Finance Act 2003

(446A) (1) This Chapter applies in certain cases where the market value of employment-related securities (or other relevant securities or interests in securities) is reduced by things done otherwise than for genuine commercial purposes. (2) The following are among the things that are, for the purposes of this Chapter, done otherwise than for genuine commercial purposes— (a) anything done as part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions, and (b) any transaction between companies which are members of the same group on terms which are not such as might be expected to be agreed between persons acting at arm’s length (other than a payment for group relief). (3) In subsection (2)(b)— (a) “group” means a company and its 51% subsidiaries, and (b) “group relief” has the same meaning as in section 402(6) of ICTA. (446B) (1) This section applies where the market value of employment-related securities at the time of the acquisition has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the acquisition. (2) The taxable amount determined under section 446C counts as employment income of the employee for the tax year in which the acquisition occurs. (3) But this section does not apply if section 425(2) (no charge on acquisition of certain restricted securities or restricted interests in securities) applies in relation to the employment-related securities. (4) This section does not affect any liability to income tax arising in respect of the acquisition of the employment-related securities under— (a) Chapter 1 of Part 3 (earnings), (b) Chapter 10 of Part 3 (taxable benefits: residual liability to charge), (c) Chapter 3 of this Part (acquisition by conversion), (d) Chapter 3C of this Part (acquisition for less than market value), or (e) Chapter 5 of this Part (acquisition pursuant to securities option). (446C) (1) The taxable amount for the purposes of section 446B (charge on acquisition) is— $FMV-MV$ (2) FMV is what would be the market value of the employment-related securities at the time of the acquisition if the things mentioned in section 446B(1) had not been done. (3) MV is the actual market value of the employment-related securities at the time of the acquisition. (4) But where what would be MV is less than the amount of any consideration given for the acquisition of the employment-related securities, MV is the amount of that consideration. (5) This section is subject to section 446D (restricted securities and convertible securities). (446D) (1) Where the employment-related securities are restricted securities or a restricted interest in securities, FMV (but not MV) is to be determined as if the employment-related securities were not restricted securities or a restricted interest in securities; and, accordingly, sections 426 to 431 (post-acquisition charges on restricted securities) do not apply to the employment-related securities. (2) Where the employment-related securities are convertible securities or an interest in convertible securities, FMV and MV are to be determined as if they were not. (446E) (1) This section applies where the market value of employment-related securities which are restricted securities or a restricted interest in securities is artificially low— (a) immediately after an event which is a chargeable event in relation to the employment-related securities for the purposes of section 426 (charge on restricted securities), or (b) on 5th April in any year. (2) The market value of the employment-related securities is artificially low where it has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the relevant period. (3) The reference in subsection (2) of section 428 (amount of charge on restricted securities) to what would be the market value of the employment-related securities is, so far as it relates to subsection (1) of that section, a reference to what would be the market value but for the reduction as a result of the things done as mentioned in subsection (2) (and but for any restrictions). (4) In a case within subsection (1)(b), there shall be treated as occurring on the 5th April concerned a chargeable event within section 427(3)(a) (lifting of restrictions) in relation to the employment-related securities. (5) “The relevant period” is the period of 7 years ending with— (a) in a case within subsection (1)(a), the chargeable event concerned, or (b) in a case within subsection (1)(b), the 5th April concerned. (6) But if section 425(2) (no charge on acquisition of certain restricted securities or restricted interests in securities) applied in relation to the employment-related securities, the relevant period is the period beginning 7 years before the acquisition. (446F) (1) This section applies where the market value of an employee’s interest in shares which is only conditional is artificially low immediately after a chargeable event relating to the shares under section 427 as originally enacted. (2) The market value of the shares is artificially low where it has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period beginning— (a) 7 years before the chargeable event, or (b) with 16th April 2003, whichever is later. (3) There is a chargeable event in relation to shares if section 427 (as originally enacted) applies in relation to them. (4) The reference in the definition of MV in section 428(1) (as originally enacted) to the market value of the employee’s interest is to what would be the market value but for the reduction as a result of the things done as mentioned in subsection (2). (5) Expressions used in this section and in Chapter 2 of this Part as originally enacted have the same meaning in this section as in that Chapter. (446G) (1) This section applies where the market value of employment-related securities which are convertible securities or an interest in convertible securities (determined as if they were not) has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the acquisition. (2) The reference to the market value of the employment-related securities in the definition of NCMV in section 442(5) (value of convertible securities at time of acquisition) is to what would be the market value but for the reduction as a result of the things done as mentioned in subsection (1) (and but for the fact that they are convertible securities or an interest in convertible securities). (446H) (1) This section applies where the market value of securities (“the converted securities”) into which employment-related securities (or securities in which employment-related securities are an interest) are converted is artificially low at the time of an event which is a chargeable event in relation to the employment-related securities by virtue of section 439(3)(a) (conversion). (2) The market value of the converted securities is artificially low where it has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the chargeable event. (3) The references to the market value of the converted securities in the definition of CMVCS in section 441(6) (amount of gain realised by conversion) are to what would be the market value but for the reduction as a result of the things done as mentioned in subsection (2). (446I) (1) This section applies where any consideration or benefit mentioned in— (a) section 428(9) (consideration on disposal of restricted securities), (b) section 441(4), (5) or (9) (consideration for disposal of convertible securities or release of entitlement to convert or benefit received in respect of entitlement to convert), (c) section 446C(4) (securities with artificially depressed market value: MV to be amount of consideration), (d) sections 446X and 446Y(3) (consideration for disposal of securities exceeding market value), or (e) section 448 (securities benefit not otherwise subject to tax), consists (in whole or in part) in the provision of securities or an interest in securities the market value of which is artificially low. (2) The market value of any securities or interest in securities is artificially low where it has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the receipt of the consideration or benefit. (3) The market value of the consideration or benefit consisting in the provision of the securities or interest in securities is for the purposes of the provision or provisions concerned to be taken to be what it would be but for the reduction as a result of the things done as mentioned in subsection (2). (446J) (1) In this Chapter— - “interest”, in relation to securities, and - “securities”, - have the meaning indicated in section 420. (2) In this Chapter “market value” has the meaning indicated in section 421(1). (3) For the purposes of this Chapter sections 421(2) and 421A apply for determining the amount of the consideration given for anything and section 421I applies for determining the amount of the consideration given for the acquisition of employment-related securities. (4) In this Chapter— - “the acquisition”, - “the employee”, and - “employment-related securities”, - have the meaning indicated in section 421B(8). (5) In this Chapter— - “restricted interest in securities”, and - “restricted securities”, - have the same meaning as in Chapter 2 of this Part (see sections 423 and 424). (6) In this Chapter “restriction” has the same meaning as in Chapter 2 of this Part (see section 432(8)). (7) In this Chapter “convertible securities” has the same meaning as in Chapter 3 of this Part (see section 436).

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• (2) Sub-paragraph (1) has effect on and after 16th April 2003 (so that sections 446A, 446F to 446H, 446I(1)(b) to (e), (2) and (3) and 446J apply on and after that date in relation to employment-related securities irrespective of the date of the acquisition).

• (3) Sections 446E and 446I(1)(a) do not affect any securities, or interests in securities, acquired before 16th April 2003; and, in relation to any securities or interests in securities acquired on or after that date but before the day appointed under paragraph 3(2), those provisions apply only on or after that appointed day.

• (4) Section 446F—

• (a) applies in relation to conditional interests in shares acquired before 16th April 2003, and

• (b) applies during the period beginning with that date and ending with the day preceding that appointed day in relation to conditional interests in shares acquired during that period.

6

• (1) After Chapter 3A of Part 7 (inserted by paragraph 5(1)) insert—

(446K) (1) This Chapter applies in certain cases where the market value of employment-related securities is increased by things done otherwise than for genuine commercial purposes. (2) The following are among the things that are, for the purposes of this Chapter, done otherwise than for genuine commercial purposes— (a) anything done as part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions, and (b) any transaction between companies which are members of the same group on terms which are not such as might be expected to be agreed between persons acting at arm’s length (other than a payment for group relief). (3) In subsection (2)(b)— (a) “group” means a company and its 51% subsidiaries, and (b) “group relief” has the same meaning as in section 402(6) of ICTA. (4) In this Chapter, in relation to the market value of the employment-related securities— - “non-commercial increase” means an increase in the market value as a result of anything done otherwise than for genuine commercial purposes, and - “non-commercial reduction” means a reduction in the market value as a result of anything done otherwise than for genuine commercial purposes. (446L) (1) This section applies in relation to employment-related securities where on a date that is the valuation date in relation to a relevant period IMV is at least 10% greater than MV. (2) The taxable amount determined under subsection (4) counts as employment income of the employee for the relevant tax year (but subject to sections 446M and 446N). (3) The “relevant tax year” is the tax year in which the valuation date falls. (4) The taxable amount is— $IMV-MV$ (5) IMV is the market value of the employment-related securities on the valuation date. (6) MV is the amount that would be the market value of the employment-related securities on the valuation date if any non-commercial increases during the relevant period were disregarded. (7) For the purposes of subsections (5) and (6)— (a) any restrictions having effect in relation to the employment-related securities on the valuation date, and (b) any non-commercial reductions during the relevant period, are to be disregarded. (446M) (1) This section applies where on the valuation date the employment-related securities are relevant restricted securities. (2) The amount determined under section 446L(4) is to be multiplied by CP. (3) CP is— $$1-OP$where OP is the amount that would be determined under section 428(5) (amount of charge on chargeable event in relation to restricted securities) on the valuation date if there were on that date a chargeable event (resulting in no tax charge).$ (4) For the purposes of this section the employment-related securities are relevant restricted securities if they are restricted securities or a restricted interest in securities but are not subject to— (a) an election under section 430 (election to ignore outstanding restrictions) in relation to a chargeable event which occurred before the valuation date, or (b) an election under section 431(1) (election to treat securities as not subject to restrictions). (5) If sections 425 to 430 apply to the employment-related securities in accordance with section 431(2) (election to treat securities as not subject to specified restrictions), the reference in subsection (3) to the amount that would be determined under section 428(5) is to the amount that would be so determined in accordance with section 431(2). (446N) (1) This section applies where the employment-related securities have been restricted securities or a restricted interest in securities at any time during the relevant period. (2) DA is to be deducted from the amount determined under section 446L(4) (or, where section 446M applies, the amount determined under sections 446L(4) and 446M). (3) DA is the aggregate of the amounts arrived at under subsection (4) in relation to each event occurring during the relevant period that is a chargeable event in relation to the employment-related securities. (4) The amount is— $TA-ARTA$ (5) TA is the taxable amount actually determined under section 428 in relation to the chargeable event. (6) ARTA is the taxable amount which would have been determined under section 428 in relation to the chargeable event if any non-commercial increases during the period— (a) beginning at the same time as the relevant period, and (b) ending immediately before the chargeable event, had been disregarded. (446O) (1) This section explains what is meant by “relevant period” and “valuation date” in this Chapter. (2) The first relevant period in relation to employment-related securities is the period beginning with the date of the acquisition and ending with the following 5th April. (3) After the first relevant period, each period beginning with 6th April and ending with the following 5th April is a relevant period in relation to the employment-related securities. (4) But if this Chapter ceases to apply to the employment-related securities during a relevant period, the relevant period ends with the date on which this Chapter ceases to apply to them. (5) And if this Chapter ceases to apply to an interest in the employment-related securities during a relevant period, the relevant period ends in relation to that interest with the date on which this Chapter ceases to apply to that interest. (6) In a case where subsection (5) applies, this Chapter has effect separately in relation to that interest and the remainder of the employment-related securities. (7) In this Chapter “valuation date”, in relation to a relevant period, means the date with which the relevant period ends. (446P) (1) In this Chapter “interest”, in relation to securities, has the meaning indicated in section 420. (2) In this Chapter “market value” has the meaning indicated in section 421(1). (3) In this Chapter— - “the acquisition”, - “the employee”, and - “employment-related securities”, - have the meaning indicated in section 421B(8). (4) In this Chapter— - “restricted interest in securities”, and - “restricted securities”, - have the same meaning as in Chapter 2 of this Part (see sections 423 and 424). (5) In this Chapter “chargeable event” means an event which is a chargeable event for the purposes of section 426. (6) In this Chapter “restriction” has the same meaning as in Chapter 2 of this Part (see section 432(8)). (7) In this Chapter— - “non-commercial increase”, and - “non-commercial reduction”, - have the meaning indicated in section 446K(4). (8) In this Chapter— - “relevant period”, and - “valuation date”, - have the meaning indicated in section 446O.

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• (2) Subject as follows, sub-paragraph (1) has effect on and after 16th April 2003 (so that it applies on and after that date in relation to employment-related securities irrespective of the date of the acquisition).

• (3) Sections 446M and 446N do not affect any securities, or interests in securities, acquired before 16th April 2003; and, in relation to any securities or interests in securities acquired on or after that date but before the day appointed under paragraph 3(2), those sections apply only on and after that appointed day.

• (4) For the purposes of section 446O employment-related securities acquired before 16th April 2003 are to be treated as acquired on that date.

7

• (1) After Chapter 3B of Part 7 (inserted by paragraph 6(1)) insert—

(446Q) (1) This Chapter applies if— (a) no payment is made for employment-related securities at or before the time of the acquisition, or (b) the payment made for employment-related securities at or before that time is less than their market value. (2) For the purposes of subsection (1) any obligation to make a payment or further payment after the time of the acquisition is to be disregarded. (3) Where the employment-related securities are, or are an interest in, securities which are not fully paid up, the reference in subsection (1) to the market value of the employment-related securities is to what it would be if the securities were fully paid up. (4) If section 425(2) (no charge on acquisition of certain restricted securities or restricted interests in securities) applies in relation to the employment-related securities, this Chapter has effect as if the employment-related securities were not acquired until the occurrence of the first event which is a chargeable event for the purposes of section 426 in relation to the employment-related securities. (5) This section is subject to section 446R (case outside this Chapter). (446R) (1) This Chapter does not apply if— (a) the employment-related securities are shares (or an interest in shares) in a company of a class, (b) all the company’s shares of the class are acquired either for no payment or for a payment less than their market value, and (c) subsection (3) or (4) is satisfied. (2) Where the company’s shares of the class are not fully paid up, the reference in subsection (1) to their market value is to what it would be if they were fully paid up. (3) This subsection is satisfied if, at the time of the acquisition of the employment-related securities, the company is employee-controlled by virtue of holdings of shares of the class. (4) This subsection is satisfied if, at that time, the majority of the company’s shares of the class are not held by or for the benefit of any of the following— (a) employees of the company, (b) persons who are related to an employee of the company, (c) associated companies of the company, (d) employees of any associated company of the company, or (e) persons who are related to an employee of any such associated company. (5) For the purposes of subsection (4) a person is related to an employee if— (a) the person acquired the shares pursuant to a right or opportunity available by reason of the employee’s employment, or (b) the person is connected with a person who so acquired the shares or with the employee and acquired the shares otherwise than by or under a disposal made by way of a bargain at arm’s length from the employee or another person who is related to the employee. (446S) (1) Where this Chapter applies an interest-free loan (“the notional loan”) is to be treated as having been made to the employee by the employer at the time of the acquisition. (2) The provisions listed in subsection (3) apply as though the notional loan were an employment-related loan as defined in section 174 if and for so long as the employment has not terminated. (3) The provisions are— - section 175 (benefit of taxable cheap loan treated as earnings), - section 178 (exception for loans where interest qualifies for tax relief), - section 180 (threshold for benefit of loan to be treated as earnings), - section 182 (normal method of calculation: averaging), - section 183 (alternative method of calculation), - section 184 (interest treated as paid), - section 185 (apportionment of cash equivalent in case of joint loan etc), and - section 187 (aggregation of loans by close company to director). (446T) (1) The amount of the notional loan initially outstanding is— $$MV-DA$where—MV is the market value of the employment-related securities at the time of the acquisition, andDA is the total of any deductible amounts.$ (2) Where the employment-related securities are, or are an interest in, securities which are not fully paid up, the reference in subsection (1) to the market value of the employment-related securities is to what it would be if the securities were fully paid up. (3) For the purposes of subsection (1) each of the following is a “deductible amount”— (a) any payment made for the employment-related securities by the employee, and any payment so made by the person by whom they were acquired (if not the employee), at or before the time of the acquisition, (b) any amount that constitutes earnings from the employee’s employment under Chapter 1 of Part 3 (earnings) in respect of the acquisition of the employment-related securities, (c) if section 425(2) (no charge on acquisition of certain restricted securities or restricted interests in securities) applies in relation to the employment-related securities, any amount that counts as employment income of the employee under section 426 by reason of the first event which is a chargeable event for the purposes of that section in relation to the employment-related securities, (d) if the employment-related securities were acquired on a conversion of other employment-related securities, any amount that counts as employment income of the employee under section 438 (charge on conversion) by reason of the conversion, and (e) if the acquisition is pursuant to a securities option, any amount that counted as employment income of the employee under section 476 (acquisition of securities pursuant to securities option) in respect of the acquisition. (4) The amount of the notional loan outstanding at any subsequent time is the difference between— (a) the amount initially outstanding, and (b) the amount of any payments or further payments made for the employment-related securities after the acquisition but before that time. (446U) (1) The notional loan is treated as discharged when— (a) the employment-related securities are disposed of otherwise than to an associated person, or (b) if the employment-related securities were securities, or an interest in securities, not fully paid up at the time of the acquisition, the outstanding or contingent liability to pay for them is released, transferred or adjusted so as no longer to bind any associated person. (2) If the notional loan is discharged as the result of an event specified in subsection (1), the amount of the notional loan outstanding immediately before the occurrence of the event counts as employment income of the employee for the relevant tax year (whether or not the employment has terminated before or since the acquisition). (3) The “relevant tax year” is the tax year in which the notional loan is treated as discharged. (4) The notional loan is also treated as discharged when— (a) payments or further payments for the employment-related securities equal to the amount initially outstanding in relation to them have been made by an associated person, or (b) the employee dies. (446V) This Chapter does not affect any liability to income tax arising in respect of the acquisition under— (a) Chapter 1 of Part 3 (earnings), (b) Chapter 10 of Part 3 (taxable benefits: residual liability to charge), (c) Chapter 3 of this Part (acquisition by conversion), (d) Chapter 3A of this Part (securities with artificially depressed market value), or (e) Chapter 5 of this Part (acquisition of securities pursuant to securities option). (446W) (1) In this Chapter— - “interest”, in relation to securities, - “securities”, - “securities option”, and - “shares”, - have the meaning indicated in section 420. (2) In this Chapter “market value” has the meaning indicated in section 421(1). (3) In this Chapter “the acquisition” has the meaning indicated in section 421B(8) (but subject to section 446Q(4)). (4) In this Chapter— - “the employment”, - “the employee” (except in section 446R), - “the employer”, and - “employment-related securities”, - have the meaning indicated in section 421B(8). (5) In this Chapter “associated person” has the meaning indicated in section 421C. (6) In this Chapter— - “associated company”, and - “employee-controlled”, - have the meaning indicated in section 421H. (7) In this Chapter “the notional loan” has the meaning indicated in section 446S(1).

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• (2) Sub-paragraph (1) has effect in relation to securities, and interests in securities, acquired on or after 16th April 2003.

8

• (1) After Chapter 3C of Part 7 (inserted by paragraph 7(1)) insert—

(446X) This Chapter applies if— (a) employment-related securities are disposed of by an associated person so that no associated person is any longer beneficially entitled to them, and (b) the disposal is for a consideration which exceeds the market value of the employment-related securities at the time of the disposal. (446Y) (1) Where this Chapter applies the amount determined under subsection (3) counts as employment income of the employee for the relevant tax year. (2) The “relevant tax year” is the tax year in which the disposal occurs. (3) The amount is— $$CD-MV-DA$where—CD is the amount of the consideration given on the disposal,MV is the market value of the employment-related securities at the time of the disposal, andDA is the amount of any expenses incurred in connection with the disposal.$ (446Z) (1) In this Chapter “market value” has the meaning indicated in section 421(1). (2) For the purposes of this Chapter sections 421(2) and 421A apply for determining the amount of the consideration given for anything. (3) In this Chapter— - “the employee”, and - “employment-related securities”, - have the meaning indicated in section 421B(8). (4) In this Chapter “associated person” has the meaning indicated in section 421C.

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• (2) Sub-paragraph (1) has effect in relation to securities, and interests in securities, disposed of on or after 16th April 2003.

9

• (1) For Chapter 4 of Part 7 substitute—

(447) (1) This Chapter applies if an associated person receives a benefit by virtue of the ownership of employment-related securities by that person or another associated person. (2) The taxable amount determined under section 448 counts as employment income of the employee for the relevant tax year. (3) The “relevant tax year” is the tax year in which the benefit is received. (4) This section does not apply if the benefit is otherwise chargeable to income tax. (5) This section is subject to section 449 (case outside this Chapter). (448) The taxable amount for the purposes of section 447 (charge on other chargeable benefits) is the amount or market value of the benefit. (449) (1) This Chapter does not apply if— (a) the employment-related securities are shares (or an interest in shares) in a company of a class, (b) a similar benefit is received by the owners of all the company’s shares of the class, and (c) subsection (2) or (3) is satisfied. (2) This subsection is satisfied if, immediately before the receipt of the benefit, the company is employee-controlled by virtue of holdings of shares of the class. (3) This subsection is satisfied if, immediately before the receipt of the benefit, the majority of the company’s shares of the class are not held by or for the benefit of any of the following— (a) employees of the company, (b) persons who are related to an employee of the company, (c) associated companies of the company, (d) employees of any associated company of the company, or (e) persons who are related to an employee of any such associated company. (4) For the purposes of subsection (3) a person is related to an employee if— (a) the person acquired the shares pursuant to a right or opportunity available by reason of the employee’s employment, or (b) the person is connected with a person who so acquired the shares or with the employee and acquired the shares otherwise than by or under a disposal made by way of a bargain at arm’s length from the employee or another person who is related to the employee. (450) (1) In this Chapter— - “interest”, in relation to shares, and - “shares”, - have the meaning indicated in section 420(8). (2) In this Chapter “market value” has the meaning indicated in section 421(1). (3) In this Chapter— - “the employee” (except in section 449), and - “employment-related securities”, - have the meaning indicated in section 421B(8). (4) In this Chapter “associated person” has the meaning indicated in section 421C. (5) In this Chapter— - “associated company”, and - “employee-controlled”, - have the meaning indicated in section 421H.

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• (2) Subject to sub-paragraph (3), sub-paragraph (1) has effect on and after 16th April 2003 (so that it applies on and after that date in relation to employment-related securities irrespective of the date of the acquisition).

• (3) The provisions of Chapter 4 as originally enacted which are mentioned in sub-paragraph (4)—

• (a) continue to apply in relation to shares, and interests in shares, acquired before 16th April 2003, and

• (b) apply in relation to shares, and interests in shares, acquired on or after that date until the day appointed under paragraph 3(2).

In this sub-paragraph “shares” means shares in a company or securities as defined in section 254(1) of the Taxes Act 1988 issued by a company.

• (4) The provisions are—

• section 450(1), (2), (3)(a), (4), (5) and (6)(a), and

• sections 447 to 449, section 451, section 452(1) to (3), section 461(1) and (2), section 462, sections 464 to 466 and sections 468 to 470, so far as relevant for the purposes of those provisions of section 450 (or the other provisions mentioned in this subsection so far as so relevant).

10

• (1) For Chapter 5 of Part 7 substitute—

(471) (1) This Chapter applies to a securities option acquired by a person where the right or opportunity to acquire the securities option is available by reason of an employment of that person or any other person. (2) For the purposes of subsection (1) “employment” includes a former or prospective employment. (3) A right or opportunity to acquire a securities option made available by a person’s employer, or a person connected with a person’s employer, is to be regarded for the purposes of subsection (1) as available by reason of an employment of that person unless— (a) the person by whom the right or opportunity is made available is an individual, and (b) the right or opportunity is made available in the normal course of the domestic, family or personal relationships of that person. (4) A right or opportunity to acquire a securities option available by reason of holding employment-related securities is to be regarded for the purposes of subsection (1) as available by reason of the same employment as that by reason of which the right or opportunity to acquire the employment-related securities was available. (5) In this Chapter— - “the acquisition”, in relation to an employment-related securities option, means the acquisition of the employment-related securities option pursuant to the right or opportunity available by reason of the employment, - “the employment” means the employment by reason of which the right or opportunity to acquire the employment-related securities option is available (“the employee” and “the employer” being construed accordingly), and - “employment-related securities option” means a securities option to which this Chapter applies. (472) (1) For the purposes of this Chapter the following are “associated persons” in relation to an employment-related securities option— (a) the person who acquired the employment-related securities option on the acquisition, (b) (if different) the employee, and (c) any relevant linked person. (2) A person is a relevant linked person if— (a) that person (on the one hand), and (b) either the person who acquired the employment-related securities option on the acquisition or the employee (on the other), are connected or, although not connected, are members of the same household. (3) But a company which would otherwise be a relevant linked person is not if it is— (a) the employer, (b) the person from whom the employment-related securities option was acquired, or (c) the person by whom the right or opportunity to acquire the employment-related securities option was made available. (473) (1) The starting-point is that section 475 contains an exemption from the liability to tax that might otherwise arise under— (a) Chapter 1 of Part 3 (earnings), or (b) Chapter 10 of that Part (taxable benefits: residual liability to charge), when an employment-related securities option is acquired. (2) Liability to tax may arise, when securities are acquired pursuant to the employment-related securities option, under— (a) section 446B (charge on acquisition where market value of securities or interest artificially depressed), (b) Chapter 3C of this Part (acquisition of securities for less than market value), or (c) section 476 (acquisition of securities pursuant to securities option). (3) Liability to tax may also arise by virtue of section 476 when— (a) the employment-related securities option is assigned or released, or (b) a benefit is received in connection with the employment-related securities option. (4) There are special rules relating to share options acquired under— (a) approved SAYE option schemes (see Chapter 7 of this Part), (b) approved CSOP schemes (see Chapter 8 of this Part), or (c) enterprise management incentives (see Chapter 9 of this Part). (474) (1) This Chapter (apart from sections 473 and 483) does not apply in relation to an employment-related securities option if, at the time of the acquisition, the earnings from the employment were not (or would not have been if there had been any) general earnings to which section 15 or 21 applies (earnings for year when employee resident and ordinarily resident in the UK). (2) This Chapter (apart from sections 473 and 483) does not apply in the case of a former employment if it would not apply if the acquisition had taken place in the last tax year in which the employment was held. (3) This Chapter (apart from sections 473 and 483) does not apply in the case of a prospective employment if it would not apply if the acquisition had taken place in the first tax year in which the employment is held. (4) Where the employment-related securities option is a new option (within the meaning of section 483), the references in this section to the acquisition are to the acquisition of the old option (within the meaning of that section). (475) (1) No liability to income tax arises in respect of the acquisition of an employment-related securities option. (2) Subsection (1) is subject to section 526 (approved CSOP schemes: charge where share option granted at a discount). (476) (1) This section applies if a chargeable event occurs in relation to an employment-related securities option. (2) The taxable amount determined under section 478 counts as employment income of the employee for the relevant tax year (but subject to subsection (5)). (3) The “relevant tax year” is the tax year in which the chargeable event occurs. (4) Section 477 explains what are chargeable events for the purposes of this section. (5) If the employee has been divested of the employment-related securities option by operation of law, the person who is the relevant person in relation to the chargeable event (see section 477(7)) is chargeable to tax under Case VI of Schedule D on the amount determined under section 478. (6) This section is subject to— - section 519 (approved SAYE option schemes: no charge in respect of exercise of share option by employee), - section 524 (approved CSOP schemes: no charge in respect of exercise of share option by employee), and - section 530 (enterprise management incentives: no charge on exercise by employee of option to acquire shares at market value). (477) (1) This section applies for the purposes of section 476 (charge on occurrence of chargeable event). (2) Any of the events mentioned in subsection (3) is a “chargeable event” in relation to the employment-related securities option unless it occurs on or after the death of the employee. (3) The events are— (a) the acquisition of securities pursuant to the employment-related securities option by an associated person, (b) the assignment for consideration of the employment-related securities option by an associated person otherwise than to another associated person or the release for consideration of the employment-related securities option by an associated person, or (c) the receipt by an associated person of a benefit in money or money’s worth in connection with the employment-related securities option (other than securities acquired pursuant to the employment-related securities option or consideration for its assignment or release). (4) For the purposes of subsection (3)(a) securities are acquired at the time when a beneficial interest is acquired (and not, if different, the time when the securities are conveyed or transferred). (5) A benefit received on account of any disability (within the meaning of the Disability Discrimination Act 1995) of the employee is to be disregarded for the purposes of subsection (3)(c). (6) A benefit in money or money’s worth received in consideration for or otherwise in connection with— (a) failing or undertaking not to acquire securities pursuant to the employment-related securities option, or (b) granting or undertaking to grant to another person a right to acquire securities which are subject to the employment-related securities option or any interest in them, is to be regarded for the purposes of subsection (3)(c) as received in connection with the employment-related securities option. (7) For the purposes of section 476(5) (charge under Case VI of Schedule D) the relevant person in relation to a chargeable event is— (a) in the case of an event that is a chargeable event by virtue of subsection (3)(a), the person by whom the securities are acquired, and (b) in the case of an event that is a chargeable event by virtue of subsection (3)(b) or (c), the person by whom the consideration or benefit is received. (478) (1) The taxable amount for the purposes of section 476 (charge on occurrence of chargeable event) is— $$AG-DA$where—AG is the amount of any gain realised on the occurrence of the chargeable event, andDA is the total of any deductible amounts.$ (2) Section 479 explains what is the amount of any gain realised on the occurrence of a chargeable event. (3) Section 480 specifies what are deductible amounts. (479) (1) This section applies for the purposes of section 478 (amount of charge on occurrence of chargeable event). (2) The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 477(3)(a) (acquisition of securities) is (subject to subsection (4))— $MV-C$ (3) In subsection (2)— - MV is the market value of the securities that are acquired at the time when they are acquired, and - C is the amount of any consideration given for the securities that are acquired. (4) But the amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 477(3)(a) (acquisition of securities) is calculated— (a) if section 531 (enterprise management incentives: limitation of charge on exercise of option to acquire shares below market value) applies, in accordance with that section, and (b) if section 532 (enterprise management incentives: modified tax consequences following disqualifying events) applies, in accordance with that section. (5) The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 477(3)(b) (assignment or release of option) is the amount of the consideration given for the assignment or release. (6) The amount of the gain realised on the occurrence of an event that is a chargeable event by virtue of section 477(3)(c) (receipt of benefit in connection with option) is the amount or market value of the benefit. (7) But if— (a) the consideration mentioned in subsection (5), or (b) the benefit mentioned in subsection (6), consists (in whole or in part) in the provision of securities or an interest in securities the market value of which has been reduced by at least 10% as a result of things done otherwise than for genuine commercial purposes within the period of 7 years ending with the receipt of the consideration or benefit, its market value is to be taken to be what it would be but for the reduction. (8) The following are among the things that are, for the purposes of subsection (7), done otherwise than for genuine commercial purposes— (a) anything done as part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax or national insurance contributions, and (b) any transaction between companies which are members of the same group on terms which are not such as might be expected to be agreed between persons acting at arm’s length (other than a payment for group relief). (9) In subsection (8)(b)— (a) “group” means a company and its 51% subsidiaries, and (b) “group relief” has the same meaning as in section 402(6) of ICTA. (480) (1) This section applies for the purposes of section 478 (amount of charge on occurrence of chargeable event). (2) The amount of— (a) any consideration given for the acquisition of the employment-related securities option, and (b) the amount of any expenses incurred in connection with the acquisition of securities, assignment, release or receipt which constitutes the chargeable event, is a deductible amount. (3) Where in consequence of— (a) the acquisition of the employment-related securities option, (b) the acquisition of securities pursuant to the employment-related securities option, or (c) a transaction of which the acquisition of the employment-related securities option or the acquisition of securities pursuant to the employment-related securities option forms part, there is a reduction in the market value of any employment-related securities to which an associated person is beneficially entitled, the amount of the reduction is to be treated for the purposes of subsection (2) as consideration (or additional consideration) given for the acquisition of the employment-related securities option. (4) If an amount counts as employment income of the employee under section 526 (approved CSOP schemes: charge where option granted at a discount) in respect of the employment-related securities option, so much of that amount as is attributable to the shares in question is a deductible amount. (5) The following are also deductible amounts— (a) any amount that constituted earnings from the employment under Chapter 1 of Part 3 (earnings) in respect of the acquisition of the employment-related securities option, (b) any amount that was treated as earnings from the employment under Chapter 10 of that Part (taxable benefits: residual liability to charge) in respect of the acquisition of the employment-related securities option, and (c) the amount of any gain by a previous holder on an assignment of the employment-related securities option which would have been a deductible cost by virtue of subsection (2)(c) of section 479 (as originally enacted) on an exercise of the option at a time when that section was in force. (6) If there has been a previous chargeable event in relation to the employment-related securities option (or if section 476 or 477 as originally enacted applied to the option by virtue of an earlier event), so much of any deductible amount as was deducted in calculating the taxable amount on the occasion of that event is to be regarded as not being a deductible amount. (7) Sections 481 and 482 (deductible amounts in respect of secondary Class 1 contributions or special contribution met by the employee) specify further deductible amounts. (481) (1) The amount calculated under subsection (2) is a deductible amount if— (a) an agreement having effect under paragraph 3A of Schedule 1 to the Contributions and Benefits Act has been entered into allowing the secondary contributor to recover from the employee the whole or part of any secondary Class 1 contributions in respect of the gain, or (b) an election having effect under paragraph 3B of Schedule 1 to that Act is in force which has the effect of transferring to the employee the whole or part of the liability to pay secondary Class 1 contributions in respect of the gain. (2) The amount is the sum of— (a) any amount that under the agreement referred to in subsection (1)(a) is recovered in respect of the gain by the secondary contributor before 5th June in the tax year following that in which the gain is realised, and (b) the amount of any liability in respect of the gain that, by virtue of the election referred to in subsection (1)(b), has become the employee’s liability. (3) If notice of withdrawal of approval of the election is given, the amount of any liability in respect of the gain for the purposes of subsection (2)(b) is limited to the amount of the liability met before 5th June in the tax year following that in which the gain is realised. (4) Subsection (1) does not apply in respect of a liability to pay Class 1 contributions which is prevented from arising by virtue of section 2(1)(a) of the Social Security Contributions (Share Options) Act 2001 (liability to pay Class 1 contributions in respect of gains replaced by liability to pay special contribution). (5) In this section— - “approval”, in relation to an election, means approval by the Board of Inland Revenue under paragraph 3B of Schedule 1 to the Contributions and Benefits Act, and - “secondary contributor” has the same meaning as in that Act (see section 7). (482) (1) The amount of the liability referred to in subsection (4) is a deductible amount if conditions A to D are met. (2) Condition A is that a notice in respect the employment-related securities option was given to the Board of Inland Revenue in accordance with section 1 of the Social Security Contributions (Share Options) Act 2001 before 11th August 2001. (3) Condition B is that the person, or one of the persons, who gave that notice is a person who (apart from that Act) was liable, or would have become liable, by virtue of an election under paragraph 3B of Schedule 1 to the Contributions and Benefits Act, to pay secondary Class 1 contributions in respect of an event which is a chargeable event for the purposes of section 476. (4) Condition C is that that person became liable to pay a special contribution under section 2 of the Social Security Contributions (Share Options) Act 2001 in respect of the employment-related securities option. (5) Condition D is that that person met that liability before 11th August 2001 or before the end of such further period as the Board of Inland Revenue directed under section 2(5) of that Act. (483) (1) This section applies if— (a) the employment-related securities option (the “old option”) is assigned or released, and (b) the whole or part of the consideration for the assignment or release consists of or includes another securities option (the “new option”). (2) For the purposes of section 479(5) (amount of gain realised by assigning or releasing option) the new option is not to be treated as consideration given for the assignment or release of the old option. (3) This Chapter applies to the new option as it applies to the old option. (4) For the purposes of section 480(2) (consideration for acquisition of option) the amount of the consideration given for the acquisition of the new option is to be treated as being the sum of— (a) the amount by which the amount of the consideration given for the acquisition of the old option exceeds the amount of any consideration given for the assignment or release of the old option, apart from the new option, and (b) any valuable consideration given for the acquisition of the new option, apart from the old option. (5) Two or more transactions are to be treated for the purposes of subsection (1) as a single transaction by which one option is assigned for a consideration which consists of or includes another option if— (a) the transactions result in— (i) a person ceasing to hold an option, and (ii) that person or a connected person coming to hold another option, and (b) one or more of the transactions is effected under arrangements to which two or more persons holding options, in respect of which there may be liability to tax under this Chapter, are parties. (6) Subsection (5) applies regardless of the order in which the assignments and the acquisition occur. (484) (1) In this Chapter— - “securities”, and - “securities option”, - have the meaning indicated in section 420. (2) In this Chapter “market value” has the meaning indicated in section 421(1). (3) For the purposes of this Chapter sections 421(2) and 421A apply for determining the amount of consideration given for anything. (4) In this Chapter “employment-related securities” has the same meaning as in Chapter 1 of this Part (see section 421B(8)). (5) In this Chapter— - “the acquisition”, - “the employee”, - “the employer”, - “the employment”, and - “employment-related securities option”, - have the meaning indicated in section 471(5). (6) In this Chapter “associated person” has the meaning indicated in section 472. (7) In this Chapter— - “secondary Class 1 contributions” has the same meaning as in the Contributions and Benefits Act (see section 1 of that Act), and - “the Contributions and Benefits Act” means SSCBA 1992 or SSCB(NI)A 1992.

.

• (2) Sub-paragraph (1) has effect—

• (a) on and after 16th April 2003 in relation to employment-related securities options which are not share options, and

• (b) on and after the day appointed under paragraph 3(2) in relation to employment-related securities options which are share options;

and for this purpose “share options” means rights to acquire shares in a company or securities as defined in section 254(1) of the Taxes Act 1988 issued by a company.

PAYE

11

• (1) Section 509 (modification of section 696 where charge on shares ceasing to be subject to plan) is amended as follows.

• (2) In subsection (4), for “subsection (5)” substitute “ subsections (5) and (6) ”.

• (3) After subsection (5) insert—

(6) In determining for the purposes of this section (and of section 696 in its application in accordance with this section) whether the shares are readily convertible assets, section 702 has effect with the omission of subsections (5A) to (5D).

.

12

• (1) For sections 698 and 699 (PAYE: conditional interests in shares and convertible shares) substitute—

(698) (1) This section applies where by reason of the operation of— (a) section 426 (chargeable events in relation to restricted securities and restricted interests in securities), (b) section 438 (chargeable events in relation to convertible securities and interests in convertible securities), (c) section 446B (charge on acquisition where market value of securities or interest artificially depressed), (d) section 446L (charge where market value of securities artificially enhanced), (e) section 446U (securities or interest acquired for less than market value: charge on discharge of notional loan), (f) section 446Y (charge where securities or interest disposed of for more than market value), or (g) section 447 (chargeable benefit from securities or interest), in relation to employment-related securities, an amount counts as employment income of an employee. (2) Sections 684 to 691 and 696 have effect as if— (a) the employee were provided with PAYE income in the form of the employment-related securities by the employer on the relevant date, and (b) the reference in subsection (2) of section 696 to the amount of income likely to be PAYE income in respect of the provision of the asset were to the amount likely to count as employment income. (3) In a case in which the employment-related securities are not readily convertible assets, if— (a) the amount counts as income by virtue of section 427(3)(c), 439(3)(b), (c) or (d), 446Y or 447, and (b) the whole or any part of the consideration or benefit concerned takes the form of a payment or consists in the provision of an asset, subsection (4) applies. (4) Sections 684 to 691 and 696 have effect — (a) to the extent that the consideration or benefit takes the form of a payment, as if it were a payment of PAYE income of the employee by the employer, and (b) to the extent that the consideration or benefit consists in the provision of an asset, as if the provision of the asset were the provision of PAYE income in the form of the asset by the employer on the relevant date. (5) Section 696 as applied by subsection (4)(b) has effect as if the reference in subsection (2) of that section to the amount of income likely to be PAYE income were to the same proportion of the amount likely to count as employment income as so much of the consideration or benefit as consists in the provision of the asset bears to the whole of the consideration or benefit. (6) In this section “the relevant date” means— (a) in relation to an amount counting as employment income under section 426 or 438, the date on which the chargeable event in question occurs, (b) in relation to an amount counting as employment income under section 446B, the date of the acquisition of the securities or interest in securities in question, (c) in relation to an amount counting as employment income under section 446L, the valuation date in question, (d) in relation to an amount counting as employment income under section 446U, the date on which the notional loan in question is treated as discharged, (e) in relation to an amount counting as employment income under section 446Y, the date of the disposal of the securities or interest in securities in question, and (f) in relation to an amount counting as employment income under section 447, the date on which the benefit in question is received. (7) In this section “employment-related securities” has the same meaning as in Chapters 1 to 4 of Part 7.

.

• (2) Sub-paragraph (1) has effect on and after the day appointed under paragraph 3(2) but does not affect the operation of section 698 as originally enacted in relation to any securities, or interests in securities, acquired before 16th April 2003.

13

• (1) For section 700 (PAYE: gains from share options) substitute—

(700) (1) This section applies where by reason of the operation of section 476 (acquisition of securities pursuant to securities option etc) in relation to an employment-related securities option an amount counts as employment income of an employee. (2) In a case where the amount counts as employment income by virtue of section 477(3)(a) (acquisition of securities), sections 684 to 691 and 696 have effect as if— (a) the employee were provided with PAYE income in the form of the securities by the employer on the relevant date, and (b) the reference in subsection (2) of section 696 to the amount of income likely to be PAYE income in respect of the provision of the asset were to the amount likely to count as employment income. (3) In a case where the amount counts as income by virtue of section 477(3)(b) or (c) (assignment or release for consideration or receipt of benefit), sections 684 to 691 and 696 have effect — (a) to the extent that the consideration or benefit takes the form of a payment, as if it were a payment of PAYE income of the employee by the employer, and (b) to the extent that the consideration or benefit consists in the provision of an asset, as if the provision of the asset were the provision of PAYE income in the form of the asset by the employer on the relevant date. (4) Section 696 as applied by subsection (3)(b) has effect as if the reference in subsection (2) of that section to the amount of income likely to be PAYE income were to the same proportion of the amount likely to count as employment income as so much of the consideration or benefit as consists in the provision of the asset bears to the whole of the consideration or benefit. (5) In this section “the relevant date” means the date on which the chargeable event in question occurs. (6) In this section— - “employment-related securities option”, and - “securities”, - have the same meaning as in Chapter 5 of Part 7.

.

• (2) Sub-paragraph (1) has effect on and after the day appointed under paragraph 3(2).

14

• (1) In section 701(2)(b) (“asset” not to include vouchers or credit-tokens), omit “subject to section 700(6),”.

• (2) Sub-paragraph (1) has effect on and after the day appointed under paragraph 3(2).

15

• (1) Section 702 (meaning of “readily convertible asset”) is amended as follows.

• (2) After subsection (5) insert—

(5A) An asset consisting in securities which is not a readily convertible asset apart from this subsection is to be treated as a readily convertible asset unless the securities are shares that are corporation tax deductible. (5B) For the purposes of subsection (5A) shares are corporation tax deductible if they are acquired by a person— (a) by reason of that, or another person's, employment with a company, or (b) pursuant to an option granted by reason of that, or another person's, employment with a company, and the company is entitled to corporation tax relief in respect of the shares under Schedule 23 to the Finance Act 2003 (corporation tax relief for employee share acquisition). (5C) If a person acquires additional shares by virtue of holding shares that are corporation tax deductible, the additional shares are to be treated for the purposes of subsection (5A) as if they were corporation tax deductible. (5D) If— (a) on a person ceasing to be beneficially entitled to shares that are corporation tax deductible, that person acquires other shares, and (b) the circumstances are such that the shares to which the person ceases to be beneficially entitled constitute “original shares” and the other shares constitute a “new holding” for the purposes of sections 127 to 130 of TCGA 1992, the shares that constitute the new holding are to be treated for the purposes of subsection (5A) as if they were corporation tax deductible.

.

• (3) In subsection (6), after the definition of “money debt” insert—

“securities” has the same meaning as in Chapters 1 to 5 of Part 7 (employment income from securities) (see section 420), “shares” includes— (a) an interest in shares, and (b) stock or an interest in stock,

.

• (4) For the purposes of section 702, shares are to be treated as corporation tax deductible during an accounting period which began before 1st January 2003 if they would have been corporation tax deductible had the accounting period begun on or after that date.

Consequential amendments

16

• (1) In section 3(1) (structure of employment income Parts), in the entry relating to Part 7, for “share-related income and exemptions” substitute “ income and exemptions relating to securities and securities options acquired in connection with an employment ”.

• (2) Sub-paragraph (1) has effect on and after 16th April 2003.

17

• (1) In section 7(6)(b) (employment income), for “(share-related income and exemptions)” substitute “ (income and exemptions relating to securities and securities options) ”.

• (2) Sub-paragraph (1) has effect on and after 16th April 2003.

18

• (1) In section 19(2) (year in which earnings treated as received), omit the entries relating to Chapters 8 and 9 of Part 3.

• (2) Sub-paragraph (1) has effect—

• (a) so far as relating to Chapter 8 of Part 3, in accordance with the provision made for the repeal of that Chapter, and

• (b) so far as relating to Chapter 9 of Part 3, in accordance with the provision made for the repeal of that Chapter.

19

• (1) In section 32(2) (receipt of non-money earnings), omit the entries relating to Chapters 8 and 9 of Part 3.

• (2) Sub-paragraph (1) has effect—

• (a) so far as relating to Chapter 8 of Part 3, in accordance with the provision made for the repeal of that Chapter, and

• (b) so far as relating to Chapter 9 of Part 3, in accordance with the provision made for the repeal of that Chapter.

20

• (1) In section 63(1) (the benefits code), omit the entries relating to Chapters 8 and 9 of Part 3.

• (2) Sub-paragraph (1) has effect—

• (a) so far as relating to Chapter 8 of Part 3, in accordance with the provision made for the repeal of that Chapter, and

• (b) so far as relating to Chapter 9 of Part 3, in accordance with the provision made for the repeal of that Chapter.

21

• (1) In section 64 (relationship between earnings and benefits code), omit subsections (5) and (6).

• (2) Sub-paragraph (1) has effect in accordance with the provision made for the repeal of Chapter 8 of Part 3.

22

• (1) Omit Chapter 8 of Part 3.

• (2) Sub-paragraph (1) has effect in relation to shares, and interests in shares, acquired on or after 16th April 2003.

23

• (1) Omit Chapter 9 of Part 3.

• (2) Sub-paragraph (1) has effect in relation to shares, and interests in shares, disposed of on or after 16th April 2003.

24

• (1) Section 216 (provisions not applicable to lower-paid employments) is amended as follows.

• (2) In subsection (4), omit the entries relating to Chapters 8 and 9 of Part 3.

• (3) In subsection (6), omit the entries relating to section 195(3) and section 199(4).

• (4) Sub-paragraphs (1) to (3) have effect—

• (a) so far as relating to Chapter 8 of Part 3, in accordance with the provision made for the repeal of that Chapter, and

• (b) so far as relating to Chapter 9 of Part 3, in accordance with the provision made for the repeal of that Chapter.

25

• (1) Section 227(4) (employment income: exemptions) is amended as follows.

• (2) For paragraphs (a) and (b) substitute—

(a) section 425 (restricted securities: no charge in respect of acquisition in certain circumstances), (b) section 475 (no charge in respect of acquisition of securities option),

.

• (3) Omit paragraphs (d), (f) and (h).

• (4) This paragraph has effect—

• (a) so far as relating to section 425, in accordance with the provision made for the substitution of Chapter 2 of Part 7, and

• (b) otherwise, in accordance with the provision made for the substitution of Chapter 5 of Part 7.

26

• (1) Omit section 491 (no charge under Chapter 8 of Part 3 in respect of acquisition of approved share incentive plan shares).

• (2) Sub-paragraph (1) has effect in accordance with the provision made for the repeal of Chapter 8 of Part 3.

27

• (1) Omit section 494 (no charge on removal of restrictions applying to approved share incentive plan shares).

• (2) Sub-paragraph (1) has effect—

• (a) so far as relating to section 427, in accordance with the provision made for the substitution of Chapter 2 of Part 7, and

• (b) so far as relating to section 449, in accordance with the provision made for the substitution of Chapter 4 of Part 7.

28

• (1) Omit section 495 (approved share incentive plan shares: value of shares in dependent subsidiary).

• (2) Sub-paragraph (1) has effect on 16th April 2003.

29

• (1) Omit section 518 (no charge in respect of acquisition of approved SAYE share scheme option).

• (2) Sub-paragraph (1) has effect on the day appointed under paragraph 3(2).

30

• (1) In section 519 (no charge in respect of exercise of approved SAYE share scheme option), omit subsection (4).

• (2) Sub-paragraph (1) has effect on the day appointed under paragraph 3(2).

31

• (1) Omit section 520 (approved SAYE option schemes: no charge in respect of post-acquisition benefits).

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

32

• (1) Omit section 523 (no charge in respect of acquisition of approved CSOP scheme option).

• (2) Sub-paragraph (1) has effect on the day appointed under paragraph 3(2).

33

• (1) In section 524 (no charge in respect of exercise of approved CSOP scheme option), omit subsection (4).

• (2) Sub-paragraph (1) has effect on the day appointed under paragraph 3(2).

34

• (1) Omit section 525 (approved CSOP schemes: no charge in respect of post-acquisition benefits).

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

35

• (1) In section 526(4) (charge where approved CSOP scheme option granted at a discount: deductions of charge from amount chargeable under other provisions), for the words from the beginning to “deductions” substitute “ Section 480(4) (gain realised on acquisition of securities pursuant to option etc) provides for a deduction ”.

• (2) Sub-paragraph (1) has effect—

• (a) so far as relating to section 194, in accordance with the provision made for the repeal of Chapter 8 of Part 3, and

• (b) otherwise, on and after the day appointed under paragraph 3(2).

36

• (1) Omit section 528 (enterprise management incentives: no charge in respect of acquisition of qualifying option).

• (2) Sub-paragraph (1) has effect on the day appointed under paragraph 3(2).

37