Corporation Tax Act 2009 (c. 4)

Part 12 U.K. Other relief for employee share acquisitions

Chapter 2 U.K. Relief if shares acquired by employee or other person

Requirements to be met for relief to be available U.K.

1007 Basic requirements for relief under Chapter 2 U.K.

(1) Relief under this Chapter is available to a company (“the employing company”) if—

(a) a person (“the employee”) has employment with the employing company,

(b) that employment (“the relevant employment”) is in relation to a business within subsection (2) (“the qualifying business”),

(c) the employee or another person acquires shares because of the relevant employment,

(d) the conditions set out in sections 1008 and 1009 are met as mentioned in those sections, and

(e) relief under Chapter 3 is not available to the employing company in relation to the acquisition of the shares.

The person who acquires the shares is, in that capacity, called “the recipient”.

(2) A business is within this subsection so far as—

(a) the business is carried on by the employing company, and

(b) the employing company is within the charge to corporation tax in relation to the profits of the business.

1008 Conditions relating to shares acquired U.K.

(1) Each of the following conditions must be met in relation to the shares acquired.

Condition 1

The shares are ordinary shares that are fully paid-up and not redeemable.

Condition 2

The shares are—

(a) shares of a class listed on a recognised stock exchange,

(b) shares in a company that is not under the control of another company, or

(c) shares in a company that is under the control of a listed company.

Condition 3

The shares are shares in—

(a) the employing company,

(b) a company that, when the shares are acquired, is a parent company of the employing company,

(c) a company that, when the shares are acquired, is a member of a consortium that owns the employing company,

(d) a company that, when the shares are acquired, is a member of a consortium that owns a parent company of the employing company, or

(e) a company within subsection (2).

(2) A company (“company A”) is within this subsection if when the shares are acquired—

(a) the employing company or a parent company of the employing company is a member of a consortium that owns another company (“company B”), and

(b) company A is—

(i) a member of that consortium or a parent company of a member of that consortium, and

(ii) a member of the same commercial association of companies as company B.

1009 Conditions relating to employee's income tax position U.K.

(1) If the shares acquired are not restricted shares, the following conditions must be met in relation to the income tax position of the employee.

Condition 1

The employee is subject to a charge under ITEPA 2003 in relation to the acquisition of the shares.

Condition 2

Section 446UA of ITEPA 2003 does not apply in relation to the shares.

(2) If the shares acquired are restricted shares, the following condition must be met in relation to the income tax position of the employee.

The Condition

The employee—

(a) has, as a result of the acquisition of the shares, earnings within Chapter 1 of Part 3 of ITEPA 2003 from the relevant employment that are subject to the charge under Part 2 of that Act, or

(b) is not within paragraph (a) but will be subject to a charge under ITEPA 2003 as a result of section 426 of that Act if an event occurs in relation to the shares that is a chargeable event for the purposes of that section.

(3) Subsection (4) applies if—

(a) the conditions are, or the condition is, not met, but

(b) the conditions or the condition would be met if at all material times the employee had been a UK employee.

(4) This Chapter applies as if the employee had been a UK employee as mentioned in subsection (3)(b).

(5) The employee is a UK employee if—

(a) the employee is UK resident and ordinarily UK resident, and

(b) the duties of the relevant employment are performed in the United Kingdom.