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Income Tax (Earnings and Pensions) Act 2003

Chapter 11: Supplementary Provisions about employee benefit trusts

2209.Chapters 678 and 9 of this Part set out the provisions for the four types of share scheme: share incentive plans (“SIPs”), Save As You Earn option schemes (“SAYE”), company share ownership plans (“CSOPs”) and enterprise management incentives (“EMIs”).

2210.Each of those schemes includes a number of requirements that the employee must meet. One of the conditions common to each of the schemes is that the employee must not have a “material interest” in the company whose shares are subject to the scheme. A “material interest” means entitlement to more than a certain percentage of the relevant company’s share capital.

2211.In determining whether or not the “material interest” test is satisfied, the entitlement of the individual to any of the company’s shares includes any such entitlement held by any “associates” of the individual.

2212.One kind of associate could be a trustee of a settlement of which the individual is a beneficiary. And one kind of trust that may well exist in the context of a company that is running share incentive schemes is an employee benefit trust. An employee wishing to participate in the share scheme may therefore need to know whether or not to count the trustees of the employee benefit trust as “associates” for the purposes of the “material interest” test.

2213.Each of the four types of share scheme mentioned in paragraph 2209 includes provisions directed to the issue whether the trustees of an employee benefit trust should be counted as associates. The provisions are to the same effect, and state, in each case, that the general rule is that the trustees are not counted as associates if neither the individual in question (with or without associates) nor any associate of the individual (with or without associates) controls more than a stated percentage of the ordinary share capital of the company.

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