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Income Tax (Earnings and Pensions) Act 2003

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Schedule 3: Approved Saye Option Schemes


3243.This Schedule, which is introduced in Chapter 7 of Part 7, deals with the rules relating to approved SAYE option schemes. The legislation relating to SAYE option schemes, which is contained in Chapter 7 of Part 7 and in this Schedule, is called “the SAYE code”, a term introduced in section 516. Chapter 7 of Part 7 deals with the tax exemptions available for participants in an approved SAYE option scheme.

3244.The legislation relating to these schemes derives from Schedule 9 to ICTA: many of the definitions are supplied by section 187 of ICTA.

3245.This Schedule contains further provisions relating to SAYE option schemes. After the introductory Part (Part 1) it deals with the following matters:

  • it specifies the requirements that a SAYE option scheme must meet in order to be “approved” for the purposes of the SAYE code (in Parts 2 to 7);

  • it deals with the procedural aspects of the approval of schemes and the withdrawal of approval (in Part 8); and

  • it deals with supplementary matters (in Part 9).

3246.The majority of the provisions in this Schedule are therefore concerned with the various requirements that SAYE option schemes must meet before they may be “approved”. On this topic the general policy has been to place the various Parts in an order consistent with that to be found in the legislation relating to other share schemes. The various requirements have been placed in a different order from that found in Schedule 9 to ICTA. Part 2 of this Schedule accordingly deals with the general requirements that apply in all cases; Part 3 with the requirements relating to the eligibility of individual employees; and Part 4 with the types of shares to which schemes can apply. The following Parts then deal with requirements relating to linked savings schemes (Part 5), share options (Part 6) and the exchange of options (Part 7).

3247.Where it seems helpful the opportunity has been taken to list the requirements relevant for a Part. This procedure is the same as that adopted in Schedule 2 for the SIP code and Schedule 5 for the EMI codes, where the procedure represents a development of layout in Schedule 8 and Schedule 14 to FA 2000.

3248.Share options are described as being granted rather than obtained in most contexts. This ties in with the terminology in EMI.

3249.Where appropriate references have been changed from “person” to “individual”.

Part 1: Introduction
Paragraph 1: Approval of SAYE option schemes

3250.This paragraph indicates the contents of this Schedule (in sub-paragraph (1)) and the sub-paragraphs into which it is divided (in sub-paragraphs (2) to (4)). It mirrors the opening paragraphs of Schedules 2, 4 and 5. The paragraph has no counterpart in the present legislation. The intention is to help users to understand the subject matter of the Schedule and to locate relevant material.

Paragraph 2: SAYE option schemes

3251.This paragraph contains definitions that apply generally for the purposes of the SAYE code. It derives from section 185(2) of ICTA and also from various paragraphs of Schedule 9 to ICTA, including paragraph 8, and continues the introductory theme.

3252.Sub-paragraph (1) contains the central definition of “SAYE option scheme”, set out earlier in section 516(4).

3253.Sub-paragraph (2) contains the definition of the word “participate”, and derives from paragraph 26 of Schedule 9 to ICTA. This sub-paragraph also introduces the term “scheme organiser”. It is preferable to the term “grantor” (the term used in ICTA) as the company that sets up the scheme does not have to be the person who actually grants the option. There is also a definition of “participant”.

Paragraph 3: Group schemes

3254.This paragraph is concerned with group schemes, and derives from paragraph 1(3) and (4) of Schedule 9 to ICTA.

3255.Sub-paragraph (1) provides that a SAYE option scheme established by a company that controls other companies (a “parent company”) may extend to all or any of those other companies. If the scheme does so extend, it is called a “group scheme”, as before (see sub-paragraph (2)).

3256.In sub-paragraph (3), the term “constituent company” replaces the term “participating company”. This change, which reflects corresponding changes made in Schedules 2 and 4, has been made on the basis that these Schedules necessarily make numerous references to “participants” and to people who “participate”, so that the use of another term is advantageous.

3257.ESC B27 enables certain jointly owned companies to participate in group schemes. Sub-paragraph (4) is a signpost to paragraph 46, which gives statutory effect to that concession.

3258.In order to distinguish the meaning from more usual uses of “parent company”, the top company in a group scheme has the label “parent scheme company”.

Part 2: General requirements for approval
Paragraph 4: General requirements for approval: introduction

3259.This paragraph derives from part of paragraph 1(1) of Schedule 9 to ICTA. The difference stems from the new approach of providing its own introduction to each type of requirement. This new layout is also a feature of the succeeding Parts of this Schedule.

Paragraph 5: General restriction on contents of scheme

3260.This paragraph derives from paragraph 2(1) of Schedule 9 to ICTA. It sets out the proposition in that sub-paragraph (that a scheme must not contain features, which are neither essential nor reasonably incidental to the specified purpose of the scheme).

Paragraph 6: All-employee nature of scheme

3261.This paragraph derives from paragraph 2(3)(a) and part of paragraph 26(1) of Schedule 9 to ICTA. As a whole the new paragraph makes it clear that a SAYE scheme has to be open to a wide category of employees and directors but can be even more comprehensive in its approach.

3262.The new entry in sub-paragraph (2)(d) contains a cross-reference to paragraph 11. This makes it clear that a scheme must not allow participation by anyone with a material interest.

3263.In sub-paragraph (3) the words “any description of employees or former employees” have been replaced by “any description of persons” who meet or have met the conditions in sub-paragraph (2). The inclusion of former employees covers circumstances where the employee has left a group scheme company for an associated company, which is not within the group scheme. The wording confirms that the provision applies to directors and secondly makes it clear that former employees can meet the required conditions. See Change 166 in Annex 1.

3264.Sub-paragraph (4) emphasises the “let-out” in paragraph 2(3)(a) of Schedule 9 to ICTA. The words “any provision required or authorised” by the provisions of this Schedule may also be found in the SIP code (see Schedule 2) and more properly reflect the various ways the rules are expressed.

Paragraph 7: Participation on similar terms

3265.This paragraph derives from the final part of paragraph 26(1) and from paragraph 26(2) of Schedule 9 to ICTA.

3266.This paragraph provides that there must be similar terms for every person who participates in the scheme, but that certain factors, such as length of service, may be taken into account. The definition of “participate” is in paragraph 2(2).

3267.Although, in general, references to “rights” have been changed to “share options”, in the context of sub-paragraph (2) “rights” has been retained to make it clear that this covers the full participatory rights, that is the rights to obtain as well as to exercise share options.

Paragraph 8: No preferential treatment for directors and senior employees

3268.This paragraph derives from paragraph 2(3)(b) and (4) Schedule 9 to ICTA. The provision is intended to prevent a group of companies from arranging among its members to set up a scheme to favour the highly paid. These are described in the heading as “senior” to avoid the confusion with earlier benefits legislation, which referred to higher paid employees.

3269.The arrangement envisaged here is the setting up of a scheme in which the only group companies participating would be those employing the persons in the group whom it was designed to benefit on a selective basis. The wide definition of “a group of companies” in sub-paragraph (2) (rewriting paragraph 2(4) of Schedule 9 to ICTA) may accordingly go beyond the group companies in the group scheme.

Part 3: Eligibility of individuals to participate in scheme
Paragraph 9: Requirements relating to the eligibility of individuals: introduction

3270.This paragraph lists the two requirements relating to the eligibility of individuals and partly derives from paragraph 1(1) of Schedule 9 to ICTA.

Paragraph 10: The employment requirement

3271.This paragraph derives from paragraph 26(3) of Schedule 9 to ICTA and provides that the individual must be a director or an employee of the scheme organiser (or a constituent company in a group scheme) at the time of participation in the scheme. The effect of ESC B27, which is now codified in paragraph 46 of this Schedule, is that employment in jointly owned companies as defined there can also qualify.

3272.There are exceptions to this rule. Paragraphs 19 and 21(1)(e) and (f) of Schedule 9 to ICTA are applied so that rights under the scheme may be exercised after changes have occurred which would otherwise mean the requirement was not met. No reference is made in the source legislation to paragraph 18 of Schedule 9 to ICTA. This paragraph which is rewritten as paragraph 32 of this Schedule, allows the option to be exercised up to one year after the option holder dies.

3273.It is the practice to treat schemes as if paragraph 18 of Schedule 9 to ICTA did not infringe the requirement. The scope of the disregard is made clear in sub-paragraph (2) by stating that this requirement is not infringed by a provision required or authorised by this Schedule. See Note 68 in Annex 2.

Paragraph 11: The “no material interest” requirement

3274.This paragraph derives from paragraph 8 of Schedule 9 to ICTA and from section 187(3) of ICTA and there are some drafting changes.

3275.It is the introductory provision which precludes admission into the scheme of an individual with a “material” interest in a close company whose shares are subject to the option or its parent company (or certain members of a consortium).

3276.The exact length of the preceding 12-month period has been clarified. It is expressed so as to include the “trigger date”, that is the date when the test is made. By so including it explicitly, the period is shorter by one day and so in favour of the taxpayer.

3277.The interests of the option holder are aggregated with those of any associates. “Associate” is defined in paragraphs  14 to 16 of this Schedule.

3278.The definition of close companies is subject to sections 414 and 415 of ICTA and there is now a short explanatory summary of those sections.

Paragraph 12: Meaning of “material interest”

3279.The definition of material interest is imported here from section 187(3) of ICTA. The capped percentage is applied to both the straightforward control through share capital and other more indirect routes. The layout mirrors the similar rules in the new (FA 2000) schemes.

3280.Unlike in the new (FA 2000) schemes this provision applies to close companies only, see paragraph 11(1). Redundant wording in section 187(3) of ICTA has been removed (the reference to “where the company is a close company”).

Paragraph 13: Material Interest: options and interests in SIPs

3281.This paragraph extends the previous paragraph; shares subject to an option are to be counted for the material interest test. This derives from paragraph 38 of Schedule 9 to ICTA. Under sub-paragraph (3) if the shares of an option holder which have not yet been issued are taken into account the total share capital is similarly increased.

3282.A disregard has been introduced for the unappropriated shares held by trustees of a SIP trust on the lines of the EMI code and similar to that contained in paragraph 39 of Schedule 9 to ICTA for approved profit sharing (APS) schemes. See Change 167 in Annex 1.

3283.Paragraph 39 of Schedule 9 to ICTA (the disregard for shares held in APS schemes) has not been reproduced in this Schedule. It is contained in Part 8 of Schedule 7 (Transitionals and savings).

Paragraph 14: Meaning of “associate”

3284.This paragraph also supplements paragraph 12 of this Schedule. It contains the definition of “associate”; and is in its turn supplemented by paragraphs 15 and 16 of this Schedule. The paragraph derives from sections 187(3) and 417(3) and (4) of ICTA (in the first two cases, parts of those subsections), and continues the pattern of bringing into the main text the ancillary explanations needed to understand the expression “material interest”.

3285.The company in sub-paragraph (1)(c) is identified as the company mentioned in paragraph 11(2) of this Schedule. This is also copied in later paragraphs to which it is relevant. This makes explicit both interpretation and practice, thereby limiting the scope of the definition of associate in the case of a trust or estate. The term “personal representatives” is defined in section 721(1). See Change 159 in Annex 1.

3286.In sub-paragraph (3), the definition of “relative” has been slightly amended.

Paragraph 15: Meaning of “associate”: trustees of employee benefit trust

3287.This paragraph supplements paragraph 14 of this Schedule and contains provisions that apply where an individual is interested as a beneficiary of an employment benefit trust. The paragraph derives from paragraph 40 of Schedule 9 to ICTA.

3288.This paragraph has counterparts in Schedules 2, 4 and 5 to this Act. Chapter 11 of Part 7 (Supplementary provisions) defines the expression “employee benefit trust”, and deals with further matters arising when payments from employee benefit trusts are made. There are references to provisions in that Chapter in the later provisions of this paragraph.

3289.Sub-paragraph (3) is new. It is modelled on EMI and SIP and amplifies the approach in paragraph 40(1) of Schedule 9 to ICTA, now reflected in sub-paragraph (2) of this paragraph. This ensures that the test in sub-paragraph (2) works satisfactorily.

Paragraph 16: Meaning of “associate”: trustees of discretionary trust

3290.This derives from paragraph 37 of Schedule 9 to ICTA (and sub-paragraph (3) of section 187(4) of ICTA) and provides a disregard from association where an individual disclaims an interest in a discretionary trust.

3291.Paragraph 37(2) of Schedule 9 to ICTA and the reference to 14 November 1986 in paragraph 37(3) have not been rewritten as these are spent.

3292.The references to disclaimers or releases executed “under seal” (from sub-paragraphs (3) and (5) of the paragraph 37) have been omitted, because section 1 of the Law of Property (Miscellaneous Provisions) Act 1989 abolished the requirement for a seal in the case of deeds executed by an individual.

Part 4: Shares to which schemes can apply
Paragraph 17: Requirements relating to shares that may be subject to share options: introduction

3293.This is the introductory paragraph to this Part derived from but also elaborating on paragraph 9 of Schedule 9 to ICTA. These requirements relate to the type of shares that can be subject to approved options within the scheme.

3294.In sub-paragraph (2), a new label is attached to these shares, “eligible” shares. The shares are those “which may be acquired by the exercise of” the options. This is in line with the reference to acquisition in paragraph (9)(1) of Schedule 9 to ICTA, (and the SIP definition of eligible shares).

Paragraph 18: Shares must be ordinary shares of certain companies

3295.This paragraph provides that eligible shares must form part of the ordinary share capital of a company with characteristics specified in this paragraph. The paragraph derives from paragraph 10 of Schedule 9 to ICTA.

Paragraph 19: Requirements as to listing

3296.This follows paragraph 11 of Schedule 9 to ICTA, but the interpretation of paragraph 11(c) is assisted by its division into sub-paragraph (1)(c) and (2) which introduces a new label, “a listed company”.

3297.Eligible shares have to be in a listed company, a company under the control of a listed company or in an independent company.

Paragraph 20: Shares must be fully paid up and not redeemable

3298.This paragraph provides that eligible shares must be fully paid up and not redeemable. It derives from part of paragraph 12(1) of Schedule 9 to ICTA.

Paragraph 21: Only certain kinds of restriction allowed

3299.This paragraph takes the material from the rest of paragraph 12 of Schedule 9 to ICTA and covers the rules about the kind of restrictions permitted for eligible shares.

3300.Broadly restrictions are not allowed unless they apply to all shares in the same class. There is an exception. This is contained in sub-paragraphs (2) and (3) and derives from sub-paragraphs (2) and (3) of paragraph 12 of Schedule 9 to ICTA. This allows companies to require ex-employees to dispose of their shares; this will usually be to the existing shareholders.

3301.In sub-paragraph (2)(a) and (b) “or offered for sale” covers the situation in which employees cannot actually secure the sale of their shares. See Change 168 in Annex 1.

3302.In sub-paragraph (5) a reference to section 74(4) of the Financial Services and Markets Act 2000 has been inserted to update the reference to the Model Code issued by the Stock Exchange, in paragraph 13(2) of Schedule 9 to ICTA. See also Change 168 in Annex 1.

3303.Sub-paragraph (6) enacts the contents of a Revenue Press Release, concerning the “directors veto”, issued on 11 June 1985. See also Change 168 in Annex 1.

3304.There is a new sub-paragraph (7), which gives statutory effect to the Inland Revenue’s interpretation of the reference in paragraph 12 of Schedule 9 to ICTA to “articles of association”. See also Change 168 in Annex 1, which refers to Note 44 in Annex 2.

Paragraph 22: Requirements as to other shareholdings

3305.This paragraph imposes a requirement relating to the majority of the issued share capital of the same class as the eligible shares. The paragraph derives from paragraph 14(1) and (3) of Schedule 9 to ICTA. Its purpose is to prevent the manipulation of a company’s share capital.

3306.This paragraph provides that the majority of the shares in the same class as the eligible shares must be either “employee-control shares” or “open market shares”. The label “open market shares” is new, and has been introduced to help understanding. Paragraph 14(2) has not been rewritten as it is concerned with APS.

Part 5: Requirement for linked savings scheme
Paragraph 23: Requirements as to linked savings scheme: introduction

3307.This paragraph lists the requirements relating to linked savings schemes that must be met before a SAYE option scheme may be approved. This is partly derived from paragraph 1(1) of Schedule 9 to ICTA.

Paragraph 24: Payment for shares to be linked to approved savings schemes

3308.This paragraph derives from paragraph 16(1) of Schedule 9 to ICTA. It introduces the link with a certified contractual savings scheme, “the CCS scheme”, defined in sub-paragraph (2). The money used to exercise an option cannot exceed the repayments and interest from the CCS scheme.

3309.The contents of sub-paragraphs (2) and (3) of paragraph 16 of Schedule 9 to ICTA are spent.

3310.The words “to them”, which carried no obvious meaning and are therefore redundant, have been deleted.

Paragraph 25: Requirements as to contributions to savings schemes

3311.This paragraph derives from paragraph 24 of Schedule 9 to ICTA. It supplements the previous paragraph by ensuring that the contributions under the CCS scheme will result in a repayment that will meet the option price. It also sets a maximum and caps a minimum for monthly contributions.

3312.“The option price” has been defined as “the amount payable” to reflect the overall cost of the acquisition of shares on exercise of the option. A further clarification has been introduced, the reference to “the maximum number of shares” that can be acquired under the option, to identify the option price more precisely.

Paragraph 26: Repayments under a savings scheme: whether bonuses included

3313.This paragraph derives from part of paragraph 17 of Schedule 9 to ICTA. It also supplements paragraph 24 of this Schedule by determining what happens to the bonus element of repayments.

3314.There is a reference to the distinction between the maximum and other bonuses, which helps understanding of the application of paragraph 30 of this Schedule.

3315.To deal with any potential confusion in the references to schemes, a SAYE option scheme has been identified in sub-paragraph (3).

Part 6: Requirements etc. relating to share options
Paragraph 27: Requirements etc. relating to share options: introduction

3316.This is another introductory paragraph, based on paragraph 1(1) of Schedule 9 to ICTA. It lists the requirements relating to share options.

Paragraph 28: Requirements as to price for acquisition of shares

3317.This paragraph derives from paragraph 25 of Schedule 9 to ICTA; and contains the rule that the exercise price for the option must be not less than 80% of the market value of the shares at the time of the grant of the option. Sub-paragraph (2) allows this price to be fixed in advance of the grant if agreed between the Inland Revenue and the scheme organiser.

3318.The decision was taken to retain “manifestly” in sub-paragraph (1). The word is interpreted to mean variations of “evidently”, “clearly” and “obviously”.

3319.Sub-paragraph (3) extends the scope for changes, which are permitted to occur as a result of a variation in the share capital. Paragraph 25 of Schedule 9 to ICTA refers only to price, but in reality the number and description of the shares may be affected. This and the necessity of getting Inland Revenue approval in advance (sub-paragraph (4)) have been recognised in practice. See Change 169 in Annex 1.

Paragraph 29: Share options must not be transferable

3320.This paragraph provides that the participant may not transfer share options. It derives from part of paragraph 22 of Schedule 9 to ICTA.

3321.There is a new sub-paragraph (2) which provides a signpost to paragraph 32 which deals with the position after the death of a participant.

Paragraph 30: Time for exercising options: general

3322.This paragraph derives from the remaining parts of paragraphs 17 and 22 of Schedule 9 to ICTA. It sets out the start and the end of the period during which an option must be exercised, and then indicates the various exceptions to this rule.

Paragraph 31: Requirement to have a “specified age”

3323.This paragraph, which derives from paragraph 8A of Schedule 9 to ICTA, explains what is meant by the expression “specified age” and indicates the paragraphs of this Schedule where this definition is relevant.

Paragraph 32: Exercise of options: death

3324.This paragraph derives from paragraph 18 of Schedule 9 to ICTA. The paragraph allows the exercise of an option after the option holder’s death.

3325.The reference to the period of six months after the bonus date in sub-paragraph (b) now makes it clear that this rule applies to a death on the bonus date.

Paragraph 33: Exercise of options: reaching specified age without retiring

3326.This paragraph applies where an option holder reaches the specified age, but has not retired. The paragraph derives from paragraph 20 of Schedule 9 to ICTA and also part of paragraph 22 of that Schedule.

Paragraph 34: Exercise of options: scheme-related employment ends

3327.This paragraph derives from paragraphs 19 and 21(1)(e) of Schedule 9 to ICTA, and draws on material in paragraph 22 of that Schedule.

3328.The paragraph deals with the various circumstances in which an employee may leave “scheme-related employment”, a term defined in sub-paragraph (7).

3329.The effect of the various situations has been clarified and one more significant revision to the situation set out in former paragraph 21(1)(e). This is to link new sub-paragraph (5) to sub-paragraph (4), to emphasise that this provision is required to enable the option to be exercised within the first three years (though income tax relief is not available in these circumstances).

3330.Paragraph 21(3) of Schedule 9 to ICTA is spent.

Paragraph 35: Time when scheme-related employment ends

3331.This derives from paragraph 23 of Schedule 9 to ICTA. The import of the definition of associated company derives from section 187(2) of ICTA.

3332.This is in part an anti-avoidance provision and complex in application. The position has been clarified: an employee is not regarded as leaving the group scheme until that employee has left any associated company of the scheme organiser.

3333.As regards sub-paragraph (3), the reference in paragraph 23 of Schedule 9 to ICTA to a company under the grantor’s control has been omitted, because such a company is also an “associated company”.

3334.There is a new sub-paragraph (5), to make it quite clear that paragraph 32 of this Schedule, rather than the rules in this paragraph, govern the situation after the death of an option holder.

Paragraph 36: Exercise of options: employment in associated company at bonus date

3335.This paragraph derives from paragraph 21(1)(f) of Schedule 9 to ICTA. It enables a person who, on the bonus date, is an employee of a company that is an associated company but not a constituent company to exercise the options within six months of that date. Paragraph 21(4) has not been rewritten. It is covered by the transitional provisions in Schedule 7 to this Act.

Paragraph 37: Exercise of options: company events

3336.This paragraph derives from the remaining parts of paragraph 21 of Schedule 9 to ICTA. It deals with a number of events, which can occasion early exercise of an option.

3337.This paragraph brings out more clearly when the relevant date occurs in relation to these events. The expression “the relevant date” is introduced in sub-paragraph (1).

Part 7: Exchange of share options
Paragraph 38: Exchange of options on company reorganisation

3338.This paragraph is the first of two that rewrite paragraph 15 of Schedule 9 to ICTA. The remainder of that paragraph is rewritten in paragraph 39 of this Schedule.

3339.This paragraph explains the circumstances in which there may be a “rollover” of share options. The layout is similar to that in paragraph 39 of Schedule 5 to this Act (EMI).

3340.Sub-paragraphs (5) to (8) of paragraph 15 of Schedule 9 to ICTA have not been rewritten as they are spent.

Paragraph 39: Requirements about share options granted in exchange

3341.This completes the picture introduced in paragraph 38 of this Schedule and reproduces the part of paragraph 15 of Schedule 9 to ICTA which sets out the rules on the new options that can be received on exchange.

3342.Paragraph 15(4) of Schedule 9 to ICTA has been divided, and has been rewritten as sub-paragraphs (5) and (6) of this paragraph.

3343.The cross-reference to paragraph 10(b) and (c) of Schedule 9 to ICTA at the end of paragraph 15(1) of that Schedule has been replaced by a cross-reference to paragraph 18 in sub-paragraph (2)(b) and the meaning of this has been clarified. The new options can relate to shares in the acquiring company or in a company which controls the acquiring company.

Part 8: Approval of schemes
Paragraph 40: Application for approval

3344.This paragraph deals with the mechanics of the application for approval of a SAYE option scheme. The paragraph derives from part of paragraph 1(1) and paragraph 1(2) of Schedule 9 to ICTA.

3345.Sub-paragraph (3) states that, after the Inland Revenue have reached their decision, they must give notice of their decision to the scheme organiser. See Change 170 in Annex 1.

Paragraph 41: Appeal against refusal of approval

3346.This paragraph derives from most of paragraph 5 of Schedule 9 to ICTA. (Sub-paragraph (c) of paragraph 5 relates to approved profit sharing schemes.) The procedure, in paragraph 5 of Schedule 9 to ICTA, is that a “matter” is referred to the Special Commissioners for them to “hear and determine the matter in like manner as an appeal” if the Inland Revenue refuse to approve the scheme. Sub-paragraph (1) provides that the scheme organiser may appeal to the Special Commissioners.

3347.The change to a straightforward appeal procedure is intended to simplify matters. Section 48(2) of TMA 1970 provides that various provisions of that Act, as regards proceedings before the Commissioners, apply to “appeals other than appeals against assessments” and to “proceedings…to be heard and determined in the same way as an appeal”. For the purposes of this paragraph of Schedule 3, there is therefore no real difference in law or practice between provisions that refer to an appeal and those that refer to proceedings where the Special Commissioners shall “hear and determine the matter in like manner as an appeal”. See Change 171 in Annex 1.

3348.Sub-paragraphs (3) and (4) now provide that the Special Commissioners may specify the date from which the scheme is to be treated as approved. See Change 171 in Annex 1.

Paragraph 42: Withdrawal of approval

3349.This paragraph derives from paragraph 3(1) of Schedule 9 to ICTA. The rewritten legislation includes the use of a new label, a “disqualifying event”. This expression does not occur in Schedule 9 to ICTA, but it does occur in the SIP code and in the EMI code.

3350.Sub-paragraph (1) has been expanded to include a requirement that the Inland Revenue give notice of their withdrawal of approval. See Change 170 in Annex 1.

3351.In sub-paragraph (3), it is made clear that SAYE option holders are protected in relation to their existing approved options if approval of a scheme is withdrawn.

3352.Paragraphs 3(2) and (3) of Schedule 9 to ICTA relate to approved profit sharing schemes.

Paragraph 43: Approval ineffective after unapproved alteration

3353.This paragraph derives from paragraph 4 of Schedule 9 to ICTA. An unapproved alteration to an approved SAYE option scheme is ineffective after the date of the alteration. The rule is clarified by the addition of the words “of the scheme” in the final line of sub-paragraph (1).

3354.Sub-paragraph (2) is new. It introduces an express requirement for the Inland Revenue to notify the scheme organiser of their decision to approve or not to approve an alteration. See Change 170 in Annex 1.

Paragraph 44: Appeal against withdrawal of approval etc.

3355.This paragraph derives from paragraph 5 of Schedule 9 to ICTA.

3356.As in the case of paragraph 41, sub-paragraph (2) provides that the scheme organiser may appeal to the Special Commissioners, as opposed to requiring the Special Commissioners to “hear and determine the matter in like manner as an appeal”. See Change 171 in Annex 1.

3357.The change to a straightforward appeal procedure is intended to simplify matters. Section 48(2) of TMA 1970 provides that various provisions of that Act, as regards proceedings before the Commissioners, apply to “appeals other than appeals against assessments” and to “proceedings…to be heard and determined in the same way as an appeal”. For the purposes of this paragraph of Schedule 3, there is therefore no real difference in law or practice between provisions that refer to an appeal and those that refer to proceedings where the Special Commissioners shall “hear and determine the matter in like manner as an appeal”.

3358.The contents of paragraph 5(b) of Schedule 9 to ICTA have not been reproduced. This provision refers to the situation where the Board approved a SAYE scheme subject to a condition and considers that the condition has not been met. There is no longer any reference in the legislation to a conditional approval and no practical experience of paragraph 5(b) operating.

Part 9: Supplementary provisions
Paragraph 45: Power to require information

3359.This paragraph derives from paragraph 6 of Schedule 9 to ICTA and gives the Inland Revenue power to obtain information. The words “think necessary” have been replaced with “reasonably require”. See Change 172 in Annex 1.

3360.This provision, as set out in sub-paragraph (2)(a)(ii), also covers liability to capital gains tax.

3361.Sub-paragraph (3) clarifies the operation of the time limit for providing information by making the period run from the date of the notice. Also the period has been extended from 30 days to 3 months. See Change 172 in Annex 1.

Paragraph 46: Jointly owned companies

3362.This paragraph gives statutory effect to ESC B27, so far as it relates to SAYE option schemes. It corresponds to paragraph 34 in Schedule 4 to this Act, for CSOP schemes. See Change 173 in Annex 1.

Paragraph 47: Meaning of “associated company”

3363.This paragraph derives from the definition of associated company in section 187(2) of ICTA.

Paragraph 48: Minor definitions

3364.This paragraph takes definitions from section 187(2) and (7) of ICTA.

Paragraph 49: Index of defined expressions

3365.This paragraph consists of an index of expressions defined or explained for the purposes of the SAYE code.

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