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Income Tax (Earnings and Pensions) Act 2003

Overview

1818.This short introductory Chapter consists of five sections:

  • Section 417 is concerned with the scope of this Part of the Act;

  • Section 418 is concerned with other provisions relating to share related income;

  • Section 419 introduces the provisions that impose duties to provide information to the Inland Revenue;

  • Section 420 deals with a computational matter of general application;

  • Section 421 deals with the application of this Part to office-holders.

Section 417: Scope of Part 7

1819.This section, which is a drafting addition, introduces the provisions of this Part of this Act. Those provisions contain special rules relating to employees or directors who acquire shares in companies, or options relating to such shares, in connection with their office or employment (see subsection (1)).

1820.Subsection (2) then lists nearly all the chapters in this Part that follow this introductory Chapter. Of these, it may be said that Chapters 2 to 5 are primarily concerned with charges to income tax that may arise in certain circumstances. Chapters 6 to 9 then deal with the plans and schemes under which employees and directors may be offered shares or options on advantageous terms. And, finally, Chapter 10 deals with a particular income tax exemption that arises when employees or directors benefit from a priority allocation of shares.

1821.Subsection (3) lists the chapters in this Part that provide for amounts to count as employment income; and subsection (4) lists the chapters in this Part that provide for exemptions and reliefs from income tax. Subsection (5) records that there is also a supplementary chapter (Chapter 11) which contains provisions about employee benefit trusts.

Section 418: Other provisions about share-related income and exemptions

1822.This section, which is another drafting addition, sets out where other provisions dealing with share related income and exemptions may be found.

1823.Subsections (1) and (2) list other provisions of this Act that deal with share-related income and exemptions.

1824.Subsection (3) deals with approved profit sharing schemes (“APS schemes”). This subsection explains that, in view of the phasing out of these schemes, the legislation relating to APS schemes has not been rewritten in this Act. That legislation will accordingly continue to apply while APS schemes continue.

1825.Subsection (4) preserves the effect of sections 138 to 140 of ICTA where shares or interests in shares were acquired before 26 October 1987.

Section 419: Duties to provide information

1826.This section lists the provisions in this Part that impose duties to provide information to the Inland Revenue.

1827.This section is also a drafting addition, as, once again, it provides signposts to the various sections that are relevant in this context. As these sections are all placed near the end of the chapters in which they appear, they might otherwise be given insufficient attention.

Section 420: Negative amounts treated as nil

1828.The charges to income tax for which this Part of this Act provides constitute “specific employment income” (see sections 6(1) and 7(4) of this Act). Under ICTA this income is charged to income tax under paragraph 5 of section 19(1) of that Act.

1829.In this Part of this Act, where deductions from a chargeable amount are permitted, the relevant provision signals this fact by using a formula.

1830.This section, which is new, gives effect to the general proposition that it is not possible for an allowable loss to arise under paragraph 5 of section 19(1) of ICTA. Deductions might reduce a chargeable amount to nil; but, beyond this point, they could not be used to create a negative amount and (accordingly) an allowable loss. See Note 43 in Annex 2.

Section 421: Application of Part 7 to office-holders

1831.The general rule is that the provisions of the employment income Parts apply equally to offices, unless the contrary is stated (see section 5(1)). But, with one exception, the legislation rewritten in this Part does not apply to office-holders. This section deals with these propositions for the whole of this Part of this Act.

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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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