Income Tax (Earnings and Pensions) Act 2003

Supplementary provisions

429 Amount or value of consideration given for employee’s interest

(1) This section applies for the purposes of section 428 (amount of charge) in determining the amount or value of the consideration given for the employee’s interest.

(2) Subject to the following provisions of this section, that consideration is any given in respect of the acquisition of an interest in the shares by—

(a) the employee, or

(b) if section 423(1)(c) applies, the person by whom the interest in the shares was acquired.

(3) The amount or value of the consideration given by a person for an interest in the shares includes the amount or value of any consideration given—

(a) for a right to acquire the shares, and

(b) for anything by virtue of which the employee’s interest in the shares ceases to be only conditional.

(4) If any consideration is given partly in respect of one thing and partly in respect of another, the amount given in respect of the different things is to be determined on a just and reasonable apportionment.

(5) The consideration which for the purposes of this section is taken to be given wholly or partly for anything does not include the performance of any duties of, or in connection with, the office or employment by reference to which the interest in the shares in question has been acquired by a person as a director or employee of a company.

(6) No amount is to be counted more than once in calculating the amount or value of any consideration.

430 Amount or value of consideration given for right to acquire shares

(1) This section applies for the purposes of section 429(3)(a) in determining the amount or value of any consideration given for a right to acquire shares.

(2) Subsection (3) applies if the right to acquire shares (“the new option”) is the whole or part of the consideration for the assignment or release of another right to acquire shares (“the old option”).

(3) The amount or value of the consideration given for the new option is to be treated as being the sum of—

(a) the amount by which the amount or value of the consideration given for the grant of the old option exceeds the amount or value of any consideration for the assignment or release of the old option, apart from the new option, and

(b) any valuable consideration given for the grant of the new option, apart from the old option.

(4) Two or more transactions are to be treated for the purposes of subsection (2) as a single transaction by which a right to acquire shares is assigned for a consideration which consists of or includes another right to acquire shares if—

(a) the transactions result in—

(i) a person ceasing to hold a right to acquire shares, and

(ii) that person or a connected person coming to hold another right to acquire shares, and

(b) one or more of the transactions is effected under arrangements to which two or more persons who hold rights to acquire shares, in respect of which there may be a liability to tax under Chapter 5 of this Part (share options), are parties.

(5) Subsection (4) applies regardless of the order in which the assignment and the acquisition occur.

(6) In this section “release” includes agreeing to the restriction of the exercise of the right.

431 Application of this Chapter where employee dies

(1) If the employee dies holding the employee’s interest, this Chapter applies as if the employee had disposed of the interest immediately before dying.

(2) The market value of the interest at the time of that disposal is to be determined for the purposes of section 428 (amount of charge) on the basis—

(a) that it is known that the disposal is being made immediately before the employee’s death, and

(b) that any restriction on disposal is to be disregarded in so far as it is a restriction terminating on the employee’s death.

432 Duty to notify provision of conditional interests in shares

(1) Subsection (2) applies if—

(a) a person provides an individual with an interest in shares which is only conditional, and

(b) the circumstances are such that subsequent events may result in an amount counting as employment income of that individual under section 427 (charge on interest in shares ceasing to be only conditional or on disposal).

(2) Each of the following persons—

(a) the person providing the interest in shares, and

(b) the employer company,

must provide the Inland Revenue with particulars in writing of the interest and its provision.

(3) The particulars must be provided before 7th July in the tax year following that in which the interest is provided.

433 Duty to notify events resulting in charges under section 427

(1) Subsection (2) applies if—

(a) a person has an interest in shares which is only conditional,

(b) either—

(i) the shares cease to be shares in which that person’s interest is only conditional,

(ii) the shares are disposed of, or

(iii) that person dies, and

(c) by virtue of that event an amount counts as employment income under section 427 (charge on interest in shares ceasing to be only conditional or on disposal).

(2) Each of the following persons—

(a) the person who provided the interest in shares, and

(b) the employer company,

must provide the Inland Revenue with particulars in writing of the interest and the event.

(3) The particulars must be provided before 7th July in the tax year following that in which the event occurs.

434 Minor definitions

(1) In this Chapter—

• “director”—

  (a)

  in the case of a company whose affairs are managed by a board of directors or similar body, means a member of that board or similar body,

  (b)

  in the case of a company whose affairs are managed by a single director or similar person, means that director or person,

  (c)

  in the case of a company whose affairs are managed by its members, means a member,

  and includes any person who is to be or has been a director;

• “employee” includes—

  (a)

  in relation to a company, a person taking part in the management of the affairs of the company who is not a director, and

  (b)

  a person who is to be or has been an employee;

• “market value”, in relation to an interest in shares, means the amount that might reasonably be expected to be obtained from a sale of the interest in the open market;

• “shares” (except in section 423 in the expression “convertible shares”) includes—

  (a)

  stock,

  (b)

  securities issued by a company, and

  (c)

  any other interest of a member of a company;

• “terms” on which a person is entitled to an interest in shares means terms imposed by contract or arrangement or in any other way.

(2) In this Chapter—

• “the employee”,

• “the employee’s interest”,

• “the employer company”, and

• “the shares”,

have the meaning indicated in section 422(1) and (2).