Finance Act, 1999
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Employee share schemes. |
69.—(1) The Principal Act is hereby amended— | |
(a) in Chapter 1 of Part 17— | ||
(i) in section 510 by the insertion of the following after subsection (5): | ||
“(5A) (a) This subsection shall apply where— | ||
(i) the trustees of an approved profit sharing scheme make an appropriation of shares, to which section 510(3) applies, to a participant, | ||
(ii) the shares concerned were transferred to the trustees of the approved scheme concerned by the trustees of an employee share ownership trust to which section 519 applies, and | ||
(iii) the shares were transferred at a date later than that on which the shares could have first been transferred in accordance with the terms of the employee share ownership trust deed or any other document but, for whatever reason, were not transferred on that earlier date. | ||
(b) Where this subsection applies, the appropriation to the participant concerned shall, for the purposes of capital gains tax, be deemed to have taken place on the day following the day on which those shares could have first been transferred by the trustees of the employee share ownership trust concerned, in accordance with the terms of the trust deed under which that trust was established or any other document.”, | ||
(ii) in section 511A by the insertion of the following subsections after subsection (2): | ||
“(3) Subject to subsection (5), subsection (4) shall apply where— | ||
(a) the trustees of an approved scheme make an appropriation to a participant of shares to which section 510(3) applies, and | ||
(b) the shares concerned were transferred to those trustees by the trustees of an employee share ownership trust to which section 519 applies. | ||
(4) For the purposes of this Chapter as it applies to the shares referred to in subsection (3), where this subsection applies— | ||
(a) the period of retention shall end— | ||
(i) where, immediately prior to the transfer referred to in subsection (3)(b), the shares concerned had been held in the employee share ownership trust for a period (in subsection (5) referred to as ‘the first period’) of less than 2 years, on the day following the day on which a period, being a period equivalent in length to the difference between 2 years and the length of the period for which the shares had been so held, has elapsed since the shares were appropriated to the participant, or | ||
(ii) where, prior to the transfer referred to in subsection (3)(b), the shares concerned had been held in the employee share ownership trust for a period (in subsection (5) referred to as ‘the second period’) of 2 years or more, the day following the day on which the shares were appropriated to the participant, | ||
and | ||
(b) where, immediately prior to the transfer referred to in subsection (3)(b), the shares concerned had been held in the employee share ownership trust for a period (in subsection (5) referred to as ‘the third period’) of less than 3 years, the release date shall be the day following the day on which a period, being a period equivalent in length to the difference between 3 years and the length of the period for which the shares had been so held, has elapsed since the shares were appropriated to the participant. | ||
(5) Subsection (4) shall not apply unless the participant concerned was a beneficiary (within the meaning of paragraph 11 of Schedule 12) under the employee share ownership trust at all times during— | ||
(a) the first period or the second period, as may be appropriate, and | ||
(b) the third period.”, | ||
and | ||
(iii) in section 515, by the substitution of the following subsections for subsections (1) and (2): | ||
“(1) Subject to subsection (2B), where the total of the initial market values of all the shares appropriated to an individual in any one year of assessment (whether under a single approved scheme or under 2 or more such schemes) exceeds— | ||
(a) £10,000, or | ||
(b) £30,000 where the conditions in subsection (2A) are satisfied, | ||
subsections (4) to (7) shall apply to any excess shares, that is, any share which caused the applicable limit to be exceeded and any share appropriated after the applicable limit was exceeded. | ||
(2) For the purposes of subsection (1), where a number of shares is appropriated to an individual at the same time under 2 or more approved schemes, the same proportion of the shares appropriated at that time under each scheme shall be regarded as being appropriated before the limit of £10,000 or the limit of £30,000, as the case may be, is exceeded. | ||
(2A) The conditions referred to in paragraph (b) of subsection (1) are— | ||
(a) the shares appropriated to such individual have been transferred to the trustees of the approved scheme concerned by the trustees of an employee share ownership trust to which section 519 applies, | ||
(b) at each given time in the 5 years commencing with the date of the establishment of the employee share ownership trust 50 per cent, or such lesser percentage as the Minister for Finance may be order prescribe, of the securities retained by the trustees at the time were pledged by them as security for borrowings, | ||
(c) at the time of transfer referred to in paragraph (a) a period of at least 10 years commencing on the date the employee share ownership trust was established and ending at the time when all the shares pledged as security for borrowings by the trustees of the employee share ownership trust became unpledged (hereafter in this section referred to as the ‘encumbered period’) has elapsed, and | ||
(d) no shares which were pledged, at any time since the trust was established, as security for borrowings by the trustees of the employee share ownership trust were previously transferred to the trustees of the approved scheme because they remained so pledged during the encumbered period. | ||
(2B) The limit of £30,000 in paragraph (b) of subsection (1) may only be applied in the first year of assessment during which the encumbered period has elapsed and then only in respect of shares appropriated after that period has so elapsed.”, | ||
(b) in Chapter 2 of Part 17— | ||
(i) by the insertion in section 519 of the following subsection after subsection (7): | ||
“(7A) Where the trustees of a trust to which this section applies sell securities on the open market, any gain accruing to such trustees shall not be a chargeable gain if, and to the extent that, the proceeds of such sale are used to repay monies borrowed by those trustees or to pay interest on such borrowings.”, | ||
and | ||
(ii) by the substitution of the following for paragraphs (b) and (c) of subsection (9): | ||
“(b) income consisting of dividends in respect of securities held by that trust, | ||
(c) the transfer of securities to a profit sharing scheme approved under Part 2 of Schedule 11, or | ||
(d) the gain accruing to the trustees of that trust from the sale of shares on the open market.”, | ||
(c) in Schedule 11— | ||
(i) by the substitution in paragraph 3, of the following subparagraph for subparagraph (4): | ||
“(4) The scheme shall provide that the total of the initial market values of the shares appropriated to any one participant in a year of assessment will not exceed £10,000, or where paragraph (b) of subsection (1) of section 515 applies, £30,000.”, | ||
(ii) in paragraph 4, by the substitution in subparagraph (1)(b) of “3 years” for “5 years”, | ||
and | ||
(iii) by the insertion of the following paragraph after paragraph 12: | ||
“12A. Notwithstanding paragraph 12, an individual shall be eligible to have shares appropriated to him or her under the scheme at any time if— | ||
(a) the shares were transferred to the trustees of the scheme by the trustees of an employee share ownership trust to which section 519 applies, and | ||
(b) the individual is at that time, or was within the preceding 30 days, a beneficiary (within the meaning of paragraph 11 of Schedule 12) of that employee share ownership trust.”, | ||
and | ||
(d) in Schedule 12— | ||
(i) in paragraph 11— | ||
(I) by the insertion of the following subparagraphs after subparagraph (2A) (inserted by the Finance Act, 1998 ): | ||
“(2B) Subject to subparagraph (2C), the trust deed may provide that a person is a beneficiary at a particular time (in this subparagraph referred to as ‘the relevant time’) if— | ||
(a) the person has at each given time in a qualifying period been an employee or director of a company within the founding company's group at that given time, | ||
(b) the person was such an employee or director— | ||
(i) on the date the trust was established or at some time within 9 months prior to that date, or | ||
(ii) at any time in the period of 5 years beginning with such date, | ||
(c) the person has ceased to be an employee or director of the company or the company has ceased to be within that group, | ||
(d) at each given time in the 5 year period referred to in clause (b) 50 per cent, or such lesser percentage as the Minister for Finance may by order prescribe, of the securities retained by the trustees at that time were pledged by them as security for borrowings, and | ||
(e) at the relevant time a period of not more than 15 years has elapsed since the trust was established. | ||
(2C) The trust deed shall not contain a rule that conforms with subparagraph (2B) unless the rule is expressed as applying to every person within it.”, | ||
(II) by the substitution in subparagraph (4)(a), of “subparagraphs (2A), (2B) and (3)” for “subparagraphs (2A) and (3)”, | ||
(III) by the substitution in subparagraph (5)(a) of “3 years” for “5 years”, | ||
(IV) by the substitution in subparagraph (6), of “subparagraphs (2B) and (3)” for “subparagraph (3)” and by the substitution of “subparagraphs (2B)(c) and (3)(b)” for “subparagraph (3)(b)”, | ||
(V) by the substitution in subparagraph (7), of “subparagraph (2A), (2B), (3) or (4)” for “subparagraph (2A), (3) or (4)”, | ||
and | ||
(VI) by the substitution in subparagraph (8), of “subparagraph (2), (2A), (2B), (3) or (4)” for “subparagraph (2), (2A), (3) or (4)”, | ||
and | ||
(ii) in paragraph 18, by the insertion in subparagraph (3)(a), after “when the agreement is made” of “or, if the agreement is subject to one or more specified conditions being satisfied, on that condition or those conditions being satisfied”. | ||
(2) (a) Paragraphs (a)(i), (a)(ii) and (c)(iii) of subsection (1) shall apply as respects an appropriation of shares made by the trustees of an approved scheme (within the meaning of section 510(1) of the Principal Act) on or after the date of the passing of this Act. | ||
(b) Paragraphs (b) and (d) of subsection (1) shall apply as respects employee share ownership trusts approved under paragraph 2 of Schedule 12 to the Principal Act on or after the date of the passing of this Act. | ||
(c) Paragraph (c)(ii) of subsection (1) shall apply as respects profit sharing schemes approved of under Part 2 of Schedule 11 to the Principal Act on or after the date of the passing of this Act. |