Corporation Tax Act 2009 (c. 4)

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

Modifications etc. (not altering text)

C1 Pt. 12 applied by 2010 c. 8, s. 425(5) (as inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1 (with Sch. 5 paras. 27, 32-34))

Chapter 3 U.K. Relief if employee or other person obtains option to acquire shares

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

1015 Basic requirements for relief under Chapter 3 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 obtains an option to acquire shares because of the relevant employment,

(d) the person who obtains the option acquires shares pursuant to the option, and

(e) the conditions set out in sections 1016 and 1017 are met as mentioned in those sections.

The person who obtains the option 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 [F1 “ or would be but for section 18A].

(3) If—

(a) the recipient dies, and

(b) subsequently another person acquires shares pursuant to the option,

this Chapter applies as if the recipient were alive and the shares were acquired by the recipient.

Textual Amendments

F1 Words in s. 1015(2)(b) inserted (19.7.2011) by Finance Act 2011 (c. 11), Sch. 13 paras. 10, 31

[F2 1015A Application of Chapter: employees of overseas companies who take up employment with a UK company U.K.

(1) This section applies if—

(a) a person (“E”) has, or had, an employment with a non-UK resident company not within the charge to corporation tax (“the overseas employment”),

(b) E or another person obtains an option to acquire shares because of the overseas employment,

(c) E has an employment (“the UK employment”) with a company that is a UK resident company or a non-UK resident company within the charge to corporation tax,

(d) the person who obtained the option acquires shares pursuant to it, and

(e) subsection (2) applies.

(2) This subsection applies if—

(a) an amount of employment income of E is charged to tax under ITEPA 2003 in relation to the acquisition because of the UK employment, or

(b) it is because of the UK employment that E or another person is able to acquire the shares pursuant to the option.

(3) For the purposes of section 1015(1)(c) (requirement that option is obtained because of employment), the option is (regardless of when it is obtained) to be treated as if it is obtained because of the UK employment.

(4) In section 1016 (conditions relating to the shares acquired) references to the employing company are to be read as including references to the company mentioned in subsection (1)(a).

(5) If, in relation to the acquisition, an amount of relief would otherwise be available that is more than the total amount of employment income of E charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.

(6) If relief is available to more than one company in respect of the same acquisition of shares pursuant to an option, relief may only be given to one of them in respect of that acquisition.

Textual Amendments

F2 Ss. 1015A, 1015B inserted (6.4.2015) by Finance Act 2014 (c. 26), Sch. 9 paras. 43, 47

1015B Application of Chapter in relation to employees of overseas companies who work for companies in the UK U.K.

(1) This section applies if—

(a) a person has an employment (“the actual employment”) with a non-UK resident company not within the charge to corporation tax (“the overseas employer”),

(b) in performing any of the duties of the actual employment, the person works in the United Kingdom for, but is not employed by, another company (“the host employer”), and

(c) the host employer is—

(i) a UK resident company, or

(ii) a non-UK resident company within the charge to corporation tax.

(2) For the purposes of this Chapter, the person is to be treated as having an employment (“the deemed employment”) with the host employer, the duties of which consist of the work the person does for the host employer.

(3) Subsection (4) applies if—

(a) an option to acquire shares (“the relevant option”) is obtained because of the actual employment,

(b) shares are acquired pursuant to the relevant option, and

(c) because of the work the person does for the host employer, an amount of employment income of the person is charged to tax under ITEPA 2003 in relation to the acquisition of the shares.

(4) For the purposes of section 1015(1)(c) (requirement that option is obtained because of employment), the relevant option is (regardless of when it is obtained) to be treated, so far as would not otherwise be the case, as if it is obtained because of the deemed employment.

(5) In section 1016 (conditions relating to the shares acquired) references to the employing company are to be read as including references to the overseas employer.

(6) If, in relation to an acquisition of shares pursuant to an option, the amount of relief would otherwise be more than the total amount of employment income of the person charged to tax under ITEPA 2003, the amount of relief is (notwithstanding any other provision of this Chapter) limited to the total amount of that income so charged.

(7) If relief is available to more than one company in respect of the same acquisition of shares pursuant to an option, relief may only be given to one of them in respect of that acquisition.

(8) For the purposes of this section a person works for another person if the person provides, and is obliged to provide, personal service to the other person.]

Textual Amendments

F2 Ss. 1015A, 1015B inserted (6.4.2015) by Finance Act 2014 (c. 26), Sch. 9 paras. 43, 47

1016 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, F3 ...

(c) shares in a company that is under the control of a listed company [F4 , or

(d) shares within subsection (1A)].

Condition 3

The shares are shares in—

(a) the employing company,

(b) a company that, when the option is obtained, is a parent company of the employing company,

(c) a company that, when the option is obtained, is a member of a consortium that owns the employing company,

(d) a company that, when the option is obtained, is a member of a consortium that owns a parent company of the employing company,

(e) a company within subsection (2), or

(f) a qualifying successor company (see section 1022).

[F5 (1A) Shares are within this subsection if—

(a) after the option is obtained, the company in which the shares are to be acquired (“the relevant company”) comes to be controlled by another company (“the takeover”),

(b) immediately before the takeover, the shares were within any of paragraphs (a) to (c) of Condition 2,

(c) as a result of the takeover, the shares cease to be within any of those paragraphs,

(d) the shares are acquired pursuant to the option within the period of 90 days beginning with the day of the takeover, and

(e) the avoidance of tax is not the main purpose (or one of the main purposes) of the takeover.]

(2) A company (“company A”) is within this subsection if when the option is obtained—

(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.

Textual Amendments

F3 Word in s. 1016(1) omitted (17.7.2014) by virtue of Finance Act 2014 (c. 26), Sch. 9 para. 44(2)

F4 Words in s. 1016(1) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 9 para. 44(2)

F5 S. 1016(1A) inserted (17.7.2014) by Finance Act 2014 (c. 26), Sch. 9 para. 44(3)

1017 Condition relating to employee's income tax position U.K.

(1) The following condition must be met in relation to the income tax position of the employee.

The Condition

The acquisition of the shares is a chargeable event in relation to the employee for the purposes of section 476 of ITEPA 2003 (whether or not an amount counts as employment income of the employee because of that event).

F6 (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F6 (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) If the employee is dead when the shares are acquired, the condition is to be treated as met if it would have been met had the employee been alive.

Textual Amendments

F6 S. 1017(2)-(4) omitted (with effect in accordance with Sch. 9 para. 48 of the amending Act) by virtue of Finance Act 2014 (c. 26), Sch. 9 paras. 31, 47