SCHEDULES
F1F1SCHEDULE 14
Part II General requirements
Introduction
8
An option is not a qualifying option unless the requirements of this Part of this Schedule are met as to—
a
the purpose for which the option is granted (see paragraph 9),
b
the maximum entitlement of an employee (see paragraph 10), and
F2c
the maximum value of the relevant company’s shares in respect of which unexercised options can exist (see paragraph 11).
Purpose of granting the option
9
An option is a qualifying option only if it is granted for commercial reasons in order to recruit or retain[F3an]employee in a company, and not as part of a scheme or arrangement the main purpose, or one of the main purposes, of which is the avoidance of tax.
Maximum entitlement of employee
10
1
An employee may not hold unexercised qualifying options which—
a
are in respect of shares with a total value of more than £100,000, and
b
were granted by reason of his employment—
i
with one company, or
ii
with two or more companies which are members of the same group.
2
An option is not a qualifying option if the limit in sub-paragraph (1) is already exceeded at the time it is granted.
3
If the grant of an option causes that limit to be exceeded, the option is not a qualifying option so far as it relates to the excess.
4
Where by reason of his employment with one company, an employee has been granted qualifying options in respect of shares with a total value of £100,000 (whether or not they have been exercised or released), any further option granted by reason of his employment with—
a
that company, or
b
if it is a member of a group, any company that is a member of that group,
within three years of the date of the grant of the last qualifying option is not a qualifying option.
5
Where, by reason of his employment with two or more companies which are members of the same group, an employee has been granted qualifying options in respect of shares with a total value of £100,000 (whether or not they have been exercised or released), any further option granted, by reason of his employment with any member of that group, within three years of the date of the grant of the last qualifying option is not a qualifying option.
6
Where, at the time an option is granted to an employee, he holds unexercised CSOP options granted by reason of his employment with—
a
the employer company, or
b
if that company is a member of a group, any member of that group,
those options shall be treated for the purposes of this paragraph as if they were unexercised qualifying options.
For this purpose a “CSOP option" is an option to acquire shares under a scheme approved under Schedule 9 to the Taxes Act 1988 by reference to the requirements of Part IV of that Schedule (non-savings-related share option schemes).
7
For the purposes of this paragraph—
a
the value of shares means the market value at the time the option is granted of shares of the same class as those that may be acquired by exercise of the option; and
b
an option is treated as granted in respect of the maximum number of shares that may be acquired under it.
8
For the purposes of this paragraph the market value of shares subject to restrictions or risk of forfeiture shall be determined as if there were no such restriction or risk.
For this purpose shares are “subject to risk of forfeiture” if the interest that may be acquired is only conditional within the meaning of section 140C of the Taxes Act 1988.
Number of employees who may hold qualifying options
11F4Maximum value of options in respect of relevant company’s shares
1
The total value of shares in the relevant company in respect of which unexercised qualifying options exist must not exceed £3 million.
2
An option is not a qualifying option if the limit in sub-paragraph (1) is already exceeded at the time it is granted.
3
If the grant of an option causes that limit to be exceeded the option is not a qualifying option so far as it relates to the excess.
4
Where the grant of two or more options at the same time causes that limit to be exceeded, then, for the purpose of determining which part of each option relates to that excess, the amount of the excess shall be divided pro rata among the options according to the value of the shares in respect of which each option was granted.
5
Sub-paragraphs (7) and (8) of paragraph 10 (determination of value of shares) apply for the purposes of this paragraph as they apply for the purposes of that paragraph.
Sch. 14 repealed (with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), Sch. 8 Pt. 1 (with Sch. 7)