Effect of notice under s. 1
2
1
Subject to subsections (3) and (4) and section 3, where liability to contributions in respect of gains realised after 7th November 2000 on the exercise, assignment or release of any right falls under section 1 to be determined in accordance with this section—
a
no liability to pay any Class 1 contributions in respect of any gain realised after the passing of this Act shall arise on the exercise, assignment or release of that right;
b
any liability to pay Class 1 contributions in respect of any gain realised after 7th November 2000 and before the passing of this Act on any exercise, assignment or release of that right shall be deemed never to have arisen; and
c
the person who gave the notice under that section in respect of that right shall become liable to pay a special contribution in respect of that right under this section.
2
The amount of the special contribution in respect of any right shall be—
a
12.2 per cent. of the amount (if any) in respect of which Class 1 contributions would have been payable by virtue of section 4(4)(a) of the Contributions and Benefits Act if the right had been exercised in full on 7th November 2000 without the giving of any further consideration for the shares acquired by the exercise of that right; or
b
where there is no such amount, nil.
3
Neither paragraph (a) nor paragraph (b) of subsection (1) shall apply in relation to any liability to pay Class 1 contributions in respect of so much of any gain realised on the assignment or release of a right as is equal to the amount (if any) by which the first of the following amounts exceeds the second, that is to say—
a
the amount of any valuable consideration given for the assignment or release; and
b
the amount which (in accordance with the provisions of section 479 of the Income Tax (Earnings and Pensions) Act 2003) would have been taken to be the amount of the gain realised by an exercise in full of that right immediately before the time of its assignment or release (less any deductible amounts under section 480(1) to (6) of that Act).
4
Subject to subsection (5), where—
a
a person becomes liable to pay to the Inland Revenue a special contribution under this section in respect of any right, but
b
that liability is not discharged before the end of the period of ninety-two days beginning with the day on which this Act is passed,
the Contributions and Benefits Act and this Act shall have effect as if no notice had been given under section 1 of this Act in respect of that right.
5
If it appears to the Inland Revenue that a person who has given a notice under section 1 in respect of any right and who would (but for subsection (4) of this section), be liable by virtue of that notice to pay a special contribution under this section—
a
did, within the period of ninety-two days mentioned in that subsection, make a payment in respect of that liability to the Inland Revenue of an amount which he had reasonable grounds for believing was the correct amount of his liability,
b
did, within that period, give notification to the Inland Revenue, in the belief on reasonable grounds that it was correct, that the liability arising by virtue of that notice was nil, or
c
has a reasonable excuse for having failed to do either of those things within that period,
the Inland Revenue may, if they think fit, direct that, in relation to that notice, subsection (1) of section 1 and subsection (4) of this section are to be treated as having had effect with the period of ninety-two days mentioned in those subsections extended by such further period as they may determine.
6
A decision as to the giving or refusal of a direction under subsection (5) shall be made by an officer of the same description and be subject to the same rights of appeal as any decision, to which the giving of the direction is or would be relevant, as to whether a person is or has been liable to pay contributions of any particular class.
7
Where paragraph (b) of subsection (1) applies in relation to any liability to pay Class 1 contributions and amounts have already been paid to the Inland Revenue in respect of that liability before the passing of this Act—
a
all such repayments shall be made as may be necessary by virtue of that paragraph; but
b
any amount which it would otherwise be necessary to repay in respect of a secondary Class 1 contribution paid by a person who has become liable to pay a special contribution under this section may be retained and set against any undischarged liability of his to pay that special contribution.
Words in s. 2(3)(b) substituted (6.4.2003 with effect in accordance with s. 723(1)(a)(b) of the amending Act) by Income Tax (Earnings and Pensions) Act 2003 (c. 1), s. 723, Sch. 6 para. 260 (with Sch. 7)
Words in s. 2(3)(b) inserted (with effect in accordance with Sch. 22 para. 55(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 56; S.I. 2003/1997, art. 2