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Income Tax (Earnings and Pensions) Act 2003

Part 7: Notification of option to Inland Revenue
Paragraph 44: Notice of option to be given to Inland Revenue

3542.A further requirement for an option to be a qualifying option is that its grant must be notified to the Inland Revenue within 92 days. This paragraph sets out this requirement, along with particulars of what information has to be included in that notification and who must make it. The wording in the source legislation does not make it clear whether the day upon which the option is granted is counted in the period of 92 days. Sub-paragraph (1) clarifies that the 92-day period only starts running the day after the date upon which the option is granted.

3543.This paragraph derives from paragraph 2 of Schedule 14 to FA 2000.

3544.In sub-paragraph (7) there is a cross- reference to the term “appropriate time”. This is a new definition in paragraph 1 of this Schedule and is helpful in this Part with, for example, the application of paragraph 46(3).

Paragraph 45: Correction of notice by Inland Revenue

3545.This paragraph gives the Inland Revenue authority to amend a notice given to it under the preceding paragraph. This paragraph also sets out how and when such a correction may be made. It derives from paragraph 3 of Schedule 14 to FA 2000.

3546.This paragraph sets out the time within which the Inland Revenue may amend a notice and the time within which the employer company may reject such a correction. The source legislation gives these time limits as “nine months after the day on which the notice…was given” and “three months from the date of issue of the notice of correction”. The time limit in each case starts running from the day after the day mentioned. Sub-paragraph (4) make this clearer for the time limit for the employer company by referring to “3 months after the date of issue of the notice”.

3547.The wording in sub-paragraph (4) of paragraph 3 of Schedule 14 to FA 2000 states that the employer company can give notice rejecting a correction without saying to whom the notice should be given. A reference to the Inland Revenue has been added in sub-paragraph (4). See Change 178 in Annex 1.

Paragraph 46: Notice of enquiry

3548.This paragraph gives the Inland Revenue authority to enquire whether an option is qualifying or not after a notice has been given under paragraph 44 of this Schedule. The paragraph describes the procedure that should be followed by the Inland Revenue in opening such an enquiry and the time limits for doing so. This paragraph derives from paragraph 4 of Schedule 14 to FA 2000.

3549.Sub-paragraph (5) of paragraph 46 of this Schedule makes it clear that a notice of enquiry can be given before the end of the 92-day notification period if the option is notified to the Inland Revenue before then. The closing date remains 12 months after the end of the 92-day period. See Change 178 in Annex 1.

Paragraph 47: Completion of enquiry: closure notices

3550.This paragraph sets out what happens when an enquiry as described in the preceding paragraph is completed. It provides for the issue of a closure notice, which must include details of the Inland Revenue’s decision as to whether the option in question qualifies under EMI. It also sets out how, to whom and when such a closure notice should be issued. This paragraph derives from paragraph 5(1) to (5) of Schedule 14 to FA 2000.

Paragraph 48: Completion of enquiry: application for closure notice to be given

3551.This paragraph derives from paragraph 5(6) to (9) of Schedule 14 to FA 2000. It sets out that the employer company (or in certain circumstances the individual concerned) has a right to apply to the Commissioners for a direction requiring the Inland Revenue to issue a closure notice as described in paragraph 47 of this Schedule.

Paragraph 49: Effect of enquiry

3552.This paragraph sets out how an enquiry impacts on the qualification of an option under EMI. The Inland Revenue’s decision given in the closure notice determines whether an option qualifies, although that decision may be subject to an appeal under paragraph 50 of this Schedule. The paragraph also explains the procedure if there is no enquiry. In this circumstance the option is taken as being a qualifying option under EMI. This paragraph derives from paragraph 6 of Schedule 14 to FA 2000.

Paragraph 50: Appeals

3553.This paragraph sets out that there is a right of appeal to the Commissioners against a decision by the Inland Revenue that either the grant of an option was not properly notified in accordance with paragraph 44 of this Schedule or that the option does not qualify under EMI. The right of appeal lies with the employer company, although if the decision concerns the “commitment of working time” test in paragraph 26 of this Schedule, it is also open to the individual concerned to appeal. This paragraph derives from paragraph 7 of Schedule 14 to FA 2000.

3554.The replacement of employer company or individual in sub-paragraph (3) with “appellant” makes it clear that only the appellant has the right to elect that the appeal is heard by the Special Commissioners.

3555.The appeal must be made within a 30 day time limit. The source legislation does not make it clear whether or not the 30 day period starts running on the day that the closure notice is given to the employer company or on the day after. Sub-paragraph (3) clarifies this by referring to “within 30 days after the date when the closure notice is given”. So if, for example, the closure notice is given during the course of the day on 1 March 2004 any appeal must be made before 1 April 2004.

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