Income Tax (Earnings and Pensions) Act 2003

Supplementary provisions

483 Extended meaning of “assign” and “release”

(1) For the purposes of this Chapter, a person who receives a benefit in money or money’s worth in consideration for, or otherwise in connection with—

(a) failing or undertaking not to exercise a share option, or

(b) granting or undertaking to grant to another person a right to acquire shares which are subject to a share option or any interest in them,

is to be treated as realising a gain by assigning or releasing the share option for a consideration equal to the amount or value of the benefit.

(2) References in this Chapter to the release of a share option include agreeing to the restriction of the exercise of the option.

484 Amount or value of consideration given for grant of share option

(1) This section applies for the purposes of sections 479 and 480 (amount of gain) in determining the amount or value of any consideration given for the grant of the share option.

(2) If any consideration is given partly in respect of the grant and partly in respect of something else, the amount given in respect of the different things is to be determined on a just and reasonable apportionment.

(3) The consideration given wholly or partly for the grant does not include the performance of any duties of, or in connection with, the office or employment by reason of which the share option was granted.

485 Application of this Chapter where share option exchanged for another

(1) This section applies if—

(a) a share option (“the old option”) is assigned or released, and

(b) the whole or part of the consideration for the assignment or release consists of or includes another share option (“the new option”).

(2) For the purposes of section 480 (amount of gain realised by assigning or releasing option) the new option is not to be treated as consideration for the assignment or release of the old option.

(3) This Chapter applies to the new option as it applies to the old option.

(4) For the purposes of sections 479 and 480 (amount of gain) the amount or value of the consideration for the grant of the new option is to be treated as being the sum of—

(a) the amount by which the amount or value of the consideration given for the grant of the old option exceeds the amount or value 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 grant of the new option, apart from the old option.

(5) Two or more transactions are to be treated for the purposes of subsection (1) as a single transaction by which one share option is assigned for a consideration which consists of or includes another share option if—

(a) the transactions result in—

(i) a person ceasing to hold a share option, and

(ii) that person or a connected person coming to hold another share option, and

(b) one or more of the transactions is effected under arrangements to which two or more persons holding share options, in respect of which there may be liability to tax under this Chapter, are parties.

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

486 Duty to notify matters relating to share options

(1) Subsection (2) applies if in a tax year a company—

(a) grants a share option,

(b) allots or transfers shares on the exercise of a share option,

(c) receives notice of the assignment of a share option, or

(d) provides a benefit in money or money’s worth—

(i) for the assignment of a share option,

(ii) for the release in whole or in part of a share option,

(iii) for or in connection with a failure, or undertaking not, to exercise a share option, or

(iv) for or in connection with the grant of, or an undertaking to grant, a right to acquire shares or an interest in shares to which a share option relates.

(2) The company must provide the Inland Revenue with particulars in writing of the matter.

(3) The particulars must be provided before 7th July in the tax year following that in which the matter occurred.

(4) The particulars of any matter must include particulars of any secondary Class 1 contributions payable in connection with the matter which are—

(a) recovered as mentioned in section 481(2)(a) (agreement for secondary contributor to recover secondary Class 1 contributions in respect of gain from the employee), or

(b) met as mentioned in section 481(3) (liability for secondary Class 1 contributions in respect of gain transferred to the employee).

(5) A company need not deliver particulars under subsection (1) if it has already given them in a notice under paragraph 44 of Schedule 5 (enterprise management incentives: notice of option to be given to Inland Revenue).

In other respects the obligations imposed by subsection (1) and by that paragraph are independent of each other.

487 Minor definitions

(1) In this Chapter—

• “company” means a body corporate;

• “director”—

  (a)

  in the case of a company whose affairs are managed by a board of directors or similar body, means a member of that board or similar body,

  (b)

  in the case of a company whose affairs are managed by a single director or similar person, means that director or person,

  (c)

  in the case of a company whose affairs are managed by its members, means a member,

  and includes a person who is to be or has been a director;

• “employee” includes—

  (a)

  in relation to a company, a person taking part in the management of the affairs of the company who is not a director, and

  (b)

  a person who is to be or has been an employee;

• “secondary Class 1 contributions” has the same meaning as in the Contributions and Benefits Act (see section 1);

• “shares” includes—

  (a)

  stock, and

  (b)

  any securities as defined in section 254(1) of ICTA issued by a company;

• “the Contributions and Benefits Act” means SSCBA 1992 or SSCB(NI)A 1992.

(2) In this Chapter—

• “share option”,

• “the employee”, and

• “the share option”,

have the meaning indicated in section 471(4).