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Income Tax (Earnings and Pensions) Act 2003

Part 2: General requirements

2962.It was mentioned, in the overview to the explanatory notes for this Schedule, that the contents of this Schedule could be divided into three categories. This Part is the first of eight that deal with the first category: the requirements that a SIP must meet before it may be approved. This Part, which consists of paragraphs 6 to 12, deals with general requirements that all SIPs must meet.

Paragraph 6: General requirements for approval: introduction

2963.This paragraph lists the general requirements that must be met before a SIP may be approved. It derives from paragraph 6 of Schedule 8.

Paragraph 7: The purpose of the plan

2964.This paragraph deals with the purpose of a SIP. It derives from paragraph 7 of Schedule 8.

Paragraph 8: All-employee nature of plan

2965.This paragraph contains provisions designed to ensure as many employees as possible are eligible to benefit in an award of shares under a SIP. It derives from paragraph 8 of Schedule 8.

2966.Sub-paragraph (1), in its final full-out words, adds a second “is” to the material that deriving from the final full-out words of paragraph 8(1) of Schedule 8, so that the sub-paragraph now ends “is invited to do so”. This addition brings this sub-paragraph into better alignment with sub-paragraph (5).

2967.Sub-paragraph (2) introduces a definition of a “UK resident taxpayer”, drawing on material in paragraph 8(1)(b) of Schedule 8. This definition is then used again in sub-paragraph (5)(b).

2968.Sub-paragraphs (3) and (4) deal with the material in paragraph 8(2) of Schedule 8, which has two sentences.

2969.Sub-paragraph (6) substantially recasts and shortens paragraph 8(4) of Schedule 8.

Paragraph 9: Participation on same terms

2970.This paragraph states that a SIP must provide that all employees who participate in it must do so on the same terms. It derives from paragraph 9 of Schedule 8.

2971.Sub-paragraph (3) recasts paragraph 9(3) of Schedule 8, replacing two sentences with a single sentence.

2972.In sub-paragraph (5), the cross-references to the provisions dealing with performance allowances have been placed in paragraphs of their own.

2973.Sub-paragraph (7) is new. This provision makes explicit that, in the case of partnership shares, the requirements of this paragraph are not infringed because a deduction of the same percentage of salary will result in employees with larger salaries having larger amounts deducted and receiving awards of more shares. This provision accords with Inland Revenue practice on this point.

Paragraph 10: No preferential treatment for directors and senior employees

2974.This paragraph provides that the SIP must not have the effect of conferring benefits mainly on directors or more highly paid employees. It derives from paragraph 10 of Schedule 8.

2975.Sub-paragraphs (2) and (3) contain the material that is presently in paragraph 10(2) of Schedule 8. The material has been divided in order to make it easier to follow and to understand.

2976.In sub-paragraph (1) the words “no feature of the plan must have or be likely to have the effect” in paragraph 10(1) of Schedule 8 have been replaced by the words “no feature of the plan has or is likely to have the effect”.

2977.Sub-paragraph (4) sets out, in full, the proposition that is contained in paragraph 10(3) of Schedule 8, instead of providing a reference to paragraph 9(3) of that Schedule.

2978.Sub-paragraphs (1)(b) and (3)(a) now refer to “the higher or highest levels of remuneration”. These changes have been made to achieve greater alignment in the legislation: in this case an alignment with paragraph 8(1)(b) of Schedule 3.

Paragraph 11: No further conditions

2979.This paragraph provides that a SIP must not impose additional conditions on an employee’s participation in an award of shares under the plan. It derives from paragraph 11 of Schedule 8.

2980.A reference to conditions “required or authorised by this Schedule” replaces a reference to conditions “required or permitted by this Schedule”. This change brings the wording used into alignment with that used elsewhere (for example, in paragraph 8(4) of this Schedule).

Paragraph 12: No loan arrangements

2981.This paragraph provides that the arrangements for the plan must not be associated in any way with any provision made for loans to employees. It derives from paragraph 12 of Schedule 8.

2982.Sub-paragraphs (1) and (2) both derive from paragraph 12(1) of Schedule 8. The material has been divided to make it easier to follow and to understand.

2983.In sub-paragraph (3), the words “For the purposes of sub-paragraph (1)” have been replaced by the words “In sub-paragraph (1)”.

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Explanatory Notes

Text created by the government department responsible for the subject matter of the Act to explain what the Act sets out to achieve and to make the Act accessible to readers who are not legally qualified. Explanatory Notes were introduced in 1999 and accompany all Public Acts except Appropriation, Consolidated Fund, Finance and Consolidation Acts.


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