Office of Public Sector Information
PART IV continued CHAPTER I continued
(2) After paragraph 13 (determination of distributable pool by method A) there shall be inserted—
“13A (1) Where a scheme includes provision by virtue of paragraph 13(4) or (5) above the scheme must be so framed that in arriving at the profits for the base year or for the previous profit period any profit-related pay and any secondary Class I contributions in respect of it are accorded the same accountancy treatment as is accorded to any profit-related pay and any secondary Class I contributions in respect of it in arriving at the profits in the profit period.
(2) In sub-paragraph (1) above—
(a) “profit-related pay” means profit-related pay under whatever scheme;
(b) “secondary Class I contributions” means secondary Class I contributions under Part I of the [1975 c. 14.] Social Security Act 1975 or Part I of the [1975 c. 15.] Social Security (Northern Ireland) Act 1975 or Part I of the [1992 c. 4.] Social Security Contributions and Benefits Act 1992 or Part I of the [1992 c. 7.] Social Security Contributions and Benefits (Northern Ireland) Act 1992.
(3) Sub-paragraph (1) above shall apply notwithstanding anything in paragraph 19 below.
(4) Where a scheme includes provision by virtue of paragraph 13(4) above the scheme must also include provision that if the pay for the profit period is less than the pay for the base year or for the previous profit period (as the case may be) the percentage to be applied for the purposes of the provision included by virtue of paragraph 13(4) above shall be the increased percentage (instead of any other percentage).
(5) The increased percentage must be one arrived at by—
(a) taking the percentage that would be applied for the purposes of the provision included by virtue of paragraph 13(4) above apart from the provision included by virtue of sub-paragraph (4) above, and
(b) adding the percentage found by expressing the difference in pay as a percentage of the profits for the base year or for the previous profit period (as the case may be).
(6) For the purposes of this paragraph—
(a) the pay for the profit period or for the previous profit period or for the base year is the pay paid to employees in respect of employment in the period or year concerned in the employment unit concerned;
(b) the difference in pay is the difference between the pay for the profit period and the pay for the previous profit period or for the base year (as the case may be);
and any profit-related pay shall be ignored in applying paragraph (a) above.”
(3) After paragraph 14 (determination of distributable pool by method B) there shall be inserted—
“14A (1) Where a scheme includes provision to give effect to paragraph 14(3) above or provision by virtue of paragraph 14(4) above the scheme must be so framed that in arriving at the profits in the preceding period of 12 months any profit-related pay and any secondary Class I contributions in respect of it are accorded the same accountancy treatment as is accorded to any profit-related pay and any secondary Class I contributions in respect of it in arriving at the profits in the profit period.
(2) Where a scheme includes provision by virtue of paragraph 14(5) above the scheme must be so framed that in arriving at the profits in the relevant period of 12 months any profit-related pay and any secondary Class I contributions in respect of it are accorded the same accountancy treatment as is accorded to any profit-related pay and any secondary Class I contributions in respect of it in arriving at the profits in the profit period; and for this purpose the relevant period of 12 months is the period of 12 months immediately preceding the first or only profit period to which the scheme relates.
(3) In sub-paragraphs (1) and (2) above—
(a) “profit-related pay” means profit-related pay under whatever scheme;
(b) “secondary Class I contributions” means secondary Class I contributions under Part I of the [1992 c. 4.] Social Security Contributions and Benefits Act 1992 or Part I of the [1992 c. 7.] Social Security Contributions and Benefits (Northern Ireland) Act 1992.
(4) Sub-paragraphs (1) and (2) above shall apply notwithstanding anything in paragraph 19 below.
(5) Where a scheme includes provision by virtue of paragraph 14(4) above the scheme must also include provision that if the pay for the profit period is less than the pay for the preceding period of 12 months the percentage to be applied for the purposes of the provision included by virtue of paragraph 14(4) above shall be the increased percentage (instead of any other percentage).
(6) The increased percentage must be one arrived at by—
(a) taking the percentage that would be applied for the purposes of the provision included by virtue of paragraph 14(4) above apart from the provision included by virtue of sub-paragraph (5) above, and
(b) adding the percentage found by expressing the difference in pay as a percentage of the profits in the preceding period of 12 months.
(7) For the purposes of this paragraph—
(a) the pay for the profit period or for the preceding period of 12 months is the pay paid to employees in respect of employment in the period concerned in the employment unit concerned;
(b) the difference in pay is the difference between the pay for the profit period and the pay for the preceding period of 12 months;
and any profit-related pay shall be ignored in applying paragraph (a) above.”
(4) This section shall have effect in relation to any scheme not registered before 1st December 1993.
(1) Schedule 8 to the Taxes Act 1988 shall also be amended by inserting the following paragraphs after paragraph 22 (which, with paragraph 21, applies to schemes relating to parts of undertakings)—
“23 (1) In a case where—
(a) paragraph 21 above applies to a scheme, and
(b) method A (specified in paragraph 13 above) is employed for the purposes of the scheme,
the scheme must contain provisions which comply with this paragraph and which apply as regards each profit period to which the scheme relates.
(2) The scheme must ensure that no payments are made under it by reference to a given profit period if the percentage mentioned in paragraph 13(1) above exceeds the permitted percentage.
(3) The scheme must ensure that the permitted percentage is a percentage found by—
(a) taking the pay paid to employees in respect of employment in the relevant year in the employment unit to which the other scheme mentioned in paragraph 22(1)(a) above relates or (if there are two or more other schemes) the aggregate of the pay paid to employees in respect of employment in the relevant year in the employment units to which the other schemes relate;
(b) taking the profit-related pay paid to employees in respect of employment in the relevant year in the employment unit to which the other scheme mentioned in paragraph 22(1)(a) above relates or (if there are two or more other schemes) the aggregate of the profit-related pay paid to employees in respect of employment in the relevant year in the employment units to which the other schemes relate;
(c) taking the pay paid to employees in respect of employment in the relevant year in the employment unit to which the scheme mentioned in paragraph 21 above relates;
(d) taking the fraction whose denominator is equal to the number of whole pounds found under paragraph (a) above and whose numerator is equal to the number of whole pounds found under paragraph (b) above;
(e) multiplying the amount found under paragraph (c) above by the fraction found under paragraph (d) above;
(f) taking the profits for the relevant year of the undertaking mentioned in paragraph 21 above;
(g) expressing the amount found under paragraph (e) above as a percentage of the amount found under paragraph (f) above;
(h) taking the percentage found under paragraph (g) above as the permitted percentage.
(4) The scheme must ensure that the relevant year is a period of 12 months identified in the scheme and ending at a time within the period of two years immediately preceding the given profit period.
24 (1) In a case where—
(a) paragraph 21 above applies to a scheme, and
(b) method B (specified in paragraph 14 above) is employed for the purposes of the scheme,
the scheme must contain provisions which comply with this paragraph and which apply as regards each profit period to which the scheme relates.
(2) The scheme must ensure that no payments are made under it by reference to the first or only profit period to which the scheme relates if the notional pool mentioned in paragraph 14(1)(a) above exceeds the permitted limit.
(3) The scheme must also ensure that no payments are made under it by reference to a given profit period other than the first if the distributable pool for the previous profit period (mentioned in paragraph 14(1)(b) above) exceeds the permitted limit.
(4) The scheme must ensure that the permitted limit is a limit found by—
(a) taking the pay paid to employees in respect of employment in the relevant year in the employment unit to which the other scheme mentioned in paragraph 22(1)(a) above relates or (if there are two or more other schemes) the aggregate of the pay paid to employees in respect of employment in the relevant year in the employment units to which the other schemes relate;
(b) taking the profit-related pay paid to employees in respect of employment in the relevant year in the employment unit to which the other scheme mentioned in paragraph 22(1)(a) above relates or (if there are two or more other schemes) the aggregate of the profit-related pay paid to employees in respect of employment in the relevant year in the employment units to which the other schemes relate;
(c) taking the pay paid to employees in respect of employment in the relevant year in the employment unit to which the scheme mentioned in paragraph 21 above relates;
(d) taking the fraction whose denominator is equal to the number of whole pounds found under paragraph (a) above and whose numerator is equal to the number of whole pounds found under paragraph (b) above;
(e) multiplying the amount found under paragraph (c) above by the fraction found under paragraph (d) above;
(f) taking the amount found under paragraph (e) above as the permitted limit.
(5) The scheme must ensure that the relevant year is—
(a) a period of 12 months identified in the scheme and ending at a time within the period of two years immediately preceding the first or only profit period to which the scheme relates (in the case of provisions contained in the scheme by virtue of sub-paragraph (2) above);
(b) a period of 12 months identified in the scheme and ending at a time within the period of two years immediately preceding the given profit period (in the case of provisions contained in the scheme by virtue of sub-paragraph (3) above).”
(2) This section shall have effect in relation to any scheme not registered before 1st December 1993.
(1) Schedule 10 to the Taxes Act 1988 (profit sharing schemes) shall be amended as follows.
(2) In paragraph 3 (the appropriate percentage for purposes of tax charge) the words from “In this paragraph” to the end of the paragraph shall be omitted.
(3) The following paragraph shall be inserted after paragraph 3—
“3A (1) In paragraph 3 above the reference to the relevant age shall be construed as follows.
(2) Where the scheme is approved before 25th July 1991 and the event occurs before 30th November 1993, the relevant age is pensionable age.
(3) Where—
(a) the scheme is approved before 25th July 1991,
(b) the event occurs on or after 30th November 1993,
(c) the scheme defines the period of retention by reference to the age of 60 for both men and women, and
(d) the reference to that age is incorporated in the definition by virtue of an alteration approved by the Board under paragraph 4 of Schedule 9 before the event occurs,
the relevant age is 60.
(4) Where—
(a) the scheme is approved before 25th July 1991,
(b) the event occurs on or after 30th November 1993, and
(c) sub-paragraph (3) above does not apply,
the relevant age is pensionable age.
(5) Where the scheme is approved on or after 25th July 1991, the relevant age is the specified age.”
(1) Schedule 10 to the Taxes Act 1988 (profit sharing schemes) shall be amended as mentioned in subsections (2) to (4) below.
(2) In paragraph 1 (limitations on contractual obligations of participants) in sub-paragraph (1) the following paragraph shall be inserted after paragraph (c)—
“(cc) directing the trustees to accept an offer of a qualifying corporate bond, whether alone or with cash or other assets or both, for his shares if the offer forms part of a general offer which is made as mentioned in paragraph (c) above; or”.
(3) In paragraph 1 the following sub-paragraph shall be inserted after sub-paragraph (3)—
“(4) In sub-paragraph (1)(cc) above “qualifying corporate bond” shall be construed in accordance with section 117 of the 1992 Act.”
(4) The following paragraph shall be inserted after paragraph 5 (company reconstructions)—
“5A (1) Paragraph 5(2) to (6) above apply where there occurs in relation to any of a participant’s shares (“the original holding”) a relevant transaction which would result in a new holding being equated with the original holding for the purposes of capital gains tax, were it not for the fact that what would be the new holding consists of or includes a qualifying corporate bond; and “relevant transaction” here means a transaction mentioned in Chapter II of Part IV of the 1992 Act.
(2) In paragraph 5(2) to (6) above as applied by this paragraph—
(a) references to a company reconstruction are to the transaction referred to in sub-paragraph (1) above;
(b) references to the new holding are to what would be the new holding were it not for the fact mentioned in sub-paragraph (1) above;
(c) references to the original holding shall be construed in accordance with sub-paragraph (1) above (and not paragraph 5(1));
(d) references to shares, in the context of the new holding, include securities and rights of any description which form part of the new holding.
(3) In sub-paragraph (1) above “qualifying corporate bond” shall be construed in accordance with section 117 of the 1992 Act.”
(5) In paragraph 32(1) of Schedule 9 to the Taxes Act 1988 (requirements applicable to profit sharing schemes) for “or (c)” there shall be substituted “, (c) or (cc)”.
(6) In paragraph 33(a) of Schedule 9 to the Taxes Act 1988 (which provides that the trust instrument must contain certain provision by reference to new shares within the meaning of paragraph 5 of Schedule 10) the reference to paragraph 5 of Schedule 10 shall be construed as including a reference to that paragraph as applied by paragraph 5A.
(7) Subsections (2) and (3) above shall have effect where a direction is made on or after the day on which this Act is passed.
(8) Subsection (4) above shall have effect where what would be the new holding comes into being on or after the day on which this Act is passed; but this is subject to subsection (13) below.
(9) Subsection (5) above shall have effect in relation to any scheme not approved before the day on which this Act is passed.
(10) In a case where—
(a) a scheme is approved before the day on which this Act is passed, and
(b) on or after that day the trust instrument is altered in such a way that paragraph 32(1) of Schedule 9 to the Taxes Act 1988 would be fulfilled if subsection (5) above applied in relation to the scheme,
subsection (5) above shall apply in relation to the scheme with effect from the time the alteration is made.
(11) Subsection (6) above shall have effect in relation to any scheme not approved before the day on which this Act is passed.
(12) In a case where—
(a) a scheme is approved before the day on which this Act is passed, and
(b) on or after that day the trust instrument is altered in such a way that paragraph 33(a) of Schedule 9 to the Taxes Act 1988 would be fulfilled if subsection (6) above applied in relation to the scheme,
subsection (6) above shall apply in relation to the scheme with effect from the time the alteration is made.
(13) In a case where—
(a) a scheme is approved before the day on which this Act is passed,
(b) subsection (4) above would apply in relation to the scheme by virtue of subsection (8) above and apart from this subsection, and
(c) the trust instrument is not altered as mentioned in subsection (12)(b) above before what would be the new holding comes into being,
subsection (4) above shall not apply in relation to the scheme.
(14) Subsection (6) above shall not imply a contrary intention for the purposes of section 20(2) of the [1978 c. 30.] Interpretation Act 1978 in its application to other references to paragraph 5 of Schedule 10 to the Taxes Act 1988.
Schedule 13 to this Act (which contains provisions about employee share ownership trusts) shall have effect.
(1) The following section shall be inserted after section 611 of the Taxes Act 1988—
(1) In this Chapter references to the administrator, in relation to a retirement benefits scheme, are to the person who is, or the persons who are, for the time being the administrator of the scheme by virtue of the following provisions of this section.
(2) Subject to subsection (7) below, where—
(a) the scheme is a trust scheme, and
(b) at any time the trustee, or any of the trustees, is or are resident in the United Kingdom,
the administrator of the scheme at that time shall be the trustee or trustees of the scheme.
(3) Subject to subsection (7) below, where—
(a) the scheme is a non-trust scheme, and
(b) at any time the scheme sponsor, or any of the scheme sponsors, is or are resident in the United Kingdom,
the administrator of the scheme at that time shall be the scheme sponsor or scheme sponsors.
(4) At any time when the trustee of a trust scheme is not resident in the United Kingdom or (if there is more than one trustee) none of the trustees is so resident, the trustee or trustees shall ensure that there is a person, or there are persons—
(a) resident in the United Kingdom, and
(b) appointed by the trustee or trustees to be responsible for the discharge of all duties relating to the scheme which are imposed on the administrator under this Chapter.
(5) At any time when the scheme sponsor of a non-trust scheme is not resident in the United Kingdom or (if there is more than one scheme sponsor) none of the scheme sponsors is so resident, the scheme sponsor or scheme sponsors shall ensure that there is a person, or there are persons—
(a) resident in the United Kingdom, and
(b) appointed by the scheme sponsor or scheme sponsors to be responsible for the discharge of all duties relating to the scheme which are imposed on the administrator under this Chapter.
(6) Without prejudice to subsections (4) and (5) above—
(a) the trustee or trustees of a trust scheme, or
(b) the scheme sponsor or scheme sponsors of a non-trust scheme,
may at any time appoint a person who is, or persons who are, resident in the United Kingdom to be responsible for the discharge of all duties relating to the scheme which are imposed on the administrator under this Chapter.
(7) Where at any time there is or are a person or persons—
(a) for the time being appointed under subsection (4), (5) or (6) above as regards a scheme, and
(b) resident in the United Kingdom,
the administrator of the scheme at that time shall be that person or those persons (and no other person).
(8) Any appointment under subsection (4), (5) or (6) above—
(a) must be in writing, and
(b) if made after the time when the scheme is established, shall constitute an alteration of the scheme for the purposes of section 591B(2).
(9) In this section—
(a) references to a trust scheme are to a retirement benefits scheme established under a trust or trusts;
(b) references to the trustee or trustees, in relation to a trust scheme and to a particular time, are to the person who is the trustee, or the persons who are the trustees, of the scheme at that time;
(c) references to a non-trust scheme are to a retirement benefits scheme not established under a trust or trusts, and
(d) references to the scheme sponsor or scheme sponsors, in relation to a retirement benefits scheme and to a particular time, are references to any person who established the scheme and is in existence at that time or, if more than one, all such persons.”
(2) In consequence of subsection (1) above, in section 612(1) of the Taxes Act 1988 (interpretation of Chapter I of Part XIV) the definition of “administrator” shall cease to have effect.
(3) This section—
(a) so far as it relates to section 591B(1) of the Taxes Act 1988, shall apply in relation to notices given on or after the day on which this Act is passed;
(b) so far as it relates to section 593(3) of that Act, shall apply in relation to contributions paid on or after that day;
(c) so far as it relates to section 596A(3) of that Act, shall apply in relation to benefits received on or after that day;
(d) so far as it relates to sections 598(2) and (4), 599(3) and 599A(2) of that Act, shall apply in relation to payments made on or after that day;
(e) so far as it relates to section 602(1) and (2) of that Act and regulations made under section 602, shall apply in relation to amounts becoming recoverable on or after that day;
(f) so far as it relates to section 604(1) of that Act, shall apply in relation to applications made on or after that day;
(g) so far as it relates to section 605(1) and (4) of that Act, shall apply in relation to notices given on or after that day.
(1) The following section shall be substituted for section 606 of the Taxes Act 1988—
(1) This section applies in relation to a retirement benefits scheme if at any time—
(a) there is no administrator of the scheme, or
(b) the person who is, or all of the persons who are, the administrator of the scheme cannot be traced, or
(c) the person who is, or all of the persons who are, the administrator of the scheme is or are in default for the purposes of this section.
(2) If the scheme is a trust scheme, then—
(a) if subsection (1)(b) or (c) above applies and at the time in question the condition mentioned in subsection (3) below is fulfilled, the trustee or trustees shall at that time be responsible for the discharge of all duties imposed on the administrator under this Chapter (whenever arising) and liable for any tax due from the administrator in the administrator’s capacity as such (whenever falling due);
(b) if subsection (1)(a) above applies, or subsection (1)(b) or (c) above applies and at the time in question the condition mentioned in subsection (3) below is not fulfilled, the employer shall at that time be so responsible and liable;
and paragraph (b) above shall apply to a person in his capacity as the employer even if he is also the administrator, or a trustee, of the scheme.
(3) The condition is that there is at least one trustee of the scheme who—
(a) can be traced,
(b) is resident in the United Kingdom, and
(c) is not in default for the purposes of this section.
(4) If the scheme is a non-trust scheme, then—
(a) if subsection (1)(b) or (c) above applies and at the time in question the condition mentioned in subsection (5) below is fulfilled, the scheme sponsor or scheme sponsors shall at that time be responsible for the discharge of all duties imposed on the administrator under this Chapter (whenever arising) and liable for any tax due from the administrator in the administrator’s capacity as such (whenever falling due);
(b) if subsection (1)(a) above applies, or subsection (1)(b) or (c) above applies and at the time in question the condition mentioned in subsection (5) below is not fulfilled, the employer shall at that time be so responsible and liable;
and paragraph (b) above shall apply to a person in his capacity as the employer even if he is also the administrator of the scheme, or a scheme sponsor.
(5) The condition is that there is at least one scheme sponsor who—
(a) can be traced,
(b) is resident in the United Kingdom, and
(c) is not in default for the purposes of this section.
(6) Where at any time—
(a) paragraph (b) or (c) of subsection (1) above applies in relation to a scheme, and
(b) a person is by virtue of this section responsible for the discharge of any duties, or liable for any tax, in relation to the scheme,
then at that time the person or persons mentioned in paragraph (b) or (as the case may be) paragraph (c) of subsection (1) above shall not, by reason only of being the administrator of the scheme, be responsible for the discharge of those duties or liable for that tax.
(7) Where the scheme is a trust scheme and the employer is not a contributor to the scheme, subsection (2) above shall have effect as if—
(a) for “the employer”, in the first place where those words occur, there were substituted “the scheme sponsor or scheme sponsors”, and
(b) for “the employer”, in the second place where those words occur, there were substituted “scheme sponsor”.
(8) Where the scheme is a non-trust scheme and the employer is not a contributor to the scheme, subsection (4) above shall have effect as if paragraph (b) and the words after that paragraph were omitted.
(9) No liability incurred under this Chapter—
(a) by the administrator of a scheme, or
(b) by a person by virtue of this section,
shall be affected by the termination of a scheme or by its ceasing to be an approved scheme or to be an exempt approved scheme.
(10) Where by virtue of this section a person becomes responsible for the discharge of any duties, or liable for any tax, the Board shall, as soon as is reasonably practicable, notify him of that fact; but any failure to give such notification shall not affect that person’s being responsible or liable by virtue of this section.
(11) A person is in default for the purposes of this section if—
(a) he has failed to discharge any duty imposed on him under this Chapter, or
(b) he has failed to pay any tax due from him by virtue of this Chapter,
and (in either case) the Board consider the failure to be of a serious nature.
(12) References in this section to a trust scheme, a non-trust scheme, trustees and scheme sponsors shall be construed in accordance with section 611AA.
(13) References in this section to the employer include, where the employer is resident outside the United Kingdom, references to any branch or agent of the employer in the United Kingdom, and in this subsection “branch or agent” has the meaning given by section 118(1) of the Management Act.
(14) This section does not apply for the purposes of sections 602 and 603 and Schedule 22.”
(2) In consequence of subsection (1) above, in section 607(3)(b)(iii) of the Taxes Act 1988 for the words “section 606(1) and (3)” there shall be substituted “section 606(2)(b), (4)(b), (7), (8) and (13)”.
(3) This section shall apply where the time in question falls on or after the day on which this Act is passed.
(1) The Taxes Act 1988 shall be amended in accordance with subsections (2) and (3) below.
(2) In section 605 (information) at the beginning there shall be inserted the following subsections—
“(1A) The Board may by regulations make any of the following provisions—
(a) provision requiring prescribed persons to furnish to the Board at prescribed times information relating to any of the matters mentioned in subsection (1B) below;
(b) provision enabling the Board to serve a notice requiring prescribed persons to furnish to the Board, within a prescribed time, particulars relating to any of those matters;
(c) provision enabling the Board to serve a notice requiring prescribed persons to produce to the Board, within a prescribed time, documents relating to any of those matters;
(d) provision enabling the Board to serve a notice requiring prescribed persons to make available for inspection on behalf of the Board books, documents and other records, being books, documents and records which relate to any of those matters;
(e) provision requiring prescribed persons to preserve for a prescribed time books, documents and other records, being books, documents and records which relate to any of those matters.
Finance Act 1994