Finance Act 2003
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Payment of tax in respect of share options in certain circumstances. |
7.—Part 5 of the Principal Act is amended in section 128A— | |
(a) in subsection (1)(a), by deleting “on or after 6 April 2000” and substituting “in the period from 6 April 2000 to the date of the passing of the Finance Act 2003”, | ||
(b) by inserting the following after subsection (4): | ||
“(4A) (a) Notwithstanding subsection (4), where an election has been made in accordance with subsection (3) and— | ||
(i) relevant shares are disposed of (in this subparagraph referred to as the ‘first-mentioned disposal’), and | ||
(I) but for this subparagraph, tax would be payable, by reference to the first-mentioned disposal, in accordance with subsection (4)(a), and | ||
(II) the market value of those shares at the date of the first-mentioned disposal is less than the tax chargeable under section 128, by reference to the exercise of an option to acquire those shares, | ||
then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General within 30 days after the date of the first-mentioned disposal or, if later, on or before 30 June 2003, and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after the date of the first-mentioned disposal, or | ||
(ii) relevant shares are held at 31 December in the year of assessment beginning 7 years after the relevant year (in this subparagraph referred to as the ‘first-mentioned date’), and | ||
(I) but for this subparagraph, tax would be payable in accordance with subsection (4)(b), and | ||
(II) the market value of the relevant shares is, at the first-mentioned date, less than the tax chargeable under section 128, by reference to the exercise of an option to acquire those shares, | ||
then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General within 30 days after the date of the first-mentioned date and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after the first-mentioned date. | ||
(b) Where a person who is entitled to make an election in accordance with subsection (3), after 6 February 2003 and on or before 31 October in the year of assessment following the relevant year in respect of relevant shares, does not do so, or tax chargeable under section 128, in respect of any gain realised by the exercise before 6 February 2003 of a right to acquire shares, is due after 6 February 2003 but on or before 31 October in the year of assessment following the relevant year, and the market value of the shares on— | ||
(i) that 31 October, or | ||
(ii) where the shares are disposed of before that date, the date of the disposal (referred to in this paragraph as the ‘first-mentioned disposal’) of the shares, | ||
is less than the tax chargeable under section 128, then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General within 30 days after the said 31 October, and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after the said 31 October or the date of the first-mentioned disposal of the shares, as the case may be. | ||
(c) In all cases other than those referred to in paragraph (a) or (b), where tax is chargeable under section 128 on an amount equal to a gain realised by the exercise, at any time before 6 February 2003, of a right to acquire shares in a company, and the market value of the shares on— | ||
(i) that date, or | ||
(ii) where the shares are disposed of before that date, the date of the disposal of the shares, | ||
is less than the tax chargeable under section 128, then an amount, being an amount equal to that market value, shall be due and payable to the Collector-General on or before 30 June 2003, and the balance of the tax chargeable remaining unpaid after that payment shall be payable in the event of, and by reference to, disposals of any shares in a company in a year of assessment, in accordance with paragraph (d), being disposals after 6 February 2003. | ||
(d) (i) A payment that is to be made in the event of, and by reference to, disposals of any shares in a year of assessment shall be a payment which is the lesser of— | ||
(I) the aggregate of the balances of unpaid tax referred to in paragraphs (a), (b) and (c), as reduced by tax payable in accordance with this paragraph by reference to disposals of shares in a previous year of assessment, and | ||
(II) the aggregate of the net gains (if any) arising in respect of disposals of shares in the year of assessment. | ||
(ii) For the purposes of subparagraph (i)(II), the net gain arising in relation to a disposal of shares shall be the market value at the date of disposal of those shares reduced by so much of the aggregate of— | ||
(I) the amount of the consideration, if any, given for the shares (including, where relevant, the grant of a right to acquire the shares), | ||
(II)(A) where this subsection does not apply to the payment of income tax chargeable under section 128 by reference to the acquisition of the shares, the amount of the income tax so chargeable, or | ||
(B) where this subsection does apply to the payment of income tax chargeable under section 128 by reference to the acquisition of the shares, the total amount paid, before the date of the disposal, in respect of that income tax, | ||
and | ||
(III) capital gains tax chargeable by reference to the disposal of the shares, | ||
as does not exceed that market value. | ||
(iii) For the purposes of subparagraph (ii), the income tax or capital gains tax, as the case may be, so chargeable shall be the amount by which the income tax or capital gains tax, as the case may be, chargeable on the taxpayer for the year of assessment would have been reduced if the acquisition or disposal of the shares, as the case may be, had not taken place. | ||
(iv) Payments referred to in paragraph (d)(i) which are to be made by reference to disposals of shares shall be due and payable to the Collector-General on or before 31 October in the year following the year of assessment in which the disposal of those shares takes place. | ||
(e) (i) A taxpayer who wishes to be entitled to avail of the provisions of this subsection shall so elect, by giving notice in writing to the inspector, on or before 1 June 2003 in a form prescribed or authorised by the Revenue Commissioners, and the notice shall contain details of— | ||
(I) the date of exercise of the option, | ||
(II) the number of shares acquired by exercise of the option, | ||
(III) the market value of the shares at date of exercise of that option, and | ||
(IV) such further particulars for the purposes of this subsection as may be required or indicated by the Revenue Commissioners. | ||
(ii) The inspector or such other officer as the Revenue Commissioners shall appoint in that behalf may admit a late election under subparagraph (i) in circumstances where he or she is satisfied that the delay in making the election was due to absence, illness or other reasonable cause. | ||
(f) In any case where, at any time, the requirements of this subsection have not been fully complied with, any amount of tax chargeable under section 128 which is unpaid shall be due and payable as if this subsection had not been enacted. | ||
(g) Any tax chargeable under section 128 which is due and payable in accordance with subsection (4) or this subsection, which remains unpaid at the date of death of the chargeable person, shall be discharged by the Revenue Commissioners. | ||
(h) Any amount paid before 6 February 2003 in respect of tax chargeable under section 128 shall not be repaid by reference to any provision of this subsection. | ||
(i) The reference in paragraph (d) to the disposal of shares includes a reference to the disposal of shares by the spouse of the person chargeable— | ||
(I) in a case where section 1017 applies, | ||
or | ||
(II) in a case where that section does not apply, but the disposal by the spouse is subsequent to a transfer, on or after 25 February 2003, of the shares from the other spouse, except where the spouses are separated in the circumstances referred to in paragraph (a) or (b) of section 1015(2), or their marriage has been dissolved under either section 5 of the Family Law (Divorce) Act 1996 , or the law of a country or jurisdiction other than the State, being a dissolution that is entitled to be recognised as valid in the State. | ||
(j) A person shall not, at any time, be entitled to avail of the provisions of this subsection where, at that time, he or she has not paid, or agreed an arrangement acceptable to the Collector-General for the payment of, tax due and payable which is chargeable under section 128 in respect of the exercise of a right to acquire shares to which this subsection does not apply. | ||
(k) In this subsection— | ||
‘market value’ shall be construed in accordance with section 548; | ||
‘shares’ includes securities within the meaning of section 135 and stock. | ||
(4B) In any case where the provisions of subsection (4A) apply, the amount by which the market value of the shares at the time of acquisition exceeds the market value at the date of disposal of those shares, or any part of that amount, shall not be an allowable loss for the purposes of the Capital Gains Tax Acts until such time as the tax liability of the person under section 128 has been paid in full to the Collector-General.”, | ||
(c) in subsection (5), by substituting “subsections (4)(a) and (4A)” for “subsection (4)(a)”, and | ||
(d) in subsection (7), by substituting “subsections (4) and (4A) but notwithstanding any provisions of subsection (4A) that subsection shall have no effect as respects the payment of any tax in relation to a gain realised by the exercise on or after 6 February 2003 of a right to acquire shares.” for “subsection (4).”. |