SCHEDULES
SCHEDULE 23Corporation tax relief for employee share acquisition
F1Part 4AProvisions applying in case of convertible shares
22CAmount of relief in case of convertible shares
1
Where the recipient acquires convertible shares, this paragraph applies in place of paragraph 8 or 15 (amount of relief).
2
Relief is available—
a
on the award of the shares or, where they are acquired pursuant to an option, on that acquisition,
b
on any event that is a chargeable event in relation to the convertible shares,
c
on the death of the employee.
3
The amount of the relief on the award of the shares is equal to the amount that constitutes earnings from the employee’s employment under Chapter 1 of Part 3 of the Income Tax (Earnings and Pensions) Act 2003 (as modified by section 437 of that Act) in respect of the award.
4
The amount of the relief on the acquisition of the shares pursuant to an option is equal to the amount that counts as employment income of the employee under section 476 of the Income Tax (Earnings and Pensions) Act 2003 (as modified by section 437 of that Act) in respect of the acquisition, F2... F3No account shall be taken for this purpose of any relief under section 481 or 482 of that Act (relief for secondary Class 1 contributions or special contribution met by employee)..
F64ZA
But if the option is a qualifying option, the amount mentioned in sub-paragraph (4) is increased by (or, if that amount is nil, is taken to be) the amount equal to any difference between—
a
the amount that would have counted as employment income of the employee under section 476 of the Income Tax (Earnings and Pensions) Act 2003 (as modified by section 437 of that Act) in respect of the acquisition apart from the EMI code, and
b
the amount (if any) that in fact counts as such income in accordance with the EMI code.
F54A
Subsections (2) and (3) of section 437 of the Income Tax (Earnings and Pensions) Act 2003 are to be disregarded in determining the amounts mentioned in sub-paragraphs (3) and (4).
5
Where convertible shares acquired as mentioned in sub-paragraph (3) or (4) are also restricted shares, the total amount of the relief in respect of the acquisition is whichever is the greater of—
a
in the case of an award of shares, the amounts mentioned in sub-paragraph (3) and paragraph 21(3), and
b
in the case of an acquisition of shares pursuant to an option, the amounts mentioned in sub-paragraph (4) and paragraph 21(4).
6
The amount of the relief on an event that is a chargeable event in relation to the convertible shares is equal to the amount that counts as employment income of the employee in respect of that event. F4No account shall be taken for this purpose of any relief under section 442A of that Act (relief for secondary Class 1 contributions met by employee).
7
The amount of the relief on the death of the employee is equal to the amount that would have counted as employment income of the employee in relation to the first event following the employee’s death which would have been a chargeable event were the employee still alive.
8
Sections 446G and 446H of the Income Tax (Earnings and Pensions) Act 2003 are to be disregarded in determining the amounts of the reliefs given by sub-paragraphs (6) and (7).
9
If the award or grant was made partly for the purposes of a business meeting the requirements of paragraph 3 (business must be within the charge to corporation tax) and partly for the purposes of a business in relation to which those requirements are not met, the amount of the relief shall be reduced to such extent as is just and reasonable.
10
Where the employee—
a
is not subject to a charge to income tax mentioned in sub-paragraph (3), (4) or (6), or would not be subject to the charge to income tax mentioned in sub-paragraph (7), but
b
would be subject to such a charge if the conditions specified in paragraph 7(2) or 14(2) were met,
the amount of the relief is to be taken to be the amount that would be the amount of the relief if those conditions were met.
11
In this paragraph and paragraph 22D “chargeable event” means an event that is a chargeable event in relation to the convertible shares within section 439(3)(a) of the Income Tax (Employment and Pensions) Act 2003; but a conversion of the convertible shares into anything other than shares which—
a
meet the requirements of paragraph 4, and
b
would meet the requirements of paragraph 6 if they had been acquired by an award of shares,
is not a chargeable event for the purposes of this paragraph.
Sch. 23 Pt. 4A inserted (with effect in accordance with Sch. 22 para. 69(2) of the amending Act) by Finance Act 2003 (c. 14), Sch. 22 para. 69(1); S.I. 2003/1997, art. 2