapter 2 does not apply by reason of a relevant step taken for the sole purpose of—
(a) the purchase of the car or its sale-back as provided for by the car ownership arrangement, or
(b) the making of the car loan as so provided,
so long as the car ownership arrangement is not a tax avoidance arrangement and there is no other connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(3) Subsection (4) applies if—
(a) apart from subsection (2), Chapter 2 would apply by reason of the making of the car loan, and
(b) by the end of the repayment date, the car loan has not been fully repaid.
(4) This Part has effect as if a relevant step within section 554C(1)(a) were taken at the end of the repayment date—
(a) the subject of which is a sum of money of an amount equal to the outstanding amount of the car loan as at the end of the repayment date,
(b) in relation to which the relevant person (within the meaning of section 554C(1)) is A, and
(c) by reason of which Chapter 2 is to apply.
(5) In this section—
“car” has the meaning given by section 235(2), and
“authorised lender” means a person who—
has permission under Part 4A of the Financial Services and Markets Act 2000 to enter into, or to exercise or have the right to exercise rights and duties under, a contract of the kind mentioned in paragraph 23 of Schedule 2 to that Act, and
is not acting as a trustee.
(6) The definition of “authorised lender” must be read with—
(a) section 22 of the 2000 Act,
(b) any relevant order under that section, and
(c) Schedule 2 to that Act.
(7) See paragraph 33 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions for car loans in a case in which the relevant step is within paragraph 1 of that Schedule.
554OA Exclusions: transfer of employment-related loans
(1) Chapter 2 does not apply by reason of a relevant step taken by a person (“P”) if—
(a) the step is acquiring a right to payment of an amount equal to the whole or part of a payment made by way of a loan to a relevant person (the “borrower”),
(b) the loan, at the time it was made, was an employment-related loan,
(c) at the time the relevant step is taken, the section 180 threshold is not exceeded in relation to the loan,
(d) at the time the relevant step is taken, the borrower is an employee, or a prospective employee, of P, and
(e) there is no connection (direct or indirect) between the relevant step and a tax avoidance arrangement.
(2) For the purposes of this section, the section 180 threshold is not exceeded in relation to a loan if, at all times in the relevant tax year—
(a) the amount outstanding on the loan, or
(b) if two or more employment-related loans are made by the same employer, the aggregate of the amount outstanding on them,
does not exceed the amount specified at the end of section 180(2) (normal threshold for benefit of a loan to be treated as earnings).
(3) Subsection (4) applies if—
(a) two or more employment-related loans are made by the same employer, and
(b) during the relevant tax year, a person acquires a right to payment of an amount (the “transfer amount”) equal to the whole or part of the payment made by way of any of the loans.
(4) The transfer amount is to be treated as an “amount outstanding” on that loan for the purposes of subsection (2)(b).
(5) In this section—
(a) “employment-related loan” has the same meaning as it has for the purposes of Chapter 7 of Part 3;
(b) “relevant tax year” means the tax year in which the relevant step is taken.
(6) See paragraph 27 of Schedule 11 to F(No. 2)A 2017 for provision about exclusions where a loan is an employment-related loan and the relevant step is within paragraph 1 of that Schedule.
554P Exclusions: employment income exemptions under Part 4
(1) Chapter 2 does not apply by reason of a relevant step if an employment income exemption under Part 4 applies to the subject of the relevant step.
(2) If the employment income exemption applies to the subject of the relevant step in part only, the relevant step is to be treated for the purposes of this Part as being two separate relevant steps—
(a) one in relation to the subject of the step so far as the exemption applies to it, and
(b) one in relation to the subject of the step so far as the exemption does not apply to it,
with subsection (1) applying only in relation to the separate relevant step mentioned in paragraph (a).
(3) In order to give effect to subsection (2), the sum of money or asset which is the subject of the relevant step is to be apportioned between the two separate relevant steps on a just and reasonable basis.
(4) In this section “employment income exemption” includes the exemption under section 271.
554Q Exclusions: income arising from earmarked sum or asset
(1) This section applies if—
(a) a sum of money or asset (“sum or asset R”) is held by or on behalf of a person (“P”),
(b) income arises from sum or asset R, and
(c) when the income arises, it—
(i) is received by or on behalf of P, and
(ii) is the subject of a relevant step within section 554B taken by P.
(2) Chapter 2 does not apply by reason of the relevant step mentioned in subsection (1)(c)(ii) if—
(a) before the income arises, sum or asset R was the subject of a relevant step within section 554B taken by P,
(b) Chapter 2 applied by reason of the relevant step mentioned in paragraph (a) in respect of A's employment with B or would have so applied apart from this section or section 554R or any of sections 554H to 554M or section 554T,
(c) immediately before the income arises, sum or asset R is still earmarked or otherwise held on the basis mentioned in section 554B(1)(a) or (b), and
(d) subsection (3) does not apply.
(3) This subsection applies if it is reasonable to suppose that, taking into account the type of investments from which the income derives (directly or indirectly), in essence, the income represents a return from sum or asset R which exceeds the return which might be expected applying the assumption that all relevant connected persons are acting at arm's length of each other.
(4) In subsection (3) “relevant connected person” means a person with a connection (direct or indirect) to the arrangement under which the income arises.
554R Exclusions: acquisitions out of sums or assets
(1) This section applies if—
(a) a sum of money or asset (“sum or asset S”) is held by or on behalf of a person (“P”),
(b) a sum of money or asset (“sum or asset T”) is acquired by or on behalf of P wholly out of sum or asset S,
(c) sum or asset T is not acquired (directly or indirectly) from A or any person linked with A, and
(d) subsection (2) does not apply.
(2) This subsection applies if it is reasonable to suppose that, in essence—
(a) at the time of the acquisition of sum or asset T, the value of sum or asset T is greater or less than the value of sum or asset S, and
(b) the difference (or any part of the difference) in the values might not have been expected applying the assumption that all relevant connected persons are acting at arm's length of each other.
(3) In subsection (2)—
(a) the reference to sum or asset S is to sum or asset S so far as sum or asset T is acquired out of it, and
(b) “relevant connected person” means a person with a connection (direct or indirect) to the arrangement under which sum or asset T is acquired.
(4) The cases covered by subsection (1)(b) include (in particular) cases in which sum or asset T represents the proceeds of the disposal of sum or asset S.
(5) Subsection (6) applies if, on its acquisition, sum or asset T is the subject of a relevant step within section 554B taken by P.
(6) Chapter 2 does not apply by reason of the relevant step if—
(a) before the acquisition, sum or asset S was the subject of a relevant step within section 554B taken by P,
(b) Chapter 2 applied by reason of the relevant step mentioned in paragraph (a) in respect of A's employment with B or would have applied apart from this section or section 554Q or 554T, and
(c) immediately before the acquisition, sum or asset S is still earmarked or otherwise held on the basis mentioned in section 554B(1)(a) or (b).
(7) Subsection (8) applies if—
(a) on its acquisition, sum or asset T—
(i) is the subject of a relevant step within section 554B taken by P by reason of which Chapter 2 applies or would apply apart from subsection (6) above or any of sections 554H to 554M, 554Q or 554T, or
(ii) if sub-paragraph (i) does not apply, is held by or on behalf of P on the same basis as that on which sum or asset S was held by or on behalf of P immediately before the acquisition, and
(b) for the sole purpose of the acquisition, sum or asset S or sum or asset T is the subject of a relevant step within section 554C(1)(a) to (c).
(8) Chapter 2 does not apply by reason of the relevant step mentioned in subsection (7)(b).
(1) This section applies (subject to subsection (5)) if—
(a) a right to repayment of principal under a relevant loan (the “repayment right”) is held by or on behalf of a person (“P”), and
(b) on or after 9 December 2010, a sum of money (the “repayment sum”) is acquired by or on behalf of P by way of repayment of principal under the relevant loan.
(2) In this section “relevant loan” means a loan made on or after 6 April 1999.
(3) Subsection (4) applies if—
(a) on its acquisition, the repayment sum is the subject of a relevant step within section 554B taken by P, or
(b) for the sole purpose of the acquisition, the making of the payment of the repayment sum is a relevant step within section 554C(1)(a).
(4) Chapter 2 does not apply by reason of the relevant step if, on its acquisition, the repayment sum is held by or on behalf of P on the same basis as that on which the repayment right was held by or on behalf of P immediately before the acquisition.
(5) This section does not apply where there is any connection (direct or indirect) between the acquisition by or on behalf of P of the repayment sum and a tax avoidance arrangement (other than the arrangement under which the relevant loan was made).
554S Exclusions: pension income chargeable under Part 9 etc
(1) Chapter 2 does not apply by reason of a relevant step within section 554C or 554D if the step is the provision of pension income which is chargeable to income tax under Part 9 or is exempt income (within the meaning of that Part).
(2) Sections 554T, 554U, 554V, 554W and 554X contain further provision relating to retirement benefits etc and are to be applied, so far as applicable, in that order.