Part 7

Employment income: income and exemptions relating to securities
Chapter 9

Enterprise management incentives

Tax advantages where disqualifying events

Disqualifying events relating to relevant company
534
1
The following events relating to the relevant company are disqualifying events in relation to a qualifying option—
a
when the relevant company becomes a 51% subsidiary of another company;
b
when the relevant company comes under the control of—
i
another company, or
ii
another company and any other person connected with that other company,
without becoming a 51% subsidiary of that other company;
c
when the relevant company ceases to meet the trading activities requirement (see paragraphs 13 to 23 of Schedule 5).
2
But where a replacement option has been granted, an event within subsection (1)(a) or (b) is not a disqualifying event in relation to the old option (see paragraph 41(2) of Schedule 5) if the event occurs at any time during the period—
a
beginning at the same time as the period within which the replacement option had to be granted (see paragraph 42 of Schedule 5), and
b
ending with the release of the rights under the old option.
3
A disqualifying event is to be treated as occurring in relation to a qualifying option if the circumstances mentioned in subsection (4) arise.
4
The circumstances are that—
a
the relevant company was a qualifying company at the time when the option was granted as a result only of preparations to carry on a qualifying trade; and
b
either—
i
the preparations cease to be carried on, or
ii
the initial period comes to an end,
without the relevant company (or, if it is a parent company, any member of the group) beginning to carry on that qualifying trade.
5
“The initial period” means the period of two years after the date when the option was granted.
6
Paragraph 41(5)(b) of Schedule 5 has the effect that a replacement option is to be treated as granted on the date when the original option was granted.
7
Subsection (1)(a) and (b) do not apply where the relevant company is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).
Pt. 7: power to modify conferred (7.4.2005) by Finance Act 2005 (c. 7), s. 21(8)-(10)
S. 534(7) inserted (retrospective to 1.10.2014) by Finance Act 2016 (c. 24), Sch. 3 para. 1
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)