Chapter 5: Additional relief in cases involving convertible securities
Overview
2675.This Chapter provides relief if the shares acquired, either directly or pursuant to an option, are convertible shares. It gives additional relief if a further employment income charge arises or the employee dies after the shares have been acquired and it also applies if there is an acquisition of convertible securities which are converted into qualifying shares. It is based on Part 4A of Schedule 23 to FA 2003.
Section 1030: Application of Chapter
2676.This section gives the conditions for the Chapter to apply. It is based on paragraphs 22B and 22C of Schedule 23 to FA 2003.
2677.As with relief under Chapter 4 the continuity of law provisions will apply if the shares or securities were acquired when Schedule 23 to FA 2003 was still in force. See the commentary on section 1025.
2678.Subsection (5) applies if the original recipient of an option dies and as a result the shares or securities are acquired by a different person. Relief under Chapter 3 on the acquisition of the shares is given by section 1015(3) which treats the shares as acquired by the original recipient of the option. Subsection (5) does the same for relief under this Chapter.
2679.Subsection (6) applies if there has been a takeover of the company whose shares were to be acquired and the options have been exchanged for options in a new company. Section 1022 gives relief under Chapter 3. Subsection (6) does the same for relief under this Chapter.
Section 1031: Additional relief available if shares acquired are convertible shares etc
2680.This section governs the events upon which and the timing on which relief is available. It is based on paragraphs 22C and 22D of Schedule 23 to FA 2003.
2681.Subsection (2) applies if the employee has died and there is a chargeable event that would have given rise to an employment income charge if the employee had been alive. Paragraph 22C(2)(c) of Schedule 23 to FA 2003 refers to relief being available on the death of the employee. In fact the availability of the relief is not triggered by the death of the employee but by the occurrence of a later chargeable event after the death. This sequence is reflected in subsection (3).
Section 1032: Meaning of “chargeable event”
2682.This section gives the meaning of “chargeable event”. It is based on paragraph 22C of Schedule 23 to FA 2003.
Section 1033: Relief available on occurrence of chargeable event
2683.This section identifies the amount and timing of relief available on a chargeable event. It is based on paragraphs 22C and 22D of Schedule 23 to FA 2003.
Section 1034: Relief available following death of employee
2684.This section identifies the amount of the relief available if the employee dies. It is based on paragraphs 22C and 22D of Schedule 23 to FA 2003.
2685.Subsections (3) and (4) provide relief which is similar to that given by section 1027 for restricted shares in that it is the amount that would count as employment income if the employee were still alive. But, under subsection (2), unlike section 1027, relief is given for the accounting period in which the event occurs, not the period in which the employee dies.
Section 1035: Supplementary provision for purposes of sections 1033 and 1034
2686.This section explains how relief is given under the Chapter. It is based on paragraphs 9, 16 and 22C of Schedule 23 to FA 2003.
2687.The section does not repeat the rules but cross-refers to the equivalent provisions in Chapters 2 and 3.
Section 1036: Transfer of qualifying business by group transfers
2688.This section gives relief to the successor company if the business carried on by the employing company is transferred before a chargeable event or the death of the employee. It is based on paragraph 23 of Schedule 23 to FA 2003.
2689.The section performs the same function for convertible shares that section 1029 performs for restricted shares.
