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Income Tax (Earnings and Pensions) Act 2003

Part 8: Supplementary provisions
Paragraph 51: Power to require information

3556.In order to carry out an enquiry as described in paragraph 46 of this Schedule, the Inland Revenue may require further information. This paragraph provides the Inland Revenue with the authority to issue a notice to a person requiring that person to provide such information.

3557.In sub-paragraph (2)(b), the authority also extends to cover information required to determine the tax liability of a person who has been granted a qualifying option. This covers liability to capital gains tax.

3558.There is a penalty for non-compliance with a notice issued under this paragraph. The consequential amendment to section 98 of TMA 1970 is contained in Schedule 6 to this Act.

3559.In sub-paragraph (1)(a) the words “reasonably require” replace the words “think necessary” in sub-paragraph (1)(a) of paragraph 64 of Schedule 14 to FA 2000. This change brings the terminology into line with SIPs (and with comparable provisions in Corporation Tax Self Assessment, known as CTSA). See Change 179 in Annex 1.

3560.Sub-paragraph (3) clarifies the operation of the time limit for providing information by making the minimum three month period start after the date of the notice.

3561.This paragraph derives from paragraph 64 of Schedule 14 to FA 2000.

Paragraph 52: Annual returns

3562.This paragraph sets out that a company must make a return to the Inland Revenue for any year during which its shares are subject to a qualifying option, prescribes when it should make the return and that the return should contain such information as the Inland Revenue may require. It derives from paragraph 65 of Schedule 14 to FA 2000.

3563.The time limit has been changed to “before 7 July” in line with the practice in this Act where it helps to refer to an exact date following the end of the tax year.

3564.As with paragraph 64 of Schedule 14 to FA 2000, there is a penalty for non-compliance with a notice issued under this paragraph. The consequential amendment to section 98 of TMA 1970 is contained in Schedule 6 to this Act.

Paragraph 53: Compliance with time limits

3565.This paragraph allows an extension to the various time limits mentioned throughout the EMI provisions if the person failing to meet a particular time limit has a reasonable excuse for doing so. It derives from paragraph 70 of Schedule 14 to FA 2000.

Paragraph 54: Power to amend by Treasury order

3566.This paragraph allows the Treasury to make an order amending the terms of the trading activities tests for a qualifying company or amending the monetary limits on share values and on a company’s gross assets. This paragraph derives from paragraph 69 of Schedule 14 to FA 2000.

3567.The power to amend by Treasury order, as set out in paragraph 69 of Schedule 14 to FA 2000, did not include any power to amend the £100,000 limit on unexercised employee options. Employee options are defined in section 536(2). That limit, which appears in paragraph 47(1)(g) of that Schedule, has been rewritten as section 536(1)(e). The power to amend by Treasury order has been extended to include that £100,000 limit. See Change 180 in Annex 1.

3568.In practice this limit is only likely to be increased but the new sub-paragraph (2) further protects the taxpayer by explicitly matching changes in the paragraph 5 and 6 limits with that in section 536(1)(e).

Paragraph 55: Meaning of “market value” of shares

3569.This paragraph sets out that the “market value” of shares should have the same meaning as in TCGA 1992, subject to the special rule on the valuation of shares subject to restriction or risk of forfeiture in paragraph 5(7) of this Schedule.

3570.Paragraph 55 derives from paragraph 66(1) of Schedule 14 to FA 2000.

Paragraph 56: Determination of market value of shares

3571.Under this paragraph, if a market value has to be determined for the purposes of the EMI provisions, the company and the Inland Revenue may agree upon that market value and the dates by reference to which it must be determined. Alternatively the Inland Revenue have to decide what that market value is, and issue a notice to the company detailing its decision. The employer company has a right to pre-empt that decision by the Inland Revenue and refer the question instead to the Commissioners for their decision. This paragraph derives from paragraphs 66(2) and 67(1), (4) and (5) of Schedule 14 to FA 2000.

Paragraph 57: Appeal against determination of market value of shares

3572.Where the Inland Revenue have decided on a market value of shares under paragraph 56 of this Schedule, and issued a notice setting out that decision, the employer company may appeal against that decision. This paragraph sets out that right of appeal, saying to whom it must be made and when.

3573.The appeal must be made within a 30 day time limit. The wording in the source legislation does not make it clear whether or not the 30 day period starts running on the day that the notice of determination is given to the employer company or on the day after. Sub-paragraph (2) clarifies this by referring to “within 30 days after the date when notice of their determination is given”. So if, for example, the notice of determination is given during the course of the day on 1 March 2004 any appeal must be made before 1 April 2004.

3574.This paragraph derives from paragraph 67(2), (3) and (5) of Schedule 14 to FA 2000.

Paragraph 58: Minor definitions

3575.This paragraph provides a number of definitions of terms used throughout the EMI provisions. It derives from paragraph 71(1) of Schedule 14 to FA 2000.

3576.There is one new term included in this list of definitions: “group of companies”. This new term has been used in section 539(2)(b) and in paragraphs 5(1)(b)(ii) and (4)(b), and 6(2)(b) and (3) of this Schedule. See Note 69 in Annex 2.

Paragraph 59: Index of defined expressions

3577.This paragraph shows where various terms used in the EMI code are defined. The equivalent list for Schedule 14 to FA 2000 is in paragraph 72 of that Schedule.

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