Finance Act 2000 (c. 17)

(The document as of February, 2008)

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This is subject to sub-paragraphs (6) and (7).

(3) In sub-paragraph (2) "the acquisition date" means the date set by the trustees in relation to the award of partnership shares, being a date within 30 days after the end of the accumulation period which applies in relation to the award.

(4) The number of shares awarded to each employee must be determined in accordance with the lower of--

(a) the market value of the shares at the beginning of the accumulation period, and

(b) the market value of the shares on the acquisition date.

(5) Any surplus partnership share money remaining after the acquisition of shares by the trustees--

(a) may with the agreement of the employee be carried forward to the next accumulation period, and

(b) in any other case must be paid over to the employee as soon as practicable.

(6) The plan must provide that where--

(a) partnership share money has been deducted in an accumulation period, and

(b) the employee ceases to be in relevant employment during that period,

the partnership share money is paid over to the individual as soon as practicable.

(7) The partnership share agreement may provide that, where an accumulation period comes to an end on the occurrence of a specified event, the partnership share money deducted in that period must be paid over to the individual as soon as practicable instead of being applied in acquiring shares.

(8) This paragraph is subject to paragraph 43 (restriction imposed on number of shares awarded).

Restriction imposed on number of shares awarded

43 (1) The plan may authorise the company to specify the maximum number of shares ("the award maximum") to be included in an award of partnership shares.

A different number may be specified in relation to different awards.

(2) If the plan so authorises the company, it must require partnership share agreements to contain an undertaking by the company to notify the employee of any restriction on the number of shares to be included in an award.

(3) The plan must require the notice to be given--

(a) if there is no accumulation period, before the deduction of the partnership share money relating to the award, and

(b) if there is an accumulation period, before the beginning of the accumulation period relating to the award.

(4) The plan must provide that where the award maximum in respect of an award of partnership shares is smaller than the number of shares which would otherwise be included in the award, the number of partnership shares included in each individual award under paragraph 40(1) or 42(2) shall be reduced proportionately.

Stopping and re-starting deductions

44 (1) The plan must provide that an employee may at any time give notice in writing to the company to stop deductions in pursuance of a partnership share agreement.

(2) The plan must also provide that an employee who has stopped deductions may subsequently give notice in writing to the company to re-start deductions in pursuance of the agreement, but may not make up deductions that have been missed.

(3) If the plan makes provision for one or more accumulation periods, it may prevent an employee re-starting deductions more than once in any accumulation period.

(4) The plan must provide that unless a later date is specified in the notice--

(a) the company must within 30 days of receiving a notice within sub-paragraph (1), ensure that no further deductions are made by it under the partnership share agreement;

(b) the company must on receiving a notice within sub-paragraph (2) re-start deductions under the partnership share agreement not later than the re-start date.

(5) For the purposes of sub-paragraph (4)(b) "the re-start date" is the date of the first deduction due under the partnership share agreement more than 30 days after receipt of the notice within sub-paragraph (2).

Withdrawal from partnership share agreement

45 (1) The plan must provide that an employee may withdraw from a partnership share agreement at any time by notice in writing to the company.

(2) The plan must provide that, unless a later date is specified in the notice, a notice of withdrawal takes effect 30 days after it is received by the company.

(3) The plan must provide that where an employee withdraws from a partnership share agreement, any partnership share money held on his behalf is to be paid over to him as soon as practicable.

Repayment of partnership share money on withdrawal of approval or termination

46 (1) The plan must provide that where--

(a) the approval of the plan is withdrawn (see paragraph 118), or

(b) a plan termination notice is issued in respect of the plan (see paragraph 120),

any partnership share money held on behalf of an employee is paid over to him.

(2) The plan must require the payment to be made--

(a) in a case within sub-paragraph (1)(a), as soon as practicable after notice of the withdrawal is given to the company, and

(b) in a case within sub-paragraph (1)(b), as soon as practicable after the plan termination notice is notified to the trustees under paragraph 120(2).

Access to partnership shares

47 (1) The plan must provide that when partnership shares have been awarded to an employee, the employee may at any time withdraw any or all of the partnership shares from the plan.

(2) There may be a charge to tax under paragraph 86 (charge on partnership shares ceasing to be subject to plan).

Meaning of "salary"

48 References in this Part of this Schedule to an employee's "salary" are to such of the emoluments of the employment by reference to which he is eligible to participate in the plan as are liable to be paid under deduction of tax pursuant to section 203 of the Taxes Act 1988 (PAYE), after deducting amounts included by virtue of Chapter II of Part V of that Act (expenses and benefits in kind), or would be so liable apart from this Schedule.

Part VI Matching shares

Introduction

49 If the plan provides for matching shares it must comply with the requirements of this Part of this Schedule.

General requirements for matching shares

50 (1) The plan must provide for the matching shares--

(a) to be shares of the same class and carrying the same rights as the partnership shares to which they relate;

(b) to be awarded on the same day as the partnership shares to which they relate are awarded; and

(2) Sub-paragraph (1) is subject to paragraph 65 (permitted restrictions: provision for forfeiture).

Ratio of matching shares to partnership shares

51 (1) The partnership share agreement must specify--

(a) the ratio of matching shares to partnership shares for the time being offered by the company, and

(b) the circumstances and manner in which the ratio may be changed by the company.

(2) The ratio must not exceed 2:1 and must be applied by reference to the number of shares.

(3) A partnership share agreement must provide for the employee to be informed by the company if the ratio offered by the company changes before partnership shares are awarded to him under the agreement.

Application of provisions relating to holding period etc.

52 The provisions of paragraphs 31 and 32 as to the holding period and related matters apply in relation to matching shares as they apply to free shares.

Part VII Reinvestment of cash dividends

Reinvestment

53 (1) The plan may provide that where the company so directs--

(a) all cash dividends in respect of plan shares held on behalf of participants must be applied in acquiring further shares on their behalf, or

(b) all cash dividends in respect of plan shares held on behalf of participants who elect to reinvest their dividends must be applied in acquiring further shares on their behalf.

This is referred to in this Part of this Schedule as "reinvestment" and the further plan shares acquired are referred to in this Schedule as "dividend shares".

(2) The company may revoke a direction.

(3) Where cash dividends in respect of plan shares held on behalf of a participant are not required to be reinvested under the plan, the plan must require the dividends to be paid over to the participant as soon as practicable.

(4) This paragraph is subject to paragraph 54 (limit on amount reinvested).

Limit on amount reinvested

54 (1) The plan must provide that the total dividend reinvestment in respect of any participant cannot exceed £1,500 in any tax year.

(2) For this purpose "the total dividend reinvestment" in respect of a participant is the sum of--

(a) the amount applied by the trustees in acquiring dividend shares on behalf of the participant under the plan, and

(b) the amount applied by the trustees of other employee share ownership plans that are--

(i) established by the company or an associated company, and

(ii) approved under this Schedule,

in acquiring dividend shares on his behalf.

(3) If the amounts received by the trustees exceed the limit in sub-paragraph (1), the plan must provide for the balance to be paid over to the participant as soon as practicable.

General requirements for dividend shares

55 The plan must provide that dividend shares are shares--

(a) of the same class and carrying the same rights as the shares in respect of which the dividend is paid, and

(b) which are not subject to any provision for forfeiture.

Acquisition of dividend shares

56 (1) The plan must provide that in exercising their powers in relation to the acquisition of dividend shares the trustees must treat participants fairly and equally.

(2) The plan must provide for the trustees to apply a cash dividend in acquiring further shares on behalf of participants on the acquisition date.

This does not affect the carrying forward under paragraph 58 of any such amount as is mentioned in sub-paragraph (1) of that paragraph (amounts remaining after acquisition of shares).

(3) For this purpose "the acquisition date" means the date set by the trustees in relation to the acquisition of dividend shares, being a date within 30 days after the dividend is received by them.

(4) The number of dividend shares acquired on behalf of each participant must be determined in accordance with the market value of the shares on the acquisition date.

(5) References in this Part of this Schedule to the trustees acquiring dividend shares on behalf of a participant include their appropriating to a participant shares already held by them.

Holding period for dividend shares

57 The provisions of paragraphs 31 and 32 (holding period and related matters) apply in relation to dividend shares as they apply to free shares, except that the holding period must be three years.

Certain amounts not reinvested to be carried forward

58 (1) Any amount that is not reinvested--

(a) because the amount of the cash dividend to which the participant is entitled is not sufficient to acquire a share, or

(b) because there is an amount remaining after acquiring one or more dividend shares on the participant's behalf,

may be retained by the trustees and carried forward to be added to the amount of the next cash dividend to be reinvested, but shall be held by them so as to be separately identifiable for the purposes of sub-paragraphs (2) and (3).

(2) An amount retained under this paragraph shall be paid over to the participant--

(a) if or to the extent that it is not reinvested within the period of three years beginning with the date on which the dividend was paid, or

(b) if during that period the participant ceases to be in relevant employment, or

(3) An amount required to be paid over to the participant under sub-paragraph (2) shall be paid over as soon as practicable.

(4) For the purposes of this paragraph an amount carried forward under this paragraph derived from an earlier cash dividend is treated as reinvested before an amount derived from a later cash dividend.

Part VIII Types of share that may be used

Introduction

59 The requirements of the following paragraphs must be met with respect to any shares that may be awarded under the plan ("eligible shares")--

paragraph 60 (must be ordinary share capital);

paragraph 61 (requirement as to listing etc.);

paragraph 62 (shares must be fully paid up and not redeemable);

paragraph 63 (only certain kinds of restriction allowed);

paragraph 67 (prohibited companies).

Must be ordinary share capital

60 Eligible shares must form part of the ordinary share capital of--

(a) the company; or

(b) a company which has control of the company; or

(c) a company which either is, or has control of, a company which is a member of a consortium owning either the company or a company having control of the company.

Requirement as to listing etc.

61 Eligible shares must be--

(a) shares of a class listed on a recognised stock exchange; or

(b) shares in a company which is not under the control of another company; or

(c) shares in a company which is under the control of a company (other than a company which is, or would if resident in the United Kingdom be, a close company) whose shares are listed on a recognised stock exchange.

Shares must be fully paid up and not redeemable

62 (1) Eligible shares must be--

(a) fully paid up, and

(b) not redeemable.

(2) Shares are not regarded as fully paid up for the purposes of sub-paragraph (1)(a) if there is any undertaking to pay cash to the company at a future date.

(3) For the purposes of sub-paragraph (1)(b) "redeemable" shares include shares that may become redeemable at a future date.

(4) Sub-paragraph (1)(b) does not apply in relation to shares in a co-operative.

(5) In sub-paragraph (4) "co-operative" means a registered industrial and provident society which is a co-operative society.

For this purpose--

"registered industrial and provident society" means a society registered or deemed to be registered under the [1965 c. 22.] Industrial and Provident Societies Act 1965 or the [1969 c. 24 (N.I.).] Industrial and Provident Societies Act (Northern Ireland) 1969; and
"co-operative society" has the same meaning as in section 1 of the 1965 Act or, as the case may be, the 1969 Act.

Only certain kinds of restriction allowed

63 (1) Eligible shares must not be subject to any restrictions other than--

(a) those involved in there being a holding period (see paragraphs 31, 52 and 57); or

(b) those affecting all ordinary shares in the company; or

paragraph 64 (voting rights),

paragraph 65 (provision for forfeiture), or

paragraph 66 (pre-emption conditions).

(2) For this purpose there is a restriction if there is any contract, agreement, arrangement or condition--

(a) by which a person's freedom to dispose of the shares or of any interest in them or of the proceeds of their sale or to exercise any right conferred by them is restricted, or

(b) by which such a disposal or exercise may result in any disadvantage to him or to a person connected with him,

subject to sub-paragraphs (3) and (4).

(3) Any discretion of the directors under the articles of association of the company to refuse to accept the transfer of shares shall be disregarded for the purposes of this paragraph if the directors--

(a) have undertaken to the Inland Revenue not to exercise it in such a way as to discriminate against participants, and

(b) have notified all qualifying employees of the existence of the undertaking.

(4) There shall also be disregarded for the purposes of this paragraph so much of any contract, agreement, arrangement or condition as contains provisions similar in purpose and effect to any of the provisions of the Model Code as (for the time being) set out in the listing rules issued by the competent authority for listing in the United Kingdom under section 74(4) of the [2000 c. 8.] Financial Services and Markets Act 2000.

Permitted restrictions: voting rights

64 Eligible shares may be shares carrying no voting rights or limited voting rights.

Permitted restrictions: provision for forfeiture

65 (1) Free or matching shares may be subject to provision for forfeiture in the following circumstances.

(2) Provision may be made for forfeiture--

(a) on the participant ceasing to be in relevant employment at any time in the forfeiture period,

(b) on the participant withdrawing the shares from the plan in that period, or

(c) in the case of matching shares, on the participant withdrawing the partnership shares in respect of which those shares were awarded from the plan within that period,

otherwise than by reason of an event within paragraph 87(2) (circumstances in which there is no charge to tax on shares ceasing to be subject to plan).

(3) In sub-paragraph (2) "the forfeiture period" means the forfeiture period specified in the plan being a period of not more than three years beginning with the date on which the shares were awarded to the participant.

(4) Forfeiture may not be linked to the performance of any person or persons.

(5) The same provision for forfeiture must apply in relation to all free or matching shares included in the same award under the plan.

(6) In this Schedule "provision for forfeiture" means any provision to the effect that a participant shall cease to be beneficially entitled to the shares on the occurrence of certain events, and references to forfeiture shall be construed accordingly.

Permitted restrictions: pre-emption conditions

66 (1) If the requirements of this paragraph are met, eligible shares may be subject to provision requiring shares--

(a) that were awarded to an employee under the plan, and

(b) that are held by an employee or a permitted transferee,

to be offered for sale on the employee ceasing to be in relevant employment.

(2) For the purposes of sub-paragraph (1)(b) a "permitted transferee" means a person to whom, under the articles of association of the company, the employee is permitted to transfer the shares.

(3) The requirements of this paragraph are that under the articles of association of the company--

(a) the same provision applies to all employees of the company or, in the case of a parent company, to all employees of that company or any company of which that company has control;

(b) the shares are required to be offered for sale at a specified consideration; and

(c) anyone disposing of shares of the same class (whether or not as an employee) is required to offer the shares for sale on no better terms.

Prohibited companies

67 (1) Eligible shares must not be shares--

(a) in an employer company, or

(b) in a company that--

(i) has control of an employer company, and

(ii) is under the control of a person or persons within sub-paragraph (2)(b)(i) in relation to an employer company.

(2) For the purposes of this paragraph a company is "an employer company" if--

(a) the business carried on by it consists substantially in the provision of the services of persons employed by it, and

(b) the majority of those services are provided to--

(i) a person who has, or two or more persons who together have, control of the company, or

(ii) a company associated with the company.

(3) For the purposes of sub-paragraph (2)(b)(ii) a company shall be treated as associated with another company if both companies are under the control of the same person or persons.

(4) For the purposes of sub-paragraphs (1) to (3)--

(a) references to a person include a partnership, and

(b) where a partner, alone or together with others, has control of a company, the partnership shall be treated as having like control of that company.

(5) For the purposes of this paragraph the question whether a person controls a company shall be determined in accordance with section 416(2) to (6) of the Taxes Act 1988.

Part IX The trustees

Establishment of trustees

68 (1) The plan must provide for the establishment of a body of persons resident in the United Kingdom ("the trustees") who are required by the plan--

(a) in the case of free or matching shares, to acquire shares and appropriate them to employees in accordance with the plan;

(b) in the case of partnership shares, to apply partnership share money in acquiring shares on behalf of employees in accordance with the plan; and

(c) in the case of dividend shares, to apply cash dividends in acquiring shares on behalf of participants in accordance with the plan.

(2) The functions of the trustees with respect to shares held by them must be regulated by a trust ("the plan trust")--

(a) which is constituted under the law of a part of the United Kingdom, and

(b) the terms of which are embodied in an instrument which complies with the requirements of this Part of this Schedule.

(3) The instrument must not contain any terms which are neither essential nor reasonably incidental to complying with the requirements of this Part of this Schedule.

Power of trustees to borrow

69 The trust instrument may provide that the trustees have power to borrow--

(a) to acquire shares for the purposes of the plan, and

(b) for such other purposes as may be specified in the trust instrument.

Duty to give notice of award of shares etc.

70 (1) The trust instrument must make the following provision regarding notices.

(2) It must provide that, as soon as practicable after any free or matching shares have been awarded to an employee, the trustees shall give him notice of the award--

(a) specifying the number and description of those shares,

(b) stating their market value on the date on which they were awarded to him, and

(3) It must provide that, as soon as practicable after any partnership shares have been awarded to an employee, the trustees shall give him notice of the award--

(a) specifying the number and description of those shares, and

(b) stating--

(i) the amount of partnership share money applied by the trustees in acquiring the shares on his behalf, and

(ii) their market value on the acquisition date (within the meaning of paragraph 40(2) or, if there is an accumulation period, paragraph 42(3)).

(4) It must provide that, as soon as practicable after any dividend shares have been acquired on behalf of a participant, the trustees shall give him notice of the acquisition--

(a) specifying the number and description of those shares,

(b) stating their market value on the acquisition date (within the meaning of paragraph 56(3)),

(d) informing him of any amount carried forward under paragraph 58 (certain amounts not reinvested).

(5) It must provide that, where any foreign cash dividend is received in respect of plan shares held on behalf of a participant, the trustees shall give him notice of the amount of any foreign tax deducted from the dividend before it was paid.

General duties of trustees

71 (1) The trust instrument must require the trustees--

(a) to dispose of a participant's plan shares, and

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