Amendment of regulation 18 of the principal Regulations
5. In regulation 18 of the principal Regulations (calculation of earnings)—
(a)in paragraph (6)(1) sub-paragraph (b) and the word “or” immediately preceding that sub-paragraph shall be omitted;
(b)for paragraph (8)(2) there shall be substituted the following paragraph—
“(8) The amount of earnings which is comprised in any payment by way of the conferment of a beneficial interest in—
(a)any asset falling within paragraph 9ZA or 9ZB of Schedule 1A(3) to these Regulations which is not a readily convertible asset;
(b)any voucher falling within paragraph 9B of that Schedule which is not capable of being exchanged for a readily convertible asset,
and which falls to be taken into account in the computation of a person’s earnings shall, for the purposes of earnings-related contributions, be calculated or estimated on the basis of the cost of the asset in question; and for the purposes of this paragraph “the cost of the asset” in relation to any voucher includes the cost of any asset for which that voucher is capable of being exchanged.”;
(c)for paragraph (9)(4) there shall be substituted the following paragraphs—
“(9) The amount of earnings which is comprised in—
(a)any payment by way of the conferment of a beneficial interest in—
(i)any asset falling within Schedule 1A to these Regulations which is a readily convertible asset;
(ii)any voucher falling within paragraph 9B of that Schedule (any voucher capable of being exchanged for an asset falling within paragraphs 1 to 9ZB of that Schedule) where the asset for which it is capable of being exchanged is a readily convertible asset;
(b)any payment by way of any asset or voucher falling within Schedule 1B(5) to these Regulations,
where that payment falls to be taken into account in the computation of a person’s earnings shall, for the purposes of earnings-related contributions, be calculated by reference to the amount determined in accordance with paragraph (10) of this regulation for the purposes of section 203F(1) of the Income and Corporation Taxes Act 1988 (PAYE: readily convertible assets).
(10) The amount referred to in paragraph (9) of this regulation is—
(a)in the case of any asset falling within paragraph (9)(a)(i) of this regulation or paragraph 1 of Schedule 1B to these Regulations, the best estimate that can reasonably be made of the amount of income likely to be chargeable to income tax under Schedule E in respect of the provision of the asset;
(b)in the case of an asset falling within paragraph 2 of the said Schedule 1B, the best estimate that can reasonably be made of the amount of income likely to be chargeable to income tax under Schedule E in respect of the enhancement of its value;
(c)in the case of any voucher falling within paragraph (9)(a)(ii) of this regulation or paragraph 3 of the said Schedule 1B, the best estimate that can reasonably be made of the amount of income likely to be chargeable to income tax under Schedule E in respect of the provision of any asset for which the voucher is capable of being exchanged.
(11) The amount of earnings which is comprised in any payment by way of the conferment of a conditional interest in shares and which falls to be taken into account in the computation of a person’s earnings shall, for the purposes of earnings-related contributions, be calculated on the basis of the best estimate that can reasonably be made of the difference between—
(a)the market value of that person’s interest immediately after that interest ceases to be only conditional or, as the case may be, at the time of the sale or other disposal of that interest; and
(b)the amount or value of the consideration given by that person for that interest together with any amounts which have previously been included in that person’s earnings for the purposes of his assessment of earnings-related contributions in respect of his acquisition of that interest.
(12) For the purposes of paragraph (11) of this regulation—
(a)“market value” has the meaning assigned to it in section 140A(6) of the Income and Corporation Taxes Act 1988 (conditional acquisition of shares);
(b)the “amount or value of the consideration given” shall be determined in accordance with section 140B of that Act (consideration for shares conditionally acquired) as if it were being determined for the purposes of section 140A of that Act.
(13) The amount of earnings which is comprised in any payment by way of the conferment of a beneficial interest in convertible shares and which falls to be taken into account in the computation of a person’s earnings shall, for the purposes of earnings-related contributions, be calculated on the basis of the best estimate that can reasonably be made of the gain from their conversion.
(14) For the purposes of paragraph (13) of this regulation, the “gain from their conversion” is the difference between—
(a)the market value at the time of the conversion of the shares into which the convertible shares are converted; and
(b)the sum of—
(i)the amount or value of any consideration given for the convertible shares;
(ii)any amount or value of any consideration given for the conversion in question;
(iii)the amounts which have previously been included in that person’s earnings for the purposes of his assessment of earnings-related contributions in respect of his acquisition of the interest in the convertible shares;
(iv)if the convertible shares were acquired through a series of conversions each of which gives rise to a liability for earnings-related contributions, any amount of the gain from each conversion, so far as not falling within head (iii) of this sub-paragraph.
(15) For the purposes of paragraph (14) of this regulation—
(a)“market value” has the meaning assigned to it in section 140F(3) of the Income and Corporation Taxes Act 1988 (supplemental provision with respect to convertible shares);
(b)the “amount or value of any consideration given” shall be determined in accordance with section 140E of that Act (consideration for convertible shares);
(c)the reference to a conversion which gives rise to a liability for earnings-related contributions is a reference to any conversion which gives rise to a gain which was treated as earnings by virtue of regulation 17AB of these Regulations or would have given rise to a gain but for the fact that the market value at the time of conversion of the shares into which the convertible shares are converted did not exceed the sum referred to in sub-paragraph (b) of paragraph (14) of this regulation.”.
Paragraph (6) was substituted by S.R. 1993 No. 463
Paragraph (8) was added by S.R. 1994 No. 328 and amended by S.R. 1996 No. 566
Schedule 1A was inserted by S.R. 1991 No. 490 and amended by S.R. 1993 No. 463, S.R. 1994 No. 328, S.R. 1995 No. 146 and S.R. 1996 No. 566
Paragraph (9) was substituted by S.R. 1996 No. 566
Schedule 1B is inserted by regulation 10 of these Regulations