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Income Tax (Earnings and Pensions) Act 2003

Part 5: Requirements etc. relating to share options
Paragraph 21: Requirements etc. relating to share options: introduction

3424.This is another introductory paragraph, based on paragraph 1(1) of Schedule 9 to ICTA. It lists the requirements relating to share options. The “etc.” refers to the voluntary provisions, which are authorised by paragraphs 24 and 25 of this Schedule.

Paragraph 22: Requirements as to price for acquisition of shares.

3425.This paragraph derives from paragraph 29 of Schedule 9 to ICTA and contains the rule that the exercise price must be not less than 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.

3426.The word “manifestly” is retained in sub-paragraph (1). The word is interpreted to mean variations of “evidently”, “clearly” and “obviously”.

3427.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 23: Share options must not be transferable

3428.This paragraph provides that the participant may not transfer share options. It derives from part of paragraph 27(2) of Schedule 9 to ICTA.

3429.There is a new sub-paragraph (2) which provides a signpost to paragraph 25 of this Schedule which deals with the position after the death of a participant.

Paragraph 24: Exercise of options: ceasing to be director or employee

3430.This derives from part of paragraph 27(1) of Schedule 9 to ICTA and permits a scheme to allow an option holder to exercise options after ceasing to be a full-time director or qualifying employee.

Paragraph 25: Exercise of options: death

3431.This derives from the other part of paragraph 27(2) of Schedule 9 to ICTA (part is reflected in paragraph 23 of this Schedule). It allows a scheme to provide for the exercise of an option after the option holder dies.

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