Finance Act 2000 (c. 17)

(The document as of February, 2008)

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Meaning of shares being withdrawn from or ceasing to be subject to plan

122 (1) For the purposes of this Schedule shares are withdrawn from the plan when--

(a) they are transferred by the trustees to the participant, or another person, on the direction of the participant,

(b) the participant assigns, charges or otherwise disposes of his beneficial interest in the shares, or

(c) they are disposed of by the trustees, on the direction of the participant, in circumstances where the trustees account (or hold themselves ready to account) for the proceeds to the participant or to another person.

(2) Where the participant has died, the references in sub-paragraph (1) to the participant shall be read as references to his personal representatives.

(3) For the purposes of this Schedule plan shares cease to be subject to the plan when--

(a) they are withdrawn from the plan,

(b) the participant to whom the shares were awarded ceases to be in relevant employment at a time when the shares are subject to the plan, or

(4) Where an individual participates in an award of partnership shares, if he ceases to be in relevant employment at any time during the acquisition period relating to that award, he shall be treated for the purposes of sub-paragraphs (3) and (7) as ceasing to be in such employment immediately after the shares are awarded to him.

(5) In sub-paragraph (4) "the acquisition period" in relation to an award means--

(a) where there was no accumulation period, the period beginning with the deduction of the partnership share money and ending with the acquisition date (within the meaning of paragraph 40(2)); and

(b) where there was an accumulation period, the period beginning with the end of that period and ending immediately before the acquisition date (within the meaning of paragraph 42(3)).

(6) For the purposes of determining the charge to income tax (if any) arising on any of the participant's shares ceasing to be subject to the plan--

(a) shares shall be taken to cease to be subject to the plan in the order in which they were awarded to the participant under the plan,

(b) where shares are awarded to the participant on the same day, the shares shall be treated as ceasing to be subject to the plan in the order which gives rise to the lowest charge to income tax on the participant.

(7) Where a participant ceases to be in relevant employment his plan shares shall be treated as ceasing to be subject to the plan on the date of leaving.

Meaning of participant ceasing to be in relevant employment

123 (1) This paragraph explains what is meant by a participant ceasing to be in relevant employment.

(2) Relevant employment means employment by the company or any associated company.

(3) A participant does not cease to be in relevant employment if he remains in the employment of the company or any associated company.

Exercise of functions conferred on "the Inland Revenue"

124 References in this Schedule to "the Inland Revenue" are to any officer of the Board.

Determination of market value

125 (1) For the purposes of this Schedule the "market value" of shares has the same meaning as, for the purposes of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992, it has by virtue of Part VIII of that Act.

This is subject to paragraph 24(3) (determination of value of shares subject to restriction or risk of forfeiture).

(2) Where for the purposes of this Schedule the market value of shares on any date falls to be determined, the Inland Revenue and the trustees may agree that it shall be determined by reference to such date or dates, or to an average of the values on a number of dates, as may be provided in the agreement.

Meaning of "associated company"

126 (1) For the purposes of this Schedule one company is an "associated company" of another company if--

(a) one has control of the other, or

(b) both are under the control of the same person or persons.

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

(3) This paragraph is subject to paragraph 67(3).

Jointly owned companies

127 (1) For the purposes of the provisions of this Schedule relating to group plans, each joint owner of a jointly owned company is treated as controlling--

(a) the jointly owned company, and

(b) any company controlled by that company.

This paragraph does not apply for the purposes of paragraph 61(b) (requirement that plan shares are in a company not under another company's control).

(2) A "jointly owned company" means a company--

(a) of which 50% of the issued share capital is owned by one person and 50% by another, and

(b) which is not controlled by any one person.

(3) A jointly owned company may not be a participating company in more than one group plan.

Meaning of "readily convertible asset"

128 (1) For the purposes of this Schedule "readily convertible asset" has the same meaning as in section 203F of the Taxes Act 1988 (PAYE: tradeable assets).

This is subject to sub-paragraph (2).

(2) In determining for the purposes of this Schedule whether shares are readily convertible assets any market for the shares that--

(a) is created by virtue of the trustees acquiring shares for the purposes of the plan, and

(b) exists solely for the purposes of the plan,

shall be disregarded.

Minor definitions

129 (1) In this Schedule--

"approved employee share ownership plan" means an employee share ownership plan approved under this Schedule;
"approved profit sharing scheme" means a profit sharing scheme approved under Schedule 9 to the Taxes Act 1988;
"articles of association", in relation to a company, includes any other written agreement between the shareholders of the company;
"company" means a body corporate;
"control", unless otherwise indicated, has the same meaning as in section 840 of the Taxes Act 1988;
"foreign cash dividend" means a cash dividend paid in respect of plan shares in a company not resident in the United Kingdom;
"group of companies" means a company and any other companies of which it has control, and "group company" has a corresponding meaning;
"ordinary share capital" has the meaning given in section 832(1) of the Taxes Act 1988;
"participant's plan shares", in relation to an employee share ownership plan, means plan shares that have been awarded to an individual participant;
"PAYE obligations" means obligations of any person under--
(a)
sections 203 to 203L of the Taxes Act 1988, or
(b)
regulations under section 203 of that Act;
"plan shares", in relation to a plan, means--
(a)
free, partnership or matching shares that have been awarded to participants under the plan,
(b)
dividend shares that have been acquired on behalf of participants under the plan, and
(c)
shares in relation to which paragraph 115(5) applies (company reconstructions: new shares)),

that remain subject to the plan;
"qualifying corporate bond" has the meaning given by section 117 of the [1992 c. 12.] Taxation of Chargeable Gains Act 1992;
"tax year" means a year of assessment.

(2) Section 839 of the Taxes Act 1988 (connected persons) applies for the purposes of this Schedule.

(3) For the purposes of this Schedule references to "shares" include fractions of shares forming part of the share capital of a company registered in a foreign country the law of which recognises such fractions.

(4) For the purposes of this Schedule a company is a member of a consortium owning another company if it is one of a number of companies--

(a) which between them beneficially own not less than three-quarters of the other company's ordinary share capital, and

(b) each of which beneficially owns not less than one-twentieth of that capital.

Index of defined expressions

130 In this Schedule the following expressions are defined or otherwise explained by the provisions indicated--

approved employee share ownership plan	paragraph 129(1) (and see paragraph 118(7))
approved profit sharing scheme	paragraph 129(1)
articles of association	paragraph 129(1)
associated company	paragraph 126 (and see paragraph 67(3))
award of shares	paragraph 3(1)
ceasing to be in relevant employment (in relation to a participant)	paragraph 123
ceasing to be subject to plan (in relation to shares)	paragraph 122
company	paragraph 129(1)
the company (in relation to an employee share ownership plan)	paragraph 1(4)
connected person	paragraph 129(2)
consortium (member of)	paragraph 129(4)
control	paragraph 129(1) (and see paragraph 127)
deduction (in Part XII)	paragraph 105
dividend shares	paragraph 53(1)
eligible shares (in Part VIII)	paragraph 59
employee share ownership plan	paragraph 1(1)
foreign cash dividend	paragraph 129(1)
forfeiture (provision for)	paragraph 65(6)
free shares	paragraph 1(1)(a)
group of companies	paragraph 129(1)
group plan	paragraph 2(1)
holding period	paragraph 31
the Inland Revenue	paragraph 124
market value (of shares)	paragraph 125
matching shares	paragraph 1(2)
ordinary share capital	paragraph 129(1)
parent company	paragraph 2(1)
participant (in relation to an employee share ownership plan)	paragraph 3(3)
participant's plan shares	paragraph 129(1) (and see paragraph 115(4))
participating company (in relation to a group plan)	paragraph 2(2)
participation in an award of shares	paragraph 3(2)
partnership share agreement	paragraph 34
partnership shares	paragraph 1(1)(b)
PAYE obligations	paragraph 129(1)
performance allowance	paragraph 25
plan shares	paragraph 129(1) (and see paragraphs 115 and 116)
the plan trust	paragraph 68(2)
qualifying corporate bond	paragraph 129(1)
qualifying employee	paragraph 8(4)
readily convertible asset	paragraph 128
reinvestment (in Part VII)	paragraph 53(1)
relevant employment	paragraph 123(2)
salary (in Part V)	paragraph 48
shares	paragraph 129(3) (and in the context of a new holding paragraph 115(8))
tax year	paragraph 129(1)
the trustees	paragraph 68(1)
withdrawal of shares from plan	paragraph 122(1)

Section 48.

SCHEDULE 9 New Schedule 7C to the [1992 c. 12.] Taxation of Chargeable Gains Act 1992

The Schedule inserted after Schedule 7B to the Taxation of Chargeable Gains Act 1992 is as follows--

" Schedule 7C Relief for transfers to approved share plans

Introductory

1 (1) A person ("the claimant") who makes a disposal of shares ("the disposal") to the trustees of the plan trust of an employee share ownership plan ("the plan") is entitled to claim relief under paragraph 5 if--

(a) the conditions in paragraph 2 are fulfilled, and

(b) paragraph 3(1) or (2) applies.

(2) Sub-paragraph (1) does not apply to a company that makes a disposal of shares.

(3) In this paragraph the references to a disposal of shares include a disposal of an interest in shares.

Conditions relating to the disposal

2 (1) The first condition is that, at the time of the disposal, the plan is approved under Schedule 8 to the Finance Act 2000.

(2) The second condition is that the relevant shares meet the requirements in Part VIII of that Schedule (types of shares that may be used in plan) in relation to the plan.

For this purpose that Part applies as if paragraph 61(a) and (c) (listed shares and shares in a company under the control of a company whose shares are listed) were omitted.

(3) The third condition is that, at any time in the entitlement period, the trustees hold, for the beneficiaries of the plan trust, shares in the relevant company that--

(a) constitute not less than 10% of the ordinary share capital of the company, and

(b) carry rights to not less than 10% of--

(i) any profits available for distribution to shareholders of the company, and

(ii) any assets of that company available for distribution to its shareholders in the event of a winding up.

(4) For the purposes of sub-paragraph (3), shares that have been appropriated to, or acquired on behalf of, an individual under the plan shall continue to be treated as held by the trustees of the plan trust for the beneficiaries of that trust until such time as they cease to be subject to the plan (within the meaning of Schedule 8 to the Finance Act 2000).

(5) The fourth condition is that, at all times in the proscribed period, there are no unauthorised arrangements under which the claimant or a person connected with him may be entitled to acquire (directly or indirectly) from the trustees of the plan trust any shares, or an interest in or right deriving from any shares.

(6) For the purposes of this paragraph--

"ordinary share capital" has the meaning given in section 832(1) of the Taxes Act;
"the relevant company" means the company of whose share capital the relevant shares form part; and
"the relevant shares" means the shares that are, or an interest in which is, the subject of the disposal.

Reinvestment of disposal proceeds

3 (1) This sub-paragraph applies if the claimant obtains consideration for the disposal and, at any time in the acquisition period, all of the amount or value of the consideration is applied by him in making an acquisition of assets or an interest in assets ("replacement assets") which--

(a) are, immediately after the time of the acquisition, chargeable assets in relation to the claimant, and

(b) are not shares in, or debentures issued by, the relevant company or a company which is (at the time of the acquisition) in the same group as the relevant company;

but the preceding provisions of this sub-paragraph shall have effect without the words ", at any time in the acquisition period," if the acquisition is made pursuant to an unconditional contract entered into in the acquisition period.

(2) This sub-paragraph applies if--

(a) sub-paragraph (1) would have applied but for the fact that part only of the amount or value mentioned in that sub-paragraph is applied as there mentioned, and

(b) all the amount or value so mentioned except for a part which is less than the amount of the gain (whether all chargeable gain or not) accruing on the disposal is so applied.

(3) In sub-paragraph (1)(b)--

"the relevant company" has the meaning given in paragraph 2(6); and
"group" shall be construed in accordance with section 170.

Provision supplementary to paragraphs 2 and 3

4 (1) This paragraph applies for the purposes of paragraphs 2 and 3.

(2) The entitlement period is the period beginning with the disposal and ending on the expiry of 12 months beginning with the date of the disposal.

(3) The acquisition period is the period beginning with the disposal and ending on the expiry of six months beginning with--

(a) the date of the disposal, or

(b) if later, the date on which the third condition (set out in paragraph 2(3)) is first fulfilled.

(4) The proscribed period is the period beginning with the disposal and ending on--

(a) the date of the acquisition, or

(b) if later, the date on which the third condition (set out in paragraph 2(3)) is first fulfilled.

(5) All arrangements are unauthorised unless they only allow shares to be appropriated to or acquired on behalf of an individual under the plan.

The relief

5 (1) Where the claimant is entitled to claim relief under this paragraph and paragraph 3(1) applies, he shall, on making a claim in the period of 2 years beginning with the acquisition, be treated for the purposes of this Act--

(a) as if the consideration for the disposal were (if otherwise of a greater amount or value) of such amount as would secure that on the disposal neither a gain nor a loss accrues to him, and

(b) as if the amount or value of the consideration for the acquisition were reduced by the excess of the amount or value of the actual consideration for the disposal over the amount of the consideration which the claimant is treated as receiving under paragraph (a).

(2) Where the claimant is entitled to claim relief under this paragraph and paragraph 3(2) applies, he shall, on making a claim in the period of 2 years beginning with the acquisition, be treated for the purposes of this Act--

(a) as if the amount of the gain accruing on the disposal were reduced to the amount of the part mentioned in paragraph 3(2)(b), and

(b) as if the amount or value of the consideration for the acquisition were reduced by the amount by which the gain is reduced under paragraph (a) above.

(3) Nothing in sub-paragraph (1) or (2) shall affect the treatment for the purposes of this Act of the other party to the disposal or of the other party to the acquisition.

(4) The provisions of this Act fixing the amount of the consideration deemed to be given for a disposal or acquisition shall be applied before the preceding provisions of this paragraph are applied.

Dwelling-houses: special provision

6 (1) Sub-paragraph (2) applies where--

(a) a claim is made under paragraph 5,

(b) immediately after the time of the acquisition mentioned in paragraph 3 and apart from this paragraph, any replacement asset was a chargeable asset in relation to the claimant,

(d) there was a time in the period beginning with the acquisition and ending with the time when paragraph 5(1) or (2) falls to be applied such that, if the asset (or an interest in it) were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant's spouse.

(2) In such a case the asset shall be treated as if, immediately after the time of the acquisition mentioned in paragraph 3, it was not a chargeable asset in relation to the claimant.

(3) Sub-paragraph (4) applies where--

(a) the provisions of paragraph 5(1) or (2) have been applied,

(b) any replacement asset which, immediately after the time of the acquisition mentioned in paragraph 3 and apart from this paragraph, was a chargeable asset in relation to the claimant consists of a dwelling-house or part of a dwelling-house or land, and

(c) there is a time after paragraph 5(1) or (2) has been applied such that, if the asset (or an interest in it) were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant's spouse.

(4) In such a case--

(a) the asset shall be treated as if, immediately after the time of the acquisition mentioned in paragraph 3, it was not a chargeable asset in relation to the claimant and adjustments shall be made accordingly, but

(b) any gain treated as accruing in consequence of the application of paragraph (a) shall be treated as accruing at the time mentioned in sub-paragraph (3)(c) or, if there is more than one such time, at the earliest of them.

(5) Sub-paragraph (6) applies where--

(a) a claim is made under paragraph 5,

(b) immediately after the time of the acquisition mentioned in paragraph 3 and apart from this paragraph, any replacement asset was a chargeable asset in relation to the claimant,

(c) the asset was an option to acquire (or to acquire an interest in) a dwelling-house or part of a dwelling-house or land,

(d) the option has been exercised, and

(e) there was a time in the period beginning with the exercise of the option and ending with the time when paragraph 5(1) or (2) falls to be applied such that, if the asset acquired on exercise of the option were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant's spouse.

(6) In such a case the option shall be treated as if, immediately after the time of the acquisition mentioned in paragraph 3, it was not a chargeable asset in relation to the claimant.

(7) Sub-paragraph (8) applies where--

(a) the provisions of paragraph 5(1) or (2) have been applied,

(b) any replacement asset which, immediately after the time of the acquisition mentioned in paragraph 3 and apart from this paragraph, was a chargeable asset in relation to the claimant consisted of an option to acquire (or to acquire an interest in) a dwelling-house or part of a dwelling-house or land,

(d) there is a time after paragraph 5(1) or (2) has been applied such that, if the asset acquired on exercise of the option were disposed of at that time, it would be within section 222(1) and the individual there mentioned would be the claimant or the claimant's spouse.

(8) In such a case--

(a) the option shall be treated as if, immediately after the time of the acquisition mentioned in paragraph 3, it was not a chargeable asset in relation to the claimant and adjustments shall be made accordingly, but

(b) any gain treated as accruing in consequence of the application of paragraph (a) shall be treated as accruing at the time mentioned in sub-paragraph (7)(d) or, if there is more than one such time, at the earliest of them.

(9) References in this paragraph to an individual include a person entitled to occupy under the terms of a settlement.

Shares: special provision

7 (1) Sub-paragraph (2) applies where--

(a) a claim is made under paragraph 5,

(b) immediately after the time of the acquisition mentioned in paragraph 3 and apart from this paragraph, any replacement asset was a chargeable asset in relation to the claimant,

(d) relief is claimed under Chapter III of Part VII of the Taxes Act (enterprise investment scheme) at any time in the period beginning with the acquisition and ending when paragraph 5(1) or (2) falls to be applied.

(2) In such a case the asset shall be treated as if, immediately after the time of the acquisition mentioned in paragraph 3, it was not a chargeable asset in relation to the claimant.

(3) Sub-paragraph (4) applies where--

(a) the provisions of paragraph 5(1) or (2) have been applied,

(c) at any time after paragraph 5(1) or (2) has been applied relief is claimed in respect of the asset under Chapter III of Part VII of the Taxes Act (enterprise investment scheme).

(4) In such a case the asset shall be treated as if, immediately after the time of the acquisition mentioned in paragraph 3, it was not a chargeable asset in relation to the claimant and adjustments shall be made accordingly.

Meaning of "chargeable asset"

8 For the purposes of this Schedule an asset is a chargeable asset in relation to the claimant at a particular time if, were the asset to be disposed of at that time, any gain accruing to him on the disposal would be a chargeable gain, and either--

(a) at that time he is resident or ordinarily resident in the United Kingdom, or

(b) he would be chargeable to capital gains tax under section 10(1) (non-resident with United Kingdom branch or agency) in respect of the gain,

unless (were he to dispose of the asset at that time) the claimant would fall to be regarded for the purposes of any double taxation relief arrangements as not liable in the United Kingdom to tax on any gains accruing to him on the disposal. " .

Section 57.

SCHEDULE 10 Benefits in kind: deregulatory amendments

Introduction

1 Chapter II of Part V of the Taxes Act 1988 (provisions relating to the Schedule E charge: benefits in kind, etc.) is amended as follows.

Accommodation, supplies or services used in performing duties of employment

2 (1) After section 155 (exceptions from the general charge) insert--

" 155ZA Accommodation, supplies or services used in performing duties of employment

(1) Section 154 does not apply to a benefit consisting in the provision of accommodation, supplies or services used by the employee in performing the duties of his employment if the following conditions are met.

(2) Where the benefit is provided on premises occupied by the employer or other person providing it, the only condition is that any use of it for private purposes by the employee or members of his family or household is not significant.

(3) Where the benefit is provided otherwise than on premises occupied by the employer or other person providing it, the conditions are--

(a) that the sole purpose of providing the benefit is to enable the employee to perform the duties of his employment,

(b) that any use of it for private purposes is not significant, and

(4) The Treasury may make provision by regulations as to what is an excluded benefit for the purposes of subsection (3)(c) above.

The regulations may provide that a benefit is an excluded benefit only if such conditions as may be prescribed are met as to the terms on which, and persons to whom, it is provided.

(5) Subject to any such regulations, the provision of any of the following is an excluded benefit (whatever the terms and whoever it is provided to)--

(a) a motor vehicle, boat or aircraft;

(b) a benefit that involves--

(i) the extension, conversion or alteration of any living accommodation, or

(ii) the construction, extension, conversion or alteration of a building or other structure on land adjacent to and enjoyed with such accommodation.

(6) For the purposes of this section--

(a) use "for private purposes" means any use that is not use in performing the duties of the employee's employment; and

(b) use that is at the same time use in performing the duties of an employee's employment and use for private purposes counts as use for private purposes. " .

(2) In section 154(2) and (3), after "155" insert ", 155ZA".

Power to provide by regulations for exemption of minor benefits

3 (1) After section 155ZA (inserted by paragraph 2(1) above), insert--

" 155ZB Power to provide for exemption of minor benefits

(1) The Treasury may make provision by regulations for exempting from section 154 such minor benefits as may be specified in the regulations.

(2) Any exemption conferred by regulations under this section is conditional on the benefit being made available to the employer's employees generally on similar terms. " .

(2) In section 154(2), after "155ZA," (inserted by paragraph 2(2) above) insert "155ZB,".

Beneficial loans: exception of loan where whole of interest qualifies for relief

4 (1) After section 161 (exceptions from the charge to tax on beneficial loan arrangements), insert--

" 161A Treatment of qualifying loans

(1) In this Chapter a "qualifying loan" means a loan made to a person where, assuming interest is paid on the loan (whether or not it is in fact paid), the whole or part of the interest paid on it for the year--

(a) is eligible for relief under section 353 or would be so eligible but for subsection (2) of that section, or

(b) is deductible in computing the amount of the profits to be charged--

(i) under Case I or II of Schedule D in respect of a trade, profession or vocation carried on by him, or

(ii) under Schedule A in respect of a Schedule A business carried on by him.

(2) Section 160(1) does not apply to a loan in any year in which, on the assumption mentioned in subsection (1) above, the whole of the interest paid on it is eligible for relief or deductible as mentioned in that subsection. " .

(2) In section 160--

(a) subsection (1C) shall cease to have effect, and

(b) in subsection (5), after "161" insert ", 161A".

Beneficial loans: loans on ordinary commercial terms

5 (1) After section 161A (inserted by paragraph 4(1) above) insert--

" 161B Beneficial loans: loans on ordinary commercial terms

(1) Section 160(1) does not apply to a loan on ordinary commercial terms.

(2) Schedule 7A to this Act has effect as to what is meant by a loan on ordinary commercial terms. " .

(2) After Schedule 7 insert--

" SCHEDULE 7A Beneficial loans: loans on ordinary commercial terms

Introduction

1 For the purposes of section 161B(1) a loan "on ordinary commercial terms" means a loan--

(a) made by a person ("the lender") in the ordinary course of a business carried on by him which includes--

(i) the lending of money, or

(ii) the supplying of goods or services on credit, and

(b) in relation to which the requirements of paragraph 2, 3 or 4 below are met.

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