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Income Tax (Earnings and Pensions) Act 2003

Section 505: Charge on free or matching shares ceasing to be subject to plan

2059.This section is the first of three that impose tax charges connected with shares ceasing to be subject to SIPs. This section is the main charging provision for free and matching shares; and it provides for the charge to vary with the length of the period for which the shares have been held. If the shares have been held for more than five years, there is no income tax liability under this section.

2060.This section derives from sub-paragraphs (1) to (6) of paragraph 81 of Schedule 8 to FA 2000.

2061.Subsection (1) introduces two new terms, “the award date” and “the exit date”. These two terms are then deployed in subsections (2) to (5). Subsection (5), by providing that the “relevant tax year” is the tax year in which the exit date falls, has the effect that any charge to tax will arise in that year. See Note 3(B) in Annex 2.

2062.Subsection (6) combines material at present contained in sub-paragraphs (5) and (6) of paragraph 81.

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