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Income Tax (Earnings and Pensions) Act 2003

Section 495: No charge on increase in value of shares of dependent subsidiary

2031.This section is the second of three that deal with tax advantages connected with the holding of shares. It provides that a participant is not liable to income tax by virtue of section 453 (charge on increase in value of shares of dependent subsidiary) in respect of any of the participant’s shares that are subject to the plan when the chargeable increase is determined for the purposes of that section.

2032.This section derives from paragraph 80(3) of Schedule 8 to FA 2000. In order to make that provision easier to understand, the rewritten legislation now consists of two subsections.

2033.Subsection (1) makes a minor change to the law. If plan shares are sold while they are still in the plan it is not the practice of the Inland Revenue to attempt to charge income tax under the dependent subsidiary charge in section 79 of FA 1988. However, there is a problem with the wording in paragraph 80 in that if the “appropriate time” for the purposes of that section is the time of sale it is debatable whether at that point the shares are still subject to the plan. In order to make it clear that no charge to income tax arises under section 453 in such circumstances, the words “or immediately before” have been added before the words “the appropriate time” at the end of this subsection. See Change 126 in Annex 1.

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