Income Tax (Earnings and Pensions) Act 2003 (c. 1)

Part 7 U.K. [F1 Employment income: income and exemptions relating to securities]

Textual Amendments

F1 Pt. 7 heading substituted (with effect in accordance with Sch. 22 para. 2(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 2(1)

Modifications etc. (not altering text)

C1 Pt. 7: power to modify conferred (7.4.2005) by Finance Act 2005 (c. 7), s. 21(8)-(10)

[F2 Chapter 1 U.K. Introduction

Textual Amendments

F2 Pt. 7 Ch. 1 substituted (with effect in accordance with Sch. 22 para. 2(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 2(1)

General U.K.

417 Scope of Part 7 U.K.

(1) This Part contains special rules about cases where securities, interests in securities or securities options are acquired in connection with an employment.

(2) The rules are contained in—

• Chapter 2 (restricted securities),

• Chapter 3 (convertible securities),

• Chapter 3A (securities with artificially depressed market value),

• Chapter 3B (securities with artificially enhanced market value),

• Chapter 3C (securities acquired for less than market value),

• Chapter 3D (securities disposed of for more than market value),

• Chapter 4 (post-acquisition benefits from securities),

• Chapter 5 (securities options),

• Chapter 6 (F3 ... share incentive plans),

• Chapter 7 (F4 ... SAYE option schemes),

• Chapter 8 (F5 ... CSOP schemes),

• Chapter 9 (enterprise management incentives), and

• Chapter 10 (priority share allocations).

(3) The following make provision for amounts to count as employment income—

• Chapters 2 to 6, and

• Chapter 8.

(4) The following make provision for exemptions and reliefs from income tax—

• Chapters 2 and 3, and

• Chapters 5 to 10.

(5) Chapter 11 contains supplementary provisions relating to employee benefit trusts.

(6) Section 5(1) (application of employment income Parts to office-holders generally) does not apply to Chapters 6 to 10; and section 549(5) makes provision about its application to Chapter 11.

Textual Amendments

F3 Word in s. 417(2) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 46, 89 (with Sch. 8 paras. 90-96)

F4 Word in s. 417(2) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 131, 146 (with Sch. 8 paras. 147-157)

F5 Word in s. 417(2) omitted (6.4.2014) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 192, 204 (with Sch. 8 paras. 205-215)

418 Other related provisions U.K.

[F6 (A1) This Part needs to be read with Chapter 5B of Part 2 (taxable specific income from employment-related securities etc: internationally mobile employees).]

(1) In Part 3—

• Chapter 1 (earnings), and

• Chapter 10 (taxable benefits: residual liability to charge),

may also have effect in relation to securities and interests in securities F7 ....

[F8 (1A) But Chapters 1 and 10 of Part 3 do not have effect in relation to—

(a) the acquisition of employment-related securities options (within the meaning of Chapter 5 of Part 7), or

(b) chargeable events (within the meaning given by section 477) occurring in relation to such options.]

(2) Part 7 of Schedule 7 (transitional provisions relating to securities and securities options) may also be relevant.

(3) In view of section 49 of FA 2000 (phasing out of APS schemes) the following are not rewritten in this Act and continue in force unaffected by the repeals made by this Act—

• section 186 of ICTA (APS schemes) and section 187 of that Act (interpretation) so far as relating to APS schemes, and

• Schedule 9 to ICTA (approval of share schemes) so far as relating to APS schemes and Schedule 10 to that Act (further provisions about APS schemes).

• “APS schemes” means profit sharing schemes approved under Schedule 9 to ICTA.

F9 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F6 S. 418(A1) inserted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by Finance Act 2014 (c. 26), Sch. 9 paras. 7, 47

F7 Words in s. 418(1) omitted (6.4.2016) by virtue of Finance Act 2016 (c. 24), s. 17(1)(4)

F8 S. 418(1A) inserted (6.4.2016) by Finance Act 2016 (c. 24), s. 17(2)(4)

F9 S. 418(4) omitted (with effect in accordance with s. 50(3) of the amending Act) by virtue of Finance Act 2008 (c. 9), s. 50(2)(a)

419 Negative amounts treated as nil U.K.

If the result given by any formula under any provision of this Part would otherwise be a negative amount, the result is to be taken to be nil instead.

Interpretation of Chapters 1 to 5 U.K.

420 Meaning of “securities” etc U.K.

(1) Subject to subsections (5) and (6), for the purposes of this Chapter and Chapters 2 to 5 the following are “securities”—

(a) shares in any body corporate (wherever incorporated) or in any unincorporated body constituted under the law of a country or territory outside the United Kingdom,

[F10 (aa) rights under contracts of insurance other than excluded contracts of insurance,]

(b) debentures, debenture stock, loan stock, bonds, certificates of deposit and other instruments creating or acknowledging indebtedness [F11 (other than contracts of insurance)],

(c) warrants and other instruments entitling their holders to subscribe for securities (whether or not in existence or identifiable),

(d) certificates and other instruments conferring rights in respect of securities held by persons other than the persons on whom the rights are conferred and the transfer of which may be effected without the consent of those persons,

(e) units in a collective investment scheme,

(f) [F12 options and] futures, F13 ...

(g) rights under contracts for differences or contracts similar to contracts for differences [F14 (other than contracts of insurance)][F15 , [F16 and

(h) arrangements to which section 564G of ITA 2007 (alternative finance arrangements: investment bond arrangements) applies.]]

[F17 (1A) For the purposes of subsection (1)(aa) a contract of insurance is an excluded contract of insurance if it is—

(a) a contract for an annuity which is (or will be) pension income (see Part 9),

(b) a contract of long-term insurance, other than an annuity contract, which does not have a surrender value and is not capable of acquiring one (whether on conversion or in any other circumstances), or

(c) a contract of general insurance other than one which falls, in accordance with generally accepted accounting practice, to be accounted for as a financial asset or liability.

(1B) In this section—

• “contract of insurance”,

• “contract of long-term insurance”, and

• “contract of general insurance”,

have the same meaning as in the Financial Services and Markets Act 2000 (Regulated Activities) Order 2001.]

(2) In subsection (1)(e) “collective investment scheme” means arrangements—

(a) which are made with respect to property of any description, including money, and

(b) the purpose or effect of which is to enable persons taking part in the arrangements (whether by becoming owners of the property or any part of it or otherwise) to participate in or receive profits or income arising from the acquisition, holding, management or disposal of the property or sums paid out of such profits or income.

(3) In subsection (1)(f) “futures” means rights under a contract for the sale of a commodity or other property under which delivery is to be made at a future date at a price agreed when the contract is made; and for this purpose a price is to be taken to be agreed when the contract is made—

(a) if it is left to be determined by reference to the price at which a contract is to be entered into on a market or exchange or could be entered into at a time and place specified in the contract, and

(b) in a case where the contract is expressed to be by reference to a standard lot and quality, even if provision is made for a variation in the price to take account of any variation in quantity or quality on delivery.

(4) For the purposes of subsection (1)(g) a contract similar to a contract for differences is a contract—

(a) which is not a contract for differences, but

(b) the purpose or pretended purpose of which is to secure a profit or avoid a loss by reference to fluctuations in the value or price of property or an index or other factor designated in the contract.

(5) The following are not “securities” for the purposes of this Chapter or Chapters 2 to 5—

(a) cheques and other bills of exchange, bankers' drafts and letters of credit (other than bills of exchange accepted by a banker),

(b) money and statements showing balances on a current, deposit or savings account,

(c) leases and other dispositions of property and heritable securities, [F18 and]

F19 (d) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(e) [F20 securities] options.

(6) The Treasury may by order amend subsections (1) to (5).

(7) An order under subsection (6) may include any appropriate consequential provision (including provision amending any enactment).

(8) In this Chapter and Chapters 2 to 5—

• “interest”, in relation to securities (or shares), means an interest in them less than full beneficial ownership and includes an interest in proceeds of their sale, but does not include a right to acquire them,

• “securities option” means a right to acquire securities [F21 other than a right to acquire securities which is acquired pursuant to a right or opportunity made available under arrangements the main purpose (or one of the main purposes) of which is the avoidance of tax or national insurance contributions], and

• “shares” includes stock.

Textual Amendments

F10 S. 420(1)(aa) inserted (with effect in accordance with Sch. 2 para. 2(8) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 2(2)

F11 Words in s. 420(1)(b) inserted (with effect in accordance with Sch. 2 para. 2(8) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 2(3)

F12 Words in s. 420(1)(f) inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2006 (c. 25), s. 92(2)

F13 Word in s. 420(1)(f) omitted (14.8.2007) by virtue of The Employment Income (Meaning of Securities) Order 2007 (S.I. 2007/2130), arts. 1, 2(a)

F14 Words in s. 420(1)(g) inserted (with effect in accordance with Sch. 2 para. 2(8) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 2(4)

F15 S. 420(1)(h) and word inserted (14.8.2007) by The Employment Income (Meaning of Securities) Order 2007 (S.I. 2007/2130), arts. 1, 2(b)

F16 S. 420(1)(h) and preceding word substituted (with effect in accordance with s. 381(1) of the amending Act) by Taxation (International and Other Provisions) Act 2010 (c. 8), s. 381(1), Sch. 8 para. 204 (with Sch. 9 paras. 1-9, 22)

F17 S. 420(1A)(1B) inserted (with effect in accordance with Sch. 2 para. 2(8) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 2(5)

F18 Word in s. 420(5)(c) inserted (with effect in accordance with Sch. 2 para. 2(8) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 2(6)(a)

F19 S. 420(5)(d) repealed (with effect in accordance with Sch. 2 para. 2(8) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 2 para. 2(6)(b), Sch. 11 Pt. 2(1)

F20 Word in s. 420(5)(e) inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2006 (c. 25), s. 92(3)

F21 Words in s. 420(8) inserted (with effect in accordance with s. 92(5) of the amending Act) by Finance Act 2006 (c. 25), s. 92(4)

421 Meaning of “market value” etc U.K.

(1) In this Chapter and Chapters 2 to 5 “market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

(2) Where consideration for anything is given in the form of an asset (as opposed to a payment), any reference in this Chapter or any of Chapters 2 to 5 to the amount of the consideration is to the market value of the asset.

421A Meaning of “consideration” U.K.

(1) This section applies for determining for the purposes of Chapters 2 to 5 the amount of the consideration given for anything.

(2) If any consideration is given partly in respect of one thing and partly in respect of another, the amount given in respect of the different things is to determined on a just and reasonable apportionment.

(3) The consideration which is taken to be given wholly or partly for anything does not include the performance of any duties of, or in connection with, an employment.

(4) No amount is to be counted more than once in calculating the amount of any consideration.

Application of Chapters 2 to [F22 4A] U.K.

Textual Amendments

F22 Word in s. 421B cross-heading substituted (with effect in accordance with s. 20(5) of the amending Act) by Finance Act 2005 (c. 7), s. 20(3)(b)

421B Application of Chapters 2 to [F23 4A] U.K.

(1) Subject as follows (and to any provision contained in Chapters 2 to [F24 4A] ) those Chapters apply to securities, or an interest in securities, acquired by a person where the right or opportunity to acquire the securities or interest is available by reason of an employment of that person or any other person.

(2) For the purposes of subsection (1)—

(a) securities are, or an interest in securities is, acquired at the time when the person acquiring the securities or interest becomes beneficially entitled to those securities or that interest (and not, if different, the time when the securities are, or interest is, conveyed or transferred), and

(b) “employment” includes a former or prospective employment.

(3) A right or opportunity to acquire securities or an interest in securities made available by a person’s employer, or by a person connected with a person’s employer, is to be regarded for the purposes of subsection (1) as available by reason of an employment of that person unless—

(a) the person by whom the right or opportunity is made available is an individual, and

(b) the right or opportunity is made available in the normal course of the domestic, family or personal relationships of that person.

(4) Chapters 2 to [F25 4A] cease to apply to securities, or an interest in securities, when subsection (5), (6) or (7) is satisfied.

(5) This subsection is satisfied immediately after the securities are, or the interest in securities is, disposed of otherwise than to an associated person.

(6) This subsection is satisfied immediately before the death of the employee.

(7) This subsection is satisfied 7 years after the first date after the acquisition on which the employee is an employee of none of the following—

(a) the employer,

(b) (if the securities are, or the interest in securities is an interest in, securities issued by a company) the company by which they are issued, or

(c) a person connected with a person within paragraph (a) or (b).

(8) In this Chapter and Chapters 2 to [F26 4A] —

• “the acquisition”, in relation to employment-related securities, means the acquisition of the employment-related securities pursuant to the right or opportunity available by reason of the employment,

• “the employment”, in relation to employment-related securities, means the employment by reason of which the right or opportunity to acquire the employment-related securities is available (“the employee” and “the employer” being construed accordingly unless otherwise indicated), and

• “employment-related securities” means securities or an interest in securities to which Chapters 2 to 4 apply (ignoring any provision of any of those Chapters which limits the application of the Chapter to a particular description or descriptions of employment-related securities).

Textual Amendments

F23 Word in s. 421B heading substituted (with effect in accordance with s. 20(5) of the amending Act) by Finance Act 2005 (c. 7), s. 20(3)(b)

F24 Word in s. 421B(1) substituted (with effect in accordance with s. 20(5) of the amending Act) by Finance Act 2005 (c. 7), s. 20(3)(a)

F25 Word in s. 421B(4) substituted (with effect in accordance with s. 20(5) of the amending Act) by Finance Act 2005 (c. 7), s. 20(3)(a)

F26 Word in s. 421B(8) substituted (with effect in accordance with s. 20(5) of the amending Act) by Finance Act 2005 (c. 7), s. 20(3)(a)

421C Associated persons U.K.

(1) For the purposes of this Chapter and Chapters 2 to 4 the following are “associated persons” in relation to employment-related securities—

(a) the person who acquired the employment-related securities on the acquisition,

(b) (if different) the employee, and

(c) any relevant linked person.

(2) A person is a relevant linked person if—

(a) that person (on the one hand), and

(b) either the person who acquired the employment-related securities on the acquisition or the employee (on the other),

[F27 are or have been connected or (without being or having been connected) are or have been] members of the same household.

(3) But a company which would otherwise be a relevant linked person is not if it is—

(a) the employer,

(b) the person from whom the employment-related securities were acquired,

(c) the person by whom the right or opportunity to acquire the employment-related securities was made available, or

(d) the person by whom the employment-related securities (or the securities in which they are an interest) were issued.

Textual Amendments

F27 Words in s. 421C(2) substituted (18.6.2004 with application in accordance with s. 90(5) of the amending Act) by Finance Act 2004 (c. 12), s. 90(2)

421D Replacement and additional securities and changes in interests U.K.

(1) Subsections (2) and (3) apply where an associated person is entitled to employment-related securities (the “original securities”) and either—

(a) as a result of the conversion of the original securities (or the securities in which they are an interest), or of any other transaction or series of transactions, that person ceases to be entitled to the original securities but that person or another associated person acquires securities or an interest in securities (the “replacement securities”), or

(b) by virtue of that person being entitled to the original securities, that person or another associated person acquires other securities or an interest in other securities (the “additional securities”).

(2) The replacement securities or the additional securities are to be regarded for the purposes of section 421B(1) (securities acquired pursuant to a right or opportunity available by reason of an employment) as acquired pursuant to the same right or opportunity as the original securities.

(3) Where the market value of the original securities is reduced by reason of the issue of, or of securities including, the replacement securities or the additional securities (or the securities in which they are an interest), the amount of that reduction is to be treated for the purposes of Chapters 2 and 3 as consideration or additional consideration given for the acquisition of the replacement securities or the additional securities [F28 and for the purposes of Chapter 3C as a payment made for their acquisition at or before the time of the acquisition].

(4) Subsections (2) and (3) apply whether or not the replacement securities, or the additional securities, were acquired for consideration [F29 or a payment was made for their acquisition at or before the time of the acquisition].

(5) Where Chapters 2 to [F30 4A] apply to an interest in securities, an increase of that interest is to be treated for the purposes of section 421B(1) (securities acquired pursuant to a right or opportunity available by reason of an employment) as a separate interest acquired pursuant to the same right or opportunity as the original interest.

(6) Where Chapters 2 to [F31 4A] apply to an interest in securities, a reduction of that interest (otherwise than by a disposal to an associated person) is to be treated for the purposes of those Chapters as the disposal otherwise than to an associated person of a separate interest proportionate to the reduction.

Textual Amendments

F28 Words in s. 421D(3) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 9 para. 35(2)

F29 Words in s. 421D(4) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 9 para. 35(3)

F30 Word in s. 421D(5) substituted (with effect in accordance with s. 20(5) of the amending Act) by Finance Act 2005 (c. 7), s. 20(3)(c)

F31 Word in s. 421D(6) substituted (with effect in accordance with s. 20(5) of the amending Act) by Finance Act 2005 (c. 7), s. 20(3)(c)

F32 421E Exclusions: residence etc U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F32 S. 421E omitted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 9 paras. 8, 47

421F Exclusions: public offers U.K.

(1) [F33 Chapters 2, 3 and 3C] do not apply in relation to employment-related securities that are shares acquired under the terms of an offer to the public or an interest in shares so acquired.

[F34 (1A) But subsection (1) does not disapply those Chapters if the main purpose (or one of the main purposes)—

(a) of the arrangements under which the right or opportunity under which the shares were acquired, or

(b) for which the shares are held,

is the avoidance of tax or national insurance contributions.]

(2) In a case within subsection (1) of section 544 (exemption for priority share allocations where offer to employees separate from public offer), any acquisition made under the terms of either the public offer or the employee offer within the meaning of that subsection is to be treated for the purposes of this section as made under the terms of an offer to the public.

(3) Subsection (2) applies whether or not there is any benefit within section 544(2) (benefit derived from entitlement to priority allocation exempt from income tax).

Textual Amendments

F33 Words in s. 421F(1) substituted (18.6.2004 with application in accordance with s. 89(4)(5) of the amending Act) by Finance Act 2004 (c. 12), s. 89(2)

F34 S. 421F(1A) inserted (18.6.2004 with application in accordance with s. 89(4)(5) of the amending Act) by Finance Act 2004 (c. 12), s. 89(3)

F35 421G Exclusions: approved plan or scheme securities U.K.

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F35 S. 421G repealed (18.6.2004 with effect in accordance with s. 88(11)-(13) of the amending Act) by Finance Act 2004 (c. 12), s. 88(2), Sch. 42 Pt. 2(11)

421H Meaning of “employee-controlled” etc U.K.

(1) For the purposes of Chapters 2 to 4 a company is “employee-controlled” by virtue of shares of a class if—

(a) the majority of the company’s shares of that class (other than any held by or for the benefit of an associated company) are held by or for the benefit of employees of the company or a company controlled by the company, and

(b) those employees are together able as holders of the shares to control the company.

In this subsection “employee” includes a person who is to be or has been an employee.

(2) In this section and Chapters 2 to 4 “associated company” has the [F36 meaning given by section 449 of CTA 2010].

Textual Amendments

F36 Words in s. 421H(2) substituted (with effect in accordance with s. 1184(1) of the amending Act) by Corporation Tax Act 2010 (c. 4), s. 1184(1), Sch. 1 para. 386 (with Sch. 2)

421I Consideration for acquisition of employment-related securities U.K.

(1) This section applies for determining for the purposes of Chapters 2 to 3A the amount of the consideration given for the acquisition of employment-related securities.

(2) References to consideration given for the acquisition of the employment-related securities are to consideration given by—

(a) the employee, or

(b) (if not the employee) the person by whom the employment-related securities were acquired.

(3) The amount of the consideration given by a person for the acquisition of the employment-related securities includes the amount of any consideration given for a right to acquire the employment-related securities.

(4) If the right to acquire the employment-related securities (“the new option”) is the whole or part of the consideration for the assignment or release of another right to acquire them (“the old option”), the amount of the consideration given for the new option is to be treated as being the sum of—

(a) the amount by which the amount of the consideration given for the old option exceeds the amount of any consideration for the assignment or release of the old option, apart from the new option, and

(b) any valuable consideration given for the new option, apart from the old option.

(5) Two or more transactions are to be treated for the purposes of subsection (4) as a single transaction by which a right to acquire the employment-related securities is assigned for a consideration which consists of or includes another right to acquire the employment-related securities if—

(a) the transactions result in a person ceasing to hold a right to acquire the employment-related securities and that person or a connected person coming to hold another right to acquire them, and

(b) one or more of the transactions is effected under arrangements to which two or more persons who hold rights to acquire the employment-related securities, in respect of which there may be a liability to tax under Chapter 5 of this Part (securities options), are parties.

(6) Subsection (5) applies regardless of the order in which the assignment and the acquisition occur.

(7) In this section “release”, in relation to a right to acquire the employment-related securities, includes agreeing to the restriction of the exercise of the right.

Information U.K.

421J Duty to provide information U.K.

(1) This section applies in relation to reportable events.

(2) Section 421K explains what are reportable events for the purposes of this section.

F37 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) [F38 An officer of Revenue and Customs] may by notice require any person to provide [F39 the officer] with such particulars of any reportable events—

(a) which take place in a period specified in the notice, and

(b) in relation to which that person is a responsible person,

as are required by the notice or, if no reportable event in relation to which that person is a responsible person has taken place in that period, to state that fact.

(5) A notice under subsection (4) must specify a date by which it must be complied with.

(6) That date must not be less than 30 days after the date when the notice is given.

F40 (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F41 (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9) Section 421L explains who are the responsible persons in relation to a reportable event.

(10) The particulars required [F42 by a notice under] this section must be provided in a form specified by [F43 the Commissioners for Her Majesty’s Revenue and Customs].

F44 (11) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F45 (12) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Textual Amendments

F37 S. 421J(3) omitted (with effect in accordance with Sch. 8 para. 233 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 227(2), 232

F38 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(1); S.I. 2005/1126, art. 2(2)(h)

F39 Words in s. 421J(4) substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 103(1)(i); S.I. 2005/1126, art. 2(2)(h)

F40 S. 421J(7) omitted (with effect in accordance with Sch. 8 para. 233 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 227(2), 232

F41 S. 421J(8) omitted (with effect in accordance with Sch. 8 para. 233 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 227(2), 232

F42 Words in s. 421J(10) substituted (with effect in accordance with Sch. 8 para. 233 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 227(3), 232

F43 Words in Act substituted (18.4.2005) by Commissioners for Revenue and Customs Act 2005 (c. 11), s. 53(1), Sch. 4 para. 102(2); S.I. 2005/1126, art. 2(2)(h)

F44 S. 421J(11) omitted (with effect in accordance with Sch. 8 para. 233 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 227(2), 232

F45 S. 421J(12) omitted (with effect in accordance with Sch. 8 para. 233 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 8 paras. 227(2), 232

[F46 421JA Annual returns U.K.

(1) This section applies in relation to a person who is (or has been) a responsible person (see section 421L) in relation to reportable events (see section 421K).

(2) The person must give to Her Majesty's Revenue and Customs (“HMRC”) a return for each tax year falling (wholly or partly) in the person's reportable event period.

(3) The person's “reportable event period” is the period—

(a) beginning when the first reportable event occurs in relation to which the person is a responsible person, and

(b) ending when the person will no longer be a responsible person in relation to reportable events.

(4) The return for a tax year must—

(a) contain, or be accompanied by, such information as HMRC may require, and

(b) be given on or before 6 July in the following tax year.

(5) The information which may be required under subsection (4)(a) includes (in particular) information to enable HMRC to determine the liability to tax, including capital gains tax, of any employee.

(6) If the person becomes aware that—

(a) anything which should have been included in, or should have accompanied, a return for a tax year was not included in, or did not accompany, the return,

(b) anything which should not have been included in, or should not have accompanied, a return for a tax year was included in, or accompanied, the return, or

(c) any other error or inaccuracy has occurred in relation to a return for a tax year,

the person must give an amended return correcting the position to HMRC without delay.

(7) A person's return for a tax year under this section need not contain, or be accompanied by, duplicate information and a person is not required to give a return for a tax year under this section if it would only contain, or be accompanied by, duplicate information.

(8) “Duplicate information” means information which is contained in or accompanies—

(a) a return which another person gives for the tax year under this section, or

(b) a return which any person gives for the tax year under any of the following provisions—

(i) paragraph 81B of Schedule 2 (annual return for Schedule 2 SIP);

(ii) paragraph 40B of Schedule 3 (annual return for Schedule 3 SAYE option scheme);

(iii) paragraph 28B of Schedule 4 (annual return for Schedule 4 CSOP scheme);

(iv) paragraph 52 of Schedule 5 (annual return for company whose shares are subject to qualifying options under the EMI code).

Textual Amendments

F46 Ss. 421JA-421JF inserted (with effect in accordance with Sch. 8 para. 234 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 228, 232

421JB Returns to be given electronically U.K.

(1) A return under section 421JA, and any information accompanying the return, must be given electronically.

(2) But, if HMRC consider it appropriate to do so, HMRC may allow a person to give a return or any accompanying information in another way; and, if HMRC do so, the return or information must be given in that other way.

(3) The Commissioners for Her Majesty's Revenue and Customs—

(a) must prescribe how returns and accompanying information are to be given electronically;

(b) may make different provision for different cases or circumstances.

Textual Amendments

F46 Ss. 421JA-421JF inserted (with effect in accordance with Sch. 8 para. 234 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 228, 232

421JC Penalties for late returns U.K.

(1) This section applies if a person fails to give a return under section 421JA for a tax year (containing, or accompanied by, all required information) on or before the date mentioned in section 421JA(4)(b) (“the date for delivery”).

(2) The person is liable for a penalty of £100.

(3) If the person's failure continues after the end of the period of 3 months beginning with the date for delivery, the person is liable for a further penalty of £300.

(4) If the person's failure continues after the end of the period of 6 months beginning with the date for delivery, the person is liable for a further penalty of £300.

(5) The person is liable for a further penalty under this subsection if—

(a) the person's failure continues after the end of the period of 9 months beginning with the date for delivery,

(b) HMRC decide that such a penalty should be payable, and

(c) HMRC give notice to the person specifying the period in respect of which the penalty is payable.

(The person may be liable for more than one penalty under this subsection.)

(6) The penalty under subsection (5) is £10 for each day that the failure continues during the period specified in the notice under subsection (5)(c).

(7) The period specified in the notice under subsection (5)(c)—

(a) may begin earlier than the date on which the notice is given, but

(b) may not begin until after the end of the period mentioned in subsection (5)(a) or, if relevant, the end of any period specified in any previous notice under subsection (5)(c) given in relation to the failure.

(8) Liability for a penalty under this section does not arise if the person satisfies HMRC (or, on an appeal under section 421JF, the tribunal) that there is a reasonable excuse for the person's failure.

(9) For the purposes of subsection (8)—

(a) an insufficiency of funds is not a reasonable excuse, unless attributable to events outside the person's control,

(b) where the person relies on any other person to do anything, that is not a reasonable excuse unless the (first mentioned) person took reasonable care to avoid the failure, and

(c) where the person had a reasonable excuse for the failure but the excuse ceased, the person is to be treated as having continued to have the excuse if the failure is remedied without unreasonable delay after the excuse ceased.

Textual Amendments

F46 Ss. 421JA-421JF inserted (with effect in accordance with Sch. 8 para. 234 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 228, 232

421JD Penalty if information not given correctly U.K.

(1) This section applies if a return under section 421JA, or any information accompanying such a return—

(a) is given otherwise than in accordance with section 421JB, or

(b) contains a material inaccuracy—

(i) which is careless or deliberate, or

(ii) which is not corrected as required by section 421JA(6).

(2) The person in question is liable for a penalty of an amount decided by HMRC.

(3) The penalty must not exceed £5,000.

(4) For the purposes of subsection (1)(b)(i) an inaccuracy is careless if it is due to a failure by the person in question to take reasonable care.

Textual Amendments

F46 Ss. 421JA-421JF inserted (with effect in accordance with Sch. 8 para. 234 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 228, 232

421JE Assessment of penalties U.K.

(1) This section applies if a person is liable for a penalty under section 421JC or 421JD.

(2) HMRC must assess the penalty and notify the person of the assessment.

(3) Subject to subsection (4), the assessment must be made no later than 12 months after the date on which the person becomes liable for the penalty.

(4) In the case of a penalty under section 421JD(1)(b), the assessment must be made no later than—

(a) 12 months after the date on which HMRC become aware of the inaccuracy, and

(b) 6 years after the date on which the person becomes liable for the penalty.

(5) A penalty payable under this Part must be paid—

(a) no later than 30 days after the date on which the notice under subsection (2) is given to the person, or

(b) if notice of appeal is given against the penalty under section 421JF(1) or (2), no later than 30 days after the date on which the appeal is determined or withdrawn.

(6) The penalty may be enforced as if it were income tax or, if the person is a company within the charge to corporation tax, corporation tax charged in an assessment and due and payable.

(7) Sections 100 to 103 of TMA 1970 do not apply to a penalty under section 421JC or 421JD.

Textual Amendments

F46 Ss. 421JA-421JF inserted (with effect in accordance with Sch. 8 para. 234 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 228, 232

421JF Appeals U.K.

(1) A person may appeal against a decision of HMRC that the person is liable for a penalty under section 421JC or 421JD.

(2) A person may appeal against a decision of HMRC as to the amount of a penalty payable by the person under section 421JC or 421JD.

(3) Notice of appeal must be given to HMRC no later than 30 days after the date on which the notice under section 421JE(2) is given to the person.

(4) On an appeal under subsection (1) which is notified to the tribunal, the tribunal may affirm or cancel the decision.

(5) On an appeal under subsection (2) which is notified to the tribunal, the tribunal may—

(a) affirm the amount of the penalty decided, or

(b) substitute another amount for that amount.

(6) Subject to this section and section 421JE, the provisions of Part 5 of TMA 1970 relating to appeals have effect in relation to an appeal under this section as they have effect in relation to an appeal against an assessment to income tax or, if the person is a company within the charge to corporation tax, corporation tax.]

Textual Amendments

F46 Ss. 421JA-421JF inserted (with effect in accordance with Sch. 8 para. 234 of the amending Act) by Finance Act 2014 (c. 26), Sch. 8 paras. 228, 232

421K Reportable events U.K.

(1) This section applies for the purposes of [F47 sections 421J and 421JA (duties to provide information and annual returns)].

(2) Each of the events mentioned in subsection (3) is a reportable event.

(3) The events are—

(a) an acquisition (or an event treated as an acquisition) of securities, an interest in securities or a securities option pursuant to a right or opportunity available by reason of the employment of the person who acquires the securities, interest in securities or securities option or of any other person,

(b) an event which is a chargeable event in relation to securities, or an interest in securities, for the purposes of section 426 (chargeable events in relation to restricted securities and restricted interests in securities),

(c) an event which is a chargeable event in relation to securities, or an interest in securities, for the purposes of section 438 (chargeable events in relation to convertible securities and interests in convertible securities),

(d) the doing of anything which gives rise to a taxable amount counting as employment income under section 446L (artificial enhancement of market value of securities),

(e) an event which discharges a notional loan relating to securities, or an interest in securities, under section 446U (securities and interests in securities acquired for less than market value),

(f) a disposal of securities, or an interest in securities, by virtue of which Chapter 3D of this Part applies (securities and interests in securities disposed of for more than market value),

(g) the receipt of a benefit which gives rise to a taxable amount counting as employment income under section 447 (charge on benefit from securities or interest in securities) [F48 or would give rise to such an amount but for Chapter 4A (shares in research institution spin-out companies)],

(h) the assignment or release of a securities option acquired pursuant to a right or opportunity available by reason of the employment of the person who acquires the securities option or any other person, and

(i) the receipt of a benefit in money or money’s worth which is (or by virtue of section 477(6) is to be regarded as being) received in connection with such a securities option.

Textual Amendments

F47 Words in s. 421K(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 229, 232

F48 Words in s. 421K(3)(g) inserted (with effect in accordance with s. 20(5) of the amending Act) by Finance Act 2005 (c. 7), s. 20(4)

421L Persons to whom section 421J applies U.K.

(1) This section applies for the purposes of [F49 sections 421J and 421JA (duties to provide information and annual returns)] .

(2) Each of the following persons is a responsible person in relation to a reportable event.

(3) The persons are—

(a) the employer in question,

(b) any host employer of the employee in question,

[F50 (ba) if the employee in question is a continental shelf worker and PAYE regulations do not apply to the employer in question, any person who is a relevant person in relation to the employee in question,]

(c) the person from whom the securities in question were, or interest or option in question was, acquired, and

(d) in relation to a reportable event concerning securities or an interest in securities which are not excluded securities, the person by whom the securities were issued.

(4) In subsection (3)(b) “host employer” means a person other than the employer in question—

(a) for whom the employee in question works at the time of the reportable event, and

(b) who would, by virtue of subsection (2) of section 689 (employees of non-UK employers working for a person other than the employer), be treated for the purposes of PAYE regulations as making a payment of PAYE income of the employee in question if a payment to which subsection (5) would apply were made by the employer in question in respect of the period during which the employee works for the other person.

(5) For the purposes of subsection (4)(b) this subsection would apply to a payment if—

(a) it were a payment of PAYE income of the employee, and

(b) the conditions in subsection (1)(c) and (d) of section 689 were satisfied in relation to the payment.

[F51 (5A) In subsection (3)(ba) “continental shelf worker” and “relevant person” have the meaning given by section 689A(11) (PAYE: oil and gas workers on the continental shelf).]

(6) For the purposes of subsection (3)(d) securities are excluded securities in relation to a reportable event if they are—

(a) loan stock, bonds or other instruments creating or acknowledging indebtedness issued by or on behalf of any national or regional government or local authority (in the United Kingdom or elsewhere) or any body whose members consists of states, national or regional governments or local authorities, or

(b) securities which are issued by a person who, at the time of the reportable event, is not connected with the employer in question and which are listed [F52 on a recognised stock exchange or dealt in on any designated market in the United Kingdom].

[F53 (7) In subsection (6)(b) “designated” means designated by an order made by the Commissioners for Her Majesty's Revenue and Customs for the purposes of that provision.

(8) An order under subsection (7) may—

(a) designate a market by name or by reference to any class or description of market, and

(b) vary or revoke a previous order under that subsection.]]

Textual Amendments

F49 Words in s. 421L(1) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 230, 232

F50 S. 421L(3)(ba) inserted (17.7.2014) by Finance Act 2014 (c. 26), s. 21(3)(a)

F51 S. 421L(5A) inserted (17.7.2014) by Finance Act 2014 (c. 26), s. 21(3)(b)

F52 Words in s. 421L(6)(b) substituted (19.7.2007) by Finance Act 2007 (c. 11), Sch. 26 para. 10(2)(a)

F53 S. 421L(7)(8) inserted (19.7.2007) by Finance Act 2007 (c. 11), Sch. 26 para. 10(2)(b)