Legalize / United Kingdom / Public General Act

Income Tax (Earnings and Pensions) Act 2003

Type Public General Act

Publication 2003-03-06

Last updated 2026-03-15

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(b) if made as part of a transaction within that sub-paragraph (that is, as part of a company reconstruction), the shares issued are to be regarded as not forming part of the new holding.

(4) An “excluded issue of shares” means an issue of shares of any of the following descriptions (in respect of which a charge to income tax arises)—

(a) redeemable shares or securities issued as mentioned in paragraph C or D in section 1000(1) of CTA 2010 (distributions);

(b) share capital issued in circumstances such that section 1022(3) of CTA 2010 (bonus issues) applies;

(c) share capital to which section 410 of ITTOIA 2005 (stock dividends) applies that is issued in a case where subsection (2) or (3) of that section applies.

Consequences of company reconstructions

87

(1) In the SIP code references to a participant’s plan shares in relation to a SIP are to be read, after the time of a company reconstruction—

(a) as referring to the new shares, or

(b) as including those shares,

as the case may be.

This is subject to the following provisions of this paragraph.

(2) For the purposes of the SIP code—

(a) a company reconstruction is to be treated as not involving a disposal of the shares comprised in the original holding;

(b) new shares are to be treated as having been awarded to the participant on the date on which the corresponding old shares were awarded;

(c) the conditions in Part 4 of this Schedule (types of share that may be awarded) are to be treated as fulfilled with respect to any new shares if they were (or were treated as) fulfilled with respect to the corresponding old shares; and

(d) the provisions of—

(i) sections 489 to 514 (SIPs: income tax advantages and charges under this Act),

(ii) sections 392 to 395 and 405 to 408 of ITTOIA 2005 (SIPs: special rules for charges under Chapters 3 and 4 of Part 4 of that Act (dividends etc. from UK or non-UK resident companies etc.)) and section 770 of that Act (exemption for amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment),

(iii) sections 686B and 686C of ICTA (SIPs: income tax advantages for trustees), and

(iv) Part 1 of Schedule 7D to TCGA 1992 (SIPs: capital gains tax),

apply in relation to the new shares as they would have applied in relation to the corresponding old shares.

(3) If the corresponding old shares were dividend shares, the reference in sub-paragraph (2)(b) to the corresponding old shares being awarded is a reference to those shares being acquired on behalf of the participant.

(4) Sub-paragraphs (1) to (3) are subject to paragraph 88 (treatment of shares acquired under rights issue).

(5) For the purposes of the SIP code if, as part of a company reconstruction, trustees become entitled to a capital receipt, their entitlement to the capital receipt is to be taken to arise before the new holding comes into being.

(6) In the SIP code, in the context of a new holding, “shares” includes securities and rights of any description which form part of the new holding for the purposes of Chapter 2 of Part 4 of TCGA 1992 (reorganisation of share capital etc.).

(7) In this paragraph—

(a) “new shares” means shares comprised in the new holding which were issued in respect of, or otherwise represent, shares comprised in the original holding;

(b) “the new holding” and “the original holding” mean respectively the new and original holdings mentioned in paragraph 86(2);

(c) “corresponding old shares”, in relation to any new shares, means the shares in respect of which the new shares are issued or which the new shares otherwise represent.

Treatment of shares acquired under rights issue

88

(1) This paragraph applies for the purposes of the SIP code where the trustees exercise rights arising under a rights issue and conferred in respect of a participant’s plan shares.

(2) In such a case, any shares or securities or rights allotted are to be treated as if they were plan shares—

(a) identical to the shares in respect of which the rights were conferred, and

(b) appropriated to, or acquired on behalf of, the participant under the plan in the same way and at the same time as those shares.

(3) If, however, either of the conditions set out in sub-paragraph (4) is met, sub-paragraph (5) applies instead.

(4) The conditions are—

(a) that the funds used by the trustees to exercise the rights are not provided by the exercise of the trustees' powers under paragraph 77 (trustees' powers to raise funds to subscribe for rights issue);

(b) that similar rights are not conferred in respect of all ordinary shares in the company.

(5) If either of those conditions is met—

(a) any shares, securities or rights allotted are not plan shares, and

(b) sections 127 to 130 of TCGA 1992 (reorganisation of share capital etc.) do not apply in relation to them.

Termination of plan

89

(1) The plan may provide for the company to issue a plan termination notice in respect of the plan in circumstances specified in the plan.

(2) The plan must provide that, where a plan termination notice is issued, a copy of the notice must be given, without delay, to—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) the trustees,

(d) each individual who has entered into a partnership share agreement which was in force immediately before the notice was issued.

Effect of plan termination notice

90

(1) This paragraph applies if the company has issued a plan termination notice under paragraph 89.

(2) No further shares may be appropriated to, or acquired on behalf of, individuals under the plan.

(3) The trustees must remove the plan shares from the plan as soon as practicable after whichever is the later of—

(a) the end of the notice period, or

(b) the first date on which the shares may be removed from the plan without giving rise to a charge to income tax under sections 501 to 507 (SIPs: tax charges) on the participant on whose behalf they are held.

(4) In sub-paragraph (3) “the notice period” means the period of 3 months beginning with the date on which the requirements imposed by the plan in accordance with paragraph 89(2) are met in respect of the plan termination notice.

(5) The trustees may remove a participant’s shares from the plan at an earlier date with the participant’s consent.

(6) Any consent given by the participant before receiving a copy of the plan termination notice is to be disregarded for the purposes of sub-paragraph (5).

(7) As soon as practicable after the plan termination notice is issued, the trustees must pay any money held on an individual’s behalf to the individual.

(8) In this paragraph references to the trustees removing the plan shares from the plan are to their doing the following in the case of each participant—

(a) transferring the shares to the participant on behalf of whom they are held, or to another person, at the participant’s direction, or

(b) disposing of the shares and accounting (or holding themselves ready to account) for the proceeds to the participant or to another person at the participant’s direction.

(9) Where a participant has died, the references in this paragraph to a participant are to the participant’s personal representatives.

Jointly owned companies

91

(1) This paragraph applies for the purposes of the provisions of the SIP code relating to group plans.

(2) Each joint owner of a jointly owned company is to be treated as controlling every company within sub-paragraph (3).

(3) The companies within this sub-paragraph are—

(a) the jointly owned company, and

(b) any company controlled by that company.

(4) However, no company within sub-paragraph (3) may be—

(a) a constituent company in more than one group plan, or

(b) a constituent company in a particular group plan if another company within that sub-paragraph is a constituent company in a different group plan.

(5) In this paragraph a “jointly owned company” means a company—

(a) of which 50% of the issued share capital is owned by one person and 50% by another, and

(b) which is not controlled by any one person.

(6) This paragraph does not apply for the purposes of paragraph 27(1)(b) (requirement that plan shares are in a company not under another company’s control).

Determination of market value

92

(1) For the purposes of the SIP code the “market value” of shares has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

(2) For the purposes of this Schedule the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

(3) Where the market value of shares on any date has to be determined for the purposes of the SIP code, an officer of Revenue and Customs and the trustees may agree that it is to be determined by reference—

(a) to a date or dates, or

(b) to an average of the values on a number of dates,

stated in the agreement.

Power to require information

93

(1) An officer of Revenue and Customs may by notice require a person to provide the officer with any information—

(a) which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the SIP code, and

(b) which the person to whom the notice is addressed has or can reasonably obtain.

(2) The power conferred by this paragraph extends, in particular, to—

(a) information to enable an officer of Revenue and Customs —

(i) to check anything contained in a notice under paragraph 81A or a return under paragraph 81B or to check any information accompanying such a notice or return, or”, and

(ii) to determine the liability to tax, including capital gains tax, of any person who has participated in a plan or any other person whose liability to tax the operation of a plan is relevant to, and

(b) information about the administration of a plan and any proposed alteration of the terms of a plan.

(3) The notice must require the information to be provided within a specified period, which must not end earlier than 3 months after the date when the notice is given.

Meaning of “associated company”

94

(1) For the purposes of the SIP code one company is an “associated company” of another company at a given time if—

(a) one has control of the other, or

(b) both are under the control of the same person or persons.

(2) Sub-paragraph (1) does not, however, apply for the purposes of paragraph 29 (prohibited shares).

(3) For the purposes of sub-paragraph (1) the question whether a person controls a company is to be determined in accordance with sections 450 and 451 of CTA 2010.

Meaning of participant ceasing to be in relevant employment

95

(1) This paragraph explains what is meant, for the purposes of the SIP code, by a participant ceasing to be in relevant employment.

(2) For the purposes of the SIP code “relevant employment” means employment by the company or any associated company.

(3) A participant who remains in the employment of the company or any associated company does not cease to be in relevant employment.

Meaning of shares being withdrawn from plan

96

(1) For the purposes of the SIP code plan shares are withdrawn from a SIP when—

(a) they are transferred by the trustees to the participant, or another person, on the direction of the participant,

(b) the participant assigns, charges or otherwise disposes of the beneficial interest in the shares, or

(c) they are disposed of by the trustees, on the direction of the participant, in circumstances where the trustees account (or hold themselves ready to account) for the proceeds to the participant or to another person.

(2) Where the participant has died, the references in sub-paragraph (1) to the participant are to the participant’s personal representatives.

Meaning of shares ceasing to be subject to plan

97

(1) For the purposes of the SIP code plan shares cease to be subject to a SIP when—

(a) they are withdrawn from the plan,

(b) the participant to whom the shares were awarded ceases to be in relevant employment at a time when the shares are subject to the plan, or

(c) the trustees dispose of the shares under provision made in accordance with paragraph 79 (meeting by trustees of PAYE obligations).

(2) If an individual—

(a) participates in an award of partnership shares, and

(b) ceases to be in relevant employment at any time during the acquisition period relating to that award,

the individual is to be treated for the purposes of this paragraph as ceasing to be in relevant employment immediately after the shares are awarded.

(3) In sub-paragraph (2) “the acquisition period” in relation to an award means—

(a) where there was no accumulation period, the period beginning with the deduction of the partnership share money and ending with the acquisition date (as defined by paragraph 50(4)), and

(b) where there was an accumulation period, the period beginning with the end of that period and ending immediately before the acquisition date (as defined by paragraph 52(5)).

(4) If a participant ceases to be in relevant employment, the participant’s plan shares are to be treated as ceasing to be subject to the plan on the date of leaving.

Meaning of “the specified retirement age”

98

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Minor definitions

99

(1) In the SIP code—

“articles of association”, in relation to a company, includes any other written agreement between the shareholders of the company;

“company” means a body corporate;

“group of companies” means a company and any other companies of which it has control, and “group company” has a corresponding meaning;

“participant’s plan shares”, in relation to a SIP, means plan shares that have been awarded to an individual participant;

“PAYE obligations” means (subject to paragraphs 79(2) and 80(2)) obligations of any person under—Part 11 of this Act, orPAYE regulations;

“plan shares”, in relation to a SIP, means—free, partnership or matching shares which have been awarded to participants under the plan,dividend shares which have been acquired on behalf of participants under the plan, andshares in relation to which paragraph 87(1) applies (company reconstructions: new shares),and which (in each case) remain subject to the plan;

“provision for forfeiture” means a provision to the effect that a participant ceases to be beneficially entitled to shares on the occurrence of certain events, and “forfeiture” is to be read accordingly;

“qualifying corporate bond” has the meaning given by section 117 of TCGA 1992;

“redundancy” has the same meaning as in ERA 1996 or ER(NI)O 1996;

“rights arising under a rights issue” means rights conferred in respect of a participant’s plan shares to be allotted, on payment, other shares or securities or rights of any description in the same company.

(2) For the purposes of the SIP code references to “shares” include fractions of shares forming part of the share capital of a company registered in a foreign country the law of which recognises such fractions.

(3) For the purposes of the SIP code a company is a member of a consortium owning another company if it is one of a number of companies—

(a) which between them beneficially own not less than 75% of the other company’s ordinary share capital, and

(b) each of which beneficially owns not less than 5% of that capital.

(4) For the purposes of the SIP code—

(a) shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

(b) the “restriction” is that provision.

Index of defined expressions

100

In the SIP code the following expressions are defined or otherwise explained by the provisions indicated below:

SCHEDULE 3

Part 1 — Introduction

Approval of SAYE option schemes

1

(A1) For the purposes of the SAYE code an SAYE option scheme is a Schedule 3 SAYE option scheme if the requirements of Parts 2 to 7 of this Schedule are met in relation to the scheme.

(3) The requirements consist of general requirements (see Part 2) and requirements as to—

the eligibility of individuals to participate in a scheme (see Part 3),

the shares to which schemes can apply (see Part 4),

the existence of a linked savings arrangement (see Part 5),

the share options that may be granted under the scheme (see Part 6), and

the exchange of share options (see Part 7).

(4) Sub-paragraph (A1) is subject to Part 8 of this Schedule which—

(a) requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 3 SAYE option scheme (see paragraph 40A(1)),

(b) provides for a scheme in relation to which such notice is given to be a Schedule 3 SAYE option scheme (see paragraph 40A(4)), and

(c) gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 3 SAYE option scheme (see paragraphs 40F to 40I).

SAYE option schemes

2

(1) In the SAYE code an “SAYE option scheme” means (in accordance with section 516(4)) a scheme established by a company which provides—

(a) for share options to be granted to employees and directors, and

(b) for the shares acquired by the exercise of the share options to be paid for in the way mentioned in paragraph 24 (payments for shares to be linked to approved savings arrangements).

(2) In the SAYE code, in relation to an SAYE option scheme—

“participant” means an individual who has been granted (but has not yet exercised) share options under the scheme (“the options”);

“participate” means obtain and exercise share options under the scheme;

“the scheme organiser” means the company which has established the scheme.

Group schemes

3

(1) An SAYE option scheme established by a company that controls one or more other companies (a “parent scheme company”) may extend to all or any of those other companies.

(2) In the SAYE code an SAYE option scheme established by a parent scheme company which so extends is called a “group scheme”.

(3) In relation to a group scheme a “constituent company” means—

(a) the parent scheme company, or

(b) any other company to which for the time being the scheme is expressed to extend.

(4) Paragraph 46 deals with jointly owned companies and companies controlled by them.

Part 2 — General requirements ...

General requirements for approval: introduction

4

An SAYE option scheme must meet the requirements of—

paragraph 5 (general restriction on contents of scheme),

paragraph 6 (all-employee nature of scheme),

paragraph 7 (participation on similar terms), and

paragraph 8 (no preferential treatment for directors and senior employees).

General restriction on contents of scheme

5

(1) The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options.

(2) The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.

(3) For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.

All-employee nature of scheme

6

(1) The scheme must provide that every person who meets the conditions in sub-paragraph (2) is eligible to participate in the scheme.

(2) A person (“E”) meets the conditions in this sub-paragraph if—

(a) E is an employee or a full-time director of the scheme organiser or (in the case of a group scheme) of a constituent company,

(b) E has been such an employee or director at all times during a qualifying period of not more than 5 years,

(c) E's earnings from the office or employment within paragraph (a) are (or would be if there were any) general earnings to which section 15 applies (earnings for year when employee UK resident), and

(ca) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(d) E is not ineligible under paragraph 11 (the “no material interest” requirement).

(3) The scheme must not contain any feature which has or is likely to have the effect of discouraging any description of persons who—

(a) meet the conditions in sub-paragraph (2), or

(b) met those conditions before ceasing to be persons within sub-paragraph (2)(a),

from actually participating in the scheme.

(4) Sub-paragraph (3) does not apply to any provision required or authorised by a provision of this Schedule.

Participation on similar terms

7

(1) The requirements of this paragraph are—

(a) that every person who meets the conditions in paragraph 6(2) (all-employee nature of scheme) must be eligible to participate in the scheme on similar terms, and

(b) that every person who participates in the scheme must actually do so on similar terms.

(2) The requirements of this paragraph are not infringed by the fact that the rights of those participating in the scheme to obtain and exercise share options vary according to—

(a) the levels of their remuneration,

(b) the length of their service, or

No preferential treatment for directors and senior employees

8

(1) The requirement of this paragraph is that, if the scheme organiser is a member of a group of companies, the scheme does not and is not likely to have the effect of conferring benefits wholly or mainly—

(a) on directors of companies in the group, or

(b) on employees of companies in the group who receive the higher or highest levels of remuneration.

(2) “A group of companies” means a company and any other companies of which it has control.

Part 3 — Eligibility of individuals to participate in scheme

Requirements relating to the eligibility of individuals: introduction

9

An SAYE option scheme must meet the requirements of—

paragraph 10 (the employment requirement),

The employment requirement

10

(1) The scheme must ensure that an individual is not eligible to participate in the scheme at a particular time unless the individual is then a director or employee of—

(a) the scheme organiser, or

(b) in the case of a group scheme, a constituent company.

(2) The requirement of this paragraph is not infringed by a provision of the scheme required or authorised by a provision of this Schedule.

The “no material interest” requirement

11

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “material interest”

12

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Material interest: options and interests in SIPs

13

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “associate”

14

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “associate”: trustees of employee benefit trust

15

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Meaning of “associate”: trustees of discretionary trust

16

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Part 4 — Shares to which schemes can apply

17

(1) An SAYE option scheme must meet the requirements of—

paragraph 18 (shares must be ordinary shares of certain companies),

paragraph 19 (requirements as to listing),

paragraph 20 (shares must be fully paid up and not redeemable), and

paragraph 22 (requirements as to other shareholdings).

(1A) Sub-paragraph (1) and the other paragraphs of this Part are subject to paragraph 37(6B).

(2) In this Part “eligible shares” means shares which may be acquired by the exercise of share options under the scheme.

Shares must be ordinary shares of certain companies

18

Eligible shares must form part of the ordinary share capital of—

(a) the scheme organiser,

(b) a company which has control of the scheme organiser, or

(c) a company which either is, or has control of, a company which is a member of a consortium owning either the scheme organiser or a company having control of the scheme organiser.

Requirements as to listing

19

(1) Eligible shares must be—

(a) shares of a class listed on a recognised stock exchange,

(b) shares in a company which is not under the control of another company, ...

(ba) shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2), or

(2) A “listed company” is a company whose shares are listed on a recognised stock exchange, other than—

(a) a close company, or

(b) a company that would be a close company if resident in the United Kingdom.

(3) But a company is not a close company for the purposes of sub-paragraph (2) if it is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).

Shares must be fully paid up and not redeemable

20

Eligible shares must be—

(a) fully paid up, and

(b) not redeemable.

Only certain kinds of restriction allowed

21

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Requirements as to other shareholdings

22

(1) The majority of the issued shares of the same class as the eligible shares must be—

(a) employee-control shares, or

(b) open market shares,

unless the eligible shares are shares in a company whose ordinary share capital consists of shares of one class only.

(2) Shares in a company are “employee-control shares” if—

(a) the persons holding the shares are, by virtue of their holding, together able to control the company, and

(b) those persons are or have been employees or directors of the company or of another company which is under the control of the company.

(3) Shares in a company are “open market shares” if the persons holding the shares are not—

(a) persons who acquired their shares as a result of a right conferred on them or an opportunity afforded to them as a director or employee of the scheme organiser or any other company, and not as a result of an offer to the public, or

(b) trustees holding shares on behalf of persons who acquired their beneficial interests in the shares as mentioned in paragraph (a), or

(i) are not of a class listed on a recognised stock exchange, and

(ii) are in a company which is under the control of a listed company (as defined by paragraph 19(2)),

companies which have control of the company whose shares are in question or of which that company is an associated company.

Part 5 — Requirement for linked savings arrangement

Requirements as to linked savings scheme: introduction

23

An SAYE option scheme must meet the requirements of—

paragraph 24 (payments for shares to be linked to approved savings arrangements), and

paragraph 25 (requirements as to contributions to savings arrangements).

Payments for shares to be linked to approved savings schemes

24

(1) The scheme must provide for shares acquired by the exercise of share options granted under the scheme to be paid for with money not exceeding the amount of repayments made and any interest paid under a certified SAYE savings arrangement which has been approved by an officer of Revenue and Customs for the purposes of this Schedule (“the approved savings arrangement”).

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

Requirements as to contributions to savings schemes

25

(1) The scheme must provide for a person’s contributions under the the approved savings arrangement to be of an amount that will secure, as nearly as possible, repayment of an amount equal to the option price.

(2) The “option price” means the amount payable, on exercising share options granted under the scheme, in order to acquire the maximum number of shares that may be acquired under them (see paragraph 28).

(3) The scheme must neither—

(a) permit the aggregate amount of a person’s contributions under certified SAYE savings arrangements linked to Schedule 3 SAYE option schemes to exceed £500 per month, nor

(b) impose a minimum on the amount of a person’s contributions which exceeds £10 per month.

(4) The Treasury may by order amend sub-paragraph (3) by substituting for any amount for the time being specified there an amount specified in the order.

Repayments under a savings scheme: whether bonuses included

26

(1) For the purposes of this Schedule repayments under a certified SAYE savings arrangement may be taken as including, or as not including, a bonus.

(2) The bonus may either be the maximum bonus under that arrangement or a lesser bonus.

(3) An SAYE option scheme must require the question whether repayments are to be taken as including bonuses to be determined at the time when share options are granted.

27

(1) An SAYE option scheme must meet the requirements of—

paragraph 28 (requirements as to price for acquisition of shares),

paragraph 29 (share options must not be transferable),

paragraph 30 (time for exercising options: general),

paragraph 32 (exercise of options: death), and

paragraph 34 (exercise of options: scheme-related employment ends).

(2) An SAYE option scheme may make any provision authorised by—

paragraph 36 (exercise of options: employment in associated company at bonus date), and

paragraph 37 (exercise of options: company events).

Requirements as to price for acquisition of shares

28

(1) The price at which shares may be acquired by the exercise of a share option granted under the scheme—

(a) must be stated at the time when the option is granted, and

(b) must not be manifestly less than 80% of the market value of shares of the same class—

(i) at that time, or

(ii) at such earlier time as may be determined in accordance with guidance issued by the Commissioners for Her Majesty's Revenue and Customs.

This is subject to sub-paragraph (3).

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

(3) The scheme may provide for one or more of the following—

(a) the price at which shares may be acquired by the exercise of a share option granted under the scheme,

(b) the number of shares which may be so acquired, or

to be varied so far as necessary to take account of a variation in the share capital of which the shares form part.

(3A) If the scheme makes provision under sub-paragraph (3), the variation or variations made under that provision to take account of a variation in any share capital must (in particular) secure—

(a) that the total market value of the shares which may be acquired by the exercise of the share option is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations, and

(b) that the total price at which those shares may be acquired is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations.

(3B) Sub-paragraph (3) does not authorise any variation which would result in the requirements of the other paragraphs of this Schedule not being met in relation to the share option.

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

(5) At the time a share option is granted—

(a) it must be stated whether or not the shares which may be acquired by the exercise of the option may be subject to any restriction, and

(b) if so, the details of the restriction must also be stated.

(6) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

29

(1) The scheme must ensure that share options granted to a participant are not capable of being transferred by the participant.

(2) Paragraph 32 provides for the exercise of the options where the participant has died.

Time for exercising options: general

30

(1) The scheme must ensure that share options granted under it must not be capable of being exercised—

(a) before the bonus date, or

(b) later than 6 months after that date.

(2) However, in sub-paragraph (1)—

(a) paragraph (a) is subject to paragraphs 32, 34 and 37 (exercise of options in the event of death, ... scheme-related employment ending or certain events occurring in relation to the company), and

(b) paragraph (b) is subject to paragraph 32.

(3) In the SAYE code “the bonus date” means the date on which repayments under the approved savings arrangement are due.

(4) For this purpose repayments are to be regarded as due as follows—

(a) if the repayments are to be taken as including the maximum bonus (see paragraph 26(2)), on the earliest date on which that bonus is payable, and

(b) in any other case, on the earliest date on which a bonus is payable.

Requirement to have a “specified age”

31

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Exercise of options: death

32

The scheme must provide that, if a participant dies before exercising the options, they may be exercised at any time on or after the date of death but not later than—

(a) 12 months after the date of death, in a case where the participant dies before the bonus date, or

(b) 12 months after the bonus date, in a case where the participant dies on or within 6 months after that date.

Exercise of options: reaching specified age without retiring

33

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

34

(1) The scheme must provide that, if a participant (“P”) no longer holds scheme-related employment (see paragraph 35), the options are exercisable as set out in sub-paragraphs (2) to (4).

(2) In a case where P ceases to hold the scheme-related employment because of—

(a) injury or disability or redundancy within the meaning of ERA 1996 or ER(NI)O 1996 , ...

(b) retirement ...,

(c) a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006, or

(d) if P holds office or is employed in a company which is an associated company (as defined in paragraph 35(4)) of the scheme organiser, that company ceasing to be an associated company of the scheme organiser by reason of a change of control (as determined in accordance with sections 450 and 451 of CTA 2010),

the options may only be exercised within 6 months after the termination date.

(3) In a case where P ceases to hold the scheme-related employment for any other reason, share options granted more than 3 years before the termination date either—

(a) may not be exercised, or

(b) may only be exercised within 6 months after the termination date,

according to which of these alternatives is specified in the scheme.

(4) Subject to any provision made under sub-paragraph (5), in a case where P ceases to hold the scheme-related employment for any reason other than one within sub-paragraph (2)(a) to (d), share options granted 3 years or less before the termination date may not be exercised at all.

(5) The scheme may make provision about the time when the options may be exercised in a case where P ceases to hold the scheme-related employment only because—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) it relates to a business or part of a business which is transferred to a person who is not an associated company of the scheme organiser where the transfer is not a relevant transfer within the meaning of the Transfer of Undertakings (Protection of Employment) Regulations 2006.

...

(5A) If the scheme makes provision by virtue of sub-paragraph (5), the provision must be either—

(a) that the options may be exercised within 6 months after the termination date, or

(b) that the options may be exercised within 6 months after the date (if any) when P ceases to hold the employment which (before the termination date) was the scheme-related employment for a reason within sub-paragraph (2)(a) to (d).

(6) This paragraph has effect subject to paragraph 30(1)(b) (options must not be capable of being exercised later than 6 months after bonus date).

(7) In this paragraph—

“scheme-related employment” means the office or employment by reference to which the person satisfies the condition in paragraph 10(1) (“the employment requirement”);

“the termination date” means the date when P ceases to hold the scheme-related employment (see paragraph 35).

35

(1) This paragraph applies for the purposes of paragraph 34 (exercise of options: scheme-related employment ends).

(2) Unless sub-paragraph (3) applies, a participant (“P”) is to be regarded as ceasing to hold scheme-related employment on the date when the office or employment in question terminates.

(3) If—

(a) P’s scheme-related employment terminates, but

(b) P continues to hold an office or employment in the scheme organiser or any associated company,

P is to be regarded as ceasing to hold the scheme-related employment on the date when P no longer holds any office or employment within paragraph (b), and not at any earlier time.

(4) For the purposes of sub-paragraph (3) one company is an “associated company” of another company if—

(a) one has control of the other, or

(b) both are under the control of the same person or persons;

and for this purpose the question of whether a person controls a company is to be determined in accordance with sections 450 and 451 of CTA 2010 (“control” in the context of close companies).

(5) Nothing in paragraph 34 or this paragraph applies where a person’s scheme-related employment terminates on that person’s death (see instead paragraph 32).

(6) In this paragraph “scheme-related employment” has the same meaning as in paragraph 34.

Exercise of options: employment in associated company at bonus date

36

The scheme may provide that if at the bonus date a participant holds an office or employment in a company which is—

(a) an associated company of the scheme organiser, but

(b) not a constituent company,

the options may be exercised within 6 months after that date.

Exercise of options: company events

37

(1) The scheme may provide that share options relating to shares in a company may be exercised within 6 months after the relevant date for the purposes of sub-paragraph (2), (4) , (4ZA) , (4A) or (5).

(2) The relevant date for the purposes of this sub-paragraph is the date when—

(a) a person has obtained control of the company as a result of making an offer falling within sub-paragraph (3), and

(b) any condition subject to which the offer is made has been satisfied.

(3) An offer falls within this sub-paragraph if it is—

(a) a general offer to acquire the whole of the issued ordinary share capital of the company, which is made on a condition such that, if it is met, the person making the offer will have control of the company, or

(b) a general offer to acquire all the shares in the company which are of the same class as the shares in question obtained under the scheme.

(3A) In sub-paragraph (3)(a) the reference to the issued ordinary share capital of the company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (3)(b) the reference to the shares in the company does not include any shares already held by the person making the offer or a person connected with that person.

(3B) For the purposes of sub-paragraph (3)(a) and (b) it does not matter if the general offer is made to different shareholders by different means.

(4) The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under section 899 of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement applicable to or affecting—

(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in a Schedule 3 SAYE option scheme.

(4ZA) The relevant date for the purposes of this sub-paragraph is the date when the court sanctions under section 901F of the Companies Act 2006 (court sanction for compromise or arrangement) a compromise or arrangement applicable to or affecting—

(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employment or directorships or their participation in a Schedule 3 SAYE option scheme.

(4A) The relevant date for the purposes of this sub-paragraph is the date on which a non-UK company reorganisation arrangement applicable to or affecting—

(a) all the ordinary share capital of the company or all the shares of the same class as the shares to which the option relates, or

(b) all the shares, or all the shares of that same class, which are held by a class of shareholders identified otherwise than by reference to their employments or directorships or their participation in a Schedule 3 SAYE option scheme,

becomes binding on the shareholders covered by it.

(5) The relevant date for the purposes of this sub-paragraph is the date when the company passes a resolution for voluntary winding up.

(6) The scheme may provide that share options relating to shares in a company may be exercised at any time when any person is bound or entitled to acquire shares in the company under sections 979 to 982 or 983 to 985 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder etc).

(6A) Sub-paragraphs (6B) to (6F) apply if the scheme makes provision under sub-paragraph (1) or (6).

(6B) The scheme may provide that if, in consequence of a relevant event, shares in the company to which a share option relates no longer meet the requirements of Part 4 of this Schedule, the share option may be exercised under the provision made under sub-paragraph (1) or (6) (as the case may be) no later than 20 days after the day on which the relevant event occurs, notwithstanding that the shares no longer meet the requirements of Part 4 of this Schedule.

(6C) In sub-paragraph (6B) “relevant event” means—

(a) a person obtaining control of the company as mentioned in sub-paragraph (2)(a);

(b) a person obtaining control of the company as a result of a compromise or arrangement sanctioned by the court as mentioned in sub-paragraph (4) or (4ZA);

(c) a person obtaining control of the company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it as mentioned in sub-paragraph (4A);

(d) a person who is bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6) obtaining control of the company.

(6D) Provision made under sub-paragraph (6B) may not authorise the exercise of a share option, as the case may be—

(a) at a time outside the 6 month period mentioned in sub-paragraph (1), or

(b) at a time not covered by sub-paragraph (6).

(6E) The scheme may provide that a share option relating to shares in a company which is exercised during the period of 20 days ending with—

(a) the relevant date for the purposes of sub-paragraph (2), (4) , (4ZA) or (4A), or

(b) the date on which any person becomes bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6),

is to be treated as if it had been exercised in accordance with the provision made under sub-paragraph (1) or (6) (as the case may be).

(6F) If the scheme makes provision under sub-paragraph (6E) it must also provide that if—

(a) a share option is exercised in reliance on that provision in anticipation of—

(i) an event mentioned in sub-paragraph (2), (4) , (4ZA) or (4A) occurring, or

(ii) a person becoming bound or entitled to acquire shares in the company as mentioned in sub-paragraph (6), but

(b) as the case may be—

(i) the relevant date for the purposes of sub-paragraph (2), (4) , (4ZA) or (4A) does not fall during the period of 20 days beginning with the date on which the share option is exercised, or

(ii) the person does not become bound or entitled to acquire shares in the company by the end of the period of 20 days beginning with the date on which the share option is exercised,

the exercise of the share option is to be treated as having had no effect.

(7) For the purposes of this paragraph—

(a) “share options” means share options granted under the scheme; and

(b) a person is to be treated as obtaining control of a company if that person and others acting in concert together obtain control of it.

(8) This paragraph has effect subject to paragraph 30(1)(b) (options must not be capable of being exercised later than 6 months after bonus date).

Exchange of options on company reorganisation

38

(1) An SAYE option scheme may provide that if—

(a) there is a company reorganisation affecting a scheme company (that is, a company whose shares may be acquired by the exercise of share options obtained under the scheme: see paragraph 18), and

(b) a participant has obtained share options under the scheme which are to acquire shares of the scheme company (“the old options”),

the participant may agree with the acquiring company to release the old options in consideration of the participant being granted new share options.

(2) For the purposes of this paragraph there is a company reorganisation affecting a scheme company if another company (“the acquiring company”)—

(a) obtains control of the scheme company—

(i) as a result of making a general offer to acquire the whole of the issued ordinary share capital of the scheme company which is made on a condition such that, if it is met, the person making the offer will have control of that company, or

(ii) as a result of making a general offer to acquire all the shares in the scheme company which are of the same class as those subject to the old options;

(b) obtains control of the scheme company as a result of a compromise or arrangement sanctioned by the court under section 899 or 901F of the Companies Act 2006 (court sanction for compromise or arrangement); ...

(ba) obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or

(c) becomes bound or entitled to acquire shares in the scheme company under sections 979 to 982 or 983 to 985 of that Act (takeover offers: right of offeror to buy out minority shareholder etc ).

(2A) In sub-paragraph (2)(a)(i) the reference to the issued ordinary share capital of the scheme company does not include any capital already held by the person making the offer or a person connected with that person and in sub-paragraph (2)(a)(ii) the reference to the shares in the scheme company does not include any shares already held by the person making the offer or a person connected with that person.

(2B) For the purposes of sub-paragraph (2)(a)(i) and (ii) it does not matter if the general offer is made to different shareholders by different means.

(3) A scheme that makes provision under sub-paragraph (1) must require the agreement referred to in that sub-paragraph to be made—

(a) where control is obtained in the way set out in sub-paragraph (2)(a)(i) or (ii), within the period of 6 months beginning with the time when the acquiring company obtains control and any condition subject to which the offer is made is met,

(b) where control is obtained in the way set out in sub-paragraph (2)(b), within the period of 6 months beginning with the time when the court sanctions the compromise or arrangement, ...

(ba) where control is obtained in the way set out in sub-paragraph (2)(ba), within the period of 6 months beginning with the date on which the non-UK company reorganisation arrangement becomes binding on the shareholders covered by it, and

(c) where sub-paragraph (2)(c) applies, within the period during which the acquiring company remains bound or entitled as mentioned in that provision.

39

(1) This paragraph applies to a scheme that makes provision under paragraph 38 (exchange of options on company reorganisation).

(2) The scheme must require the new share options to relate to shares in a company which—

(a) is different from the company whose shares are subject to the old options, and

(b) is either the acquiring company itself or some other company within sub-paragraph (b) or (c) of paragraph 18 (shares must be ordinary shares of certain companies), namely—

(i) a company which has control of the scheme organiser, or

(ii) a company which is, or has control of a company which is, a member of a consortium owning either the scheme organiser or a company having control of the scheme organiser.

For this purpose the control in question may be through the medium of the acquiring company.

(3) The scheme must also require the new share options to be equivalent to the old options.

(4) For the new options to be regarded as equivalent to the old options—

(a) the shares to which they relate must meet the conditions in paragraphs 18 to 22 (types of share that may be used),

(b) they must be exercisable in the same manner as the old options and subject to the provisions of the scheme as it had effect immediately before the release of the old options,

(c) the total market value of the shares subject to the old options immediately before the release of those options by the participant must be substantially the same as the total market value, immediately after the grant of the new options to the participant, of the shares subject to those options, and

(d) the total amount payable by the participant for the acquisition of shares under the new options must be substantially the same as the total amount that would have been so payable under the old options.

(5) For the purposes of the SAYE code, new share options granted under the terms of a provision included in a scheme under paragraph 38 are to be treated as having been granted at the time when the corresponding old options were granted.

(6) This also applies for the purposes of the provisions of the scheme in their operation, after the grant of the new options, by virtue of a condition complying with sub-paragraph (4)(b).

(7) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

(8) For the purposes of this paragraph the market value of any shares is to be determined using a methodology agreed by Her Majesty's Revenue and Customs.

PART 8 — Notification of schemes, annual returns and enquiries

Application for approval

40

(1) Where—

(a) an SAYE option scheme has been established, and

(b) the scheme organiser makes an application to an officer of Revenue and Customs for approval of the scheme,

an officer of Revenue and Customs must approve the scheme if the officer is satisfied that it meets the requirements of Parts 2 to 7 of this Schedule.

(2) An application for approval—

(a) must be in writing, and

(b) must contain such particulars and be supported by such evidence as an officer of Revenue and Customs may require.

(3) Once an officer of Revenue and Customs has decided whether or not to approve the scheme, the officer must give notice of the decision to the scheme organiser.

Appeal against refusal of approval

41

(1) If an officer of Revenue and Customs refuses to approve the scheme, the scheme organiser may appeal ....

(2) The notice of appeal must be given to an officer of Revenue and Customs within 30 days after the date on which notice of the officer's decision was given to the scheme organiser.

(3) If the appeal is notified to and allowed by the tribunal, the tribunal may direct an officer of Revenue and Customs to approve the scheme with effect from a date specified by the tribunal.

(4) The date so specified must not be earlier than that of the application for approval.

Withdrawal of approval

42

(1) If any disqualifying event occurs in connection with an approved SAYE option scheme, an officer of Revenue and Customs may by a notice given to the scheme organiser withdraw the approval with effect from—

(a) the time at which the disqualifying event occurred, or

(b) a later time specified by an officer of Revenue and Customs in the notice.

(2) A “disqualifying event” occurs in connection with a scheme if—

(a) any of the requirements of Parts 2 to 7 of this Schedule ceases to be met;

(aa) an alteration is made in a key feature of the scheme without the approval of an officer of Revenue and Customs; or

(b) the scheme organiser fails to provide information requested by an officer of Revenue and Customs under paragraph 45.

(2A) For the purposes of sub-paragraph (2)(aa) an officer of Revenue and Customs may not withhold ... approval unless it appears to the officer at the time in question that the scheme as proposed to be altered would not then be approved on an application under paragraph 40.

(2B) For the purposes of that sub-paragraph a “key feature” of a scheme is a provision of the scheme which is necessary in order to meet the requirements of this Schedule.

(3) If share options granted under an SAYE option scheme before the withdrawal of approval under this paragraph are exercised after the withdrawal, the scheme is to be treated for the purposes of—

(a) section 519 (exemption in respect of exercise of share option), and

(b) section 421G(b) (exemption from Chapters 2 to 4 of Part 7),

in their application to such options, as if it were still approved at the time of the exercise.

Approval ineffective after unapproved alteration

43

Where an officer of Revenue and Customs —

(a) has been requested to approve any alteration in a SAYE option scheme that has been approved, and

(b) has decided whether or not to approve the alteration,

the officer must give notice of the decision to the scheme organiser.

Appeal against withdrawal of approval etc.

44

(1) This paragraph applies if an SAYE option scheme has been approved by an officer of Revenue and Customs and the officer —

(a) decides to withdraw approval of the scheme under paragraph 42, or

(b) decides to refuse approval under paragraph 42(2)(aa).

(2) The scheme organiser may appeal against the decision ....

(3) The notice of appeal must be given to an officer of Revenue and Customs within 30 days after the date on which notice of the officer's decision was given to the scheme organiser.

Part 9 — Supplementary provisions

Power to require information

45

(1) An officer of Revenue and Customs may by notice require a person to provide the officer with any information—

(a) which the officer reasonably requires for the performance of any functions of Her Majesty's Revenue and Customs or an officer of Revenue and Customs under the SAYE code, and

(b) which the person to whom the notice is addressed has or can reasonably obtain.

(2) The power conferred by this paragraph extends, in particular, to—

(a) information to enable an officer of Revenue and Customs —

(i) to check anything contained in a notice under paragraph 40A or a return under paragraph 40B or to check any information accompanying such a notice or return, or”, and

(ii) to determine the liability to tax, including capital gains tax, of any person who has participated in a scheme or any other person whose liability to tax the operation of a scheme is relevant to, and

(b) information about the administration of a scheme and any alteration of the terms of a scheme.

(3) The notice must require the information to be provided within a specified time, which must not end earlier than 3 months after the date when the notice is given.

Jointly owned companies

46

(1) This paragraph applies for the purposes of the provisions of the SAYE code relating to group schemes.

(2) Each joint owner of a jointly owned company is to be treated as controlling every company within sub-paragraph (3).

(3) The companies within this sub-paragraph are—

(a) the jointly owned company, and

(b) any company controlled by that company.

(4) However, no company within sub-paragraph (3) may be—

(a) a constituent company in more than one group scheme, or

(b) a constituent company in a particular group scheme if another company within that sub-paragraph is a constituent company in a different group scheme.

(5) In this paragraph a “jointly owned company” means a company which (apart from sub-paragraph (2)) is not controlled by any one person and—

(a) of which 50% of the issued share capital is owned by one person and 50% by another, or

(b) which is otherwise controlled by two persons taken together.

(6) In this paragraph “joint owner” means one of the persons mentioned in sub-paragraph (5)(a) or (b).

Meaning of “associated company”

47

(1) For the purposes of the SAYE code, except in paragraph 35(3) (time when “scheme-related employment” ends), one company is an “associated company” of another company at a given time if, at that time or at any other time within one year previously—

(a) one has control of the other, or

(b) both are under the control of the same person or persons.

(2) For the purposes of sub-paragraph (1) the question whether a person controls a company is to be determined in accordance with sections 450 and 451 of CTA 2010.

Minor definitions

48

(1) In the SAYE code—

“certified SAYE savings arrangement” has the meaning given in section 703(1) of ITTOIA 2005;

“company” means a body corporate;

“market value” has the same meaning as it has for the purposes of TCGA 1992 by virtue of Part 8 of that Act.

(2) For the purposes of the SAYE code a company is a member of a consortium owning another company if it is one of a number of companies—

(a) which between them beneficially own not less than 75% of the other company’s ordinary share capital, and

(b) each of which beneficially owns not less than 5% of that capital.

(3) For the purposes of the SAYE code—

(a) shares are subject to a “restriction” if there is any contract, agreement, arrangement or condition which makes provision to which any of subsections (2) to (4) of section 423 (restricted securities) would apply if the references in those subsections to the employment-related securities were to the shares, and

(b) the “restriction” is that provision.

Index of defined expressions

49

In the SAYE code the following expressions are defined or otherwise explained by the provisions indicated below:

SCHEDULE 4

Part 1 — Introduction

Approval of CSOP schemes

1

(A1) For the purposes of the CSOP code a CSOP scheme is a Schedule 4 CSOP scheme if the requirements of Parts 2 to 6 of this Schedule are met in relation to the scheme.

(3) The requirements consist of general requirements (see Part 2) and requirements as to—

the eligibility of individuals to participate in a scheme (see Part 3),

the shares to which a scheme can apply (see Part 4),

the share options which may be granted under a scheme (see Part 5), and

the exchange of share options (see Part 6).

(4) Sub-paragraph (A1) is subject to Part 7 of this Schedule which—

(a) requires notice of a scheme to be given to Her Majesty's Revenue and Customs (“HMRC”) in order for the scheme to be a Schedule 4 CSOP scheme (see paragraph 28A(1)),

(b) provides for a scheme in relation to which such notice is given to be a Schedule 4 CSOP scheme (see paragraph 28A(4)), and

(c) gives power to HMRC to enquire into a scheme and to decide that the scheme should not be a Schedule 4 CSOP scheme (see paragraphs 28F to 28I).

CSOP schemes

2

(1) In the CSOP code a “CSOP scheme” means (in accordance with section 521(4)) a scheme which—

(a) is established by a company,

(b) provides for share options to be granted to employees and directors, and

(2) In the CSOP code, in relation to a CSOP scheme—

“participant” means an individual who has been granted (but has not yet exercised) share options under the scheme (“the options”);

“participate” means obtain and exercise share options under the scheme;

“the scheme organiser” means the company which has established the scheme.

Group schemes

3

(1) A CSOP scheme established by a company that controls one or more other companies (a “parent scheme company”) may extend to all or any of those other companies.

(2) In the CSOP code a CSOP scheme established by a parent scheme company which so extends is called a “group scheme”.

(3) In relation to a group scheme a “constituent company” means—

(a) the parent scheme company, or

(b) any other company to which for the time being the scheme is expressed to extend.

(4) Paragraph 34 deals with jointly owned companies and companies controlled by them.

Part 2 — General requirements ...

General requirements for approval: introduction

4

A CSOP scheme must meet the requirements of—

paragraph 5 (general restriction on contents of scheme), and

paragraph 6 (limit on value of shares subject to options).

General restriction on contents of scheme

5

(1) The purpose of the scheme must be to provide, in accordance with this Schedule, benefits for employees and directors in the form of share options.

(2) The scheme must not provide benefits to employees or directors otherwise than in accordance with this Schedule.

(3) For example, the scheme must not provide cash as an alternative to share options or shares which might otherwise be acquired by the exercise of share options.

Limit on value of shares subject to options

6

(1) The scheme must provide that an individual may not be granted share options under it which would at the time when they are granted cause the aggregate market value of the shares which the individual may acquire by exercising share options granted under—

(a) the scheme, or

(b) any other Schedule 4 CSOP scheme established by the scheme organiser or an associated company of the scheme organiser,

to exceed or further exceed £60,000.

(2) For the purposes of sub-paragraph (1) share options that have already been exercised are to be left out of account.

(3) For the purposes of sub-paragraph (1) the market value of shares is to be calculated as at—

(a) the time when the options relating to them were granted, or

(b) if an agreement relating to them has been made under paragraph 22 (requirements as to price for acquisition of shares) the earlier time or times stated in the agreement.

(4) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

(5) The Treasury may by regulations amend sub-paragraph (1) by substituting a different sum of money for the sum for the time being specified there.

Part 3 — Eligibility of individuals to participate in scheme

Requirements relating to the eligibility of individuals: introduction

7

A CSOP scheme must meet the requirements of—

paragraph 8 (the employment requirement), and

paragraph 9 (the “no material interest” requirement).

The employment requirement

8

(1) The scheme must ensure that an individual is not eligible to be granted share options under the scheme at a particular time unless the individual is then a full-time director or a qualifying employee of—

(a) the scheme organiser, or

(b) in the case of a group scheme, a constituent company.

(2) A “qualifying employee”, in relation to a company, means an employee of the company other than one who is a director of—

(a) the company, or

(b) in the case of a group scheme, a constituent company.

The “no material interest” requirement

9

(1) The scheme must ensure that an individual is not eligible to participate in the scheme on any date if the individual has on that date, or has had within the 12 months preceding that date, a material interest in a close company—

(a) whose shares may be acquired as a result of exercising share options granted under the scheme, or

(b) which has control of a company whose shares may be acquired as a result of exercising share options granted under the scheme, or

(2) For the purposes of this paragraph an individual is to be regarded as having a material interest in a company if—

(a) the individual, or

(b) the individual together with one or more of the individual’s associates, or

has a material interest in the company.

(3) This paragraph is supplemented—

(a) as regards the meaning of “material interest”, by paragraphs 10 and 11, and

(b) as regards the meaning of “associate”, by paragraph 12 (read with paragraphs 13 and 14).

(4) In this paragraph and paragraph 10 “close company” includes a company that would be a close company but for—

(a) section 442(a) of CTA 2010 (exclusion of companies not resident in the United Kingdom), or

(b) sections 446 and 447 of CTA 2010 (exclusion of certain quoted companies).

Meaning of “material interest”

10

(1) In paragraph 9 (the “no material interest” requirement) references to a “material interes” in a company are to—

(a) a material interest in the share capital of the company, or

(b) a material interest in its assets.

(2) A material interest in the share capital of a company means—

(a) beneficial ownership of, or

(b) the ability to control (directly or through the medium of other companies or by any other indirect means),

more than 30% of the ordinary share capital of the company.

(3) A material interest in the assets of a company means—

(a) possession of, or

(b) an entitlement to acquire,

such rights as would, in the event of the winding up of the company or in any other circumstances, give an entitlement to receive more than 30% of the assets that would then be available for distribution among the participators.

(4) In this paragraph “participator” has the meaning given by section 454 of CTA 2010.

(5) This paragraph is supplemented by paragraph 11 (material interest: options etc.).

Material interest: options and interests in SIPs

11

(1) For the purposes of paragraph 10 (meaning of “material interest”) a right to acquire shares (however arising) is to be treated as a right to control them.

(2) Sub-paragraph (3) also applies for the purposes of paragraph 10 in a case where—

(a) the shares to be attributed to an individual consist of or include shares which the individual or another person has a right to acquire, and

(b) the circumstances are such that, if that right were to be exercised, the shares acquired would be shares which were previously unissued and which the company would be contractually bound to issue in the event of the exercise of the right.

(3) In determining at any time prior to the exercise of the right whether the number of shares to be attributed to the individual exceeds 30% of the ordinary share capital of the company, that ordinary share capital is to be treated as increased by the number of unissued shares referred to in sub-paragraph (2)(b).

(4) The references in sub-paragraphs (2) and (3) to the shares to be attributed to an individual are to the shares which—

(a) for the purposes of paragraph 10(2) (material interest in share capital), and

(b) in accordance with paragraph 9(2) (material interest can consist of or include that of individual’s associates),

fall to be brought into account in the individual’s case so that it can be determined whether their number exceeds 30% of the company’s ordinary share capital.

(5) In applying paragraph 10 the following are to be disregarded—

(a) the interest of the trustees of any Schedule 2 SIP (within the meaning of the SIP code: see section 488(4)) in any shares which are held by them in accordance with the plan but which have not been appropriated to, or acquired on behalf of, an individual, and

(b) any rights exercisable by the trustees as a result of that interest.

Meaning of “associate”

12

(1) In paragraph 9(2) (the “no material interest” requirement) “associate”, in relation to an individual, means—

(a) any relative or partner of that individual,

(b) the trustee or trustees of any settlement in relation to which that individual, or any of the individual’s relatives (living or dead), is or was a settlor, or

(c) where that individual is interested in any shares or obligations of the company mentioned in paragraph 9(2) which are subject to any trust or are part of the estate of a deceased person—

(i) the trustee or trustees of the settlement concerned, or

(ii) the personal representatives of the deceased,

as the case may be.

(2) Sub-paragraph (1)(c) needs to be read with paragraphs 13 and 14 (which relate to employee benefit trusts and discretionary trusts).

(3) In this paragraph—

“relative” means—spouse or civil partner,parent, child or remoter relation in the direct line, orbrother or sister;

“settlor” and “settlement” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).

Meaning of “associate”: trustees of employee benefit trust

13

(1) This paragraph applies for the purposes of paragraph 12(1)(c) (meaning of “associate”: trustees of settlement) where the individual is interested as a beneficiary of an employee benefit trust in shares or obligations of the company mentioned in paragraph 9(2).

(2) The trustees of the employee benefit trust are not to be regarded as associates of the individual as a result only of the individual’s being so interested if neither—

(a) the individual, nor

(b) the individual together with one or more of the individual’s associates, nor

has at any time after 13th March 1989 been the beneficial owner of, or been able (directly or through the medium of other companies or by any other indirect means) to control, more than 30% of the ordinary share capital of the company.

(3) In sub-paragraph (2)(b) and (c) “associate” has the meaning given by paragraph 12(1), but does not include the trustees of an employee benefit trust as a result only of the individual’s having an interest in shares or obligations of the trust.

(4) Chapter 11 of Part 7 of this Act (which deals with the attribution of interests in companies to beneficiaries of employee benefit trusts) applies for the purposes of sub-paragraph (2).

(5) In this paragraph “employee benefit trust” has the same meaning as in that Chapter (see sections 550 and 551).

Meaning of “associate”: trustees of discretionary trust

14

(1) This paragraph applies for the purposes of paragraph 12(1)(c) (meaning of “associate”: trustees of settlement) where—

(a) the individual (“the beneficiary”) is one of the objects of a discretionary trust,

(b) the property subject to the trust has at any time consisted of, or included, shares or obligations of the company mentioned in paragraph 9(2),

(i) an irrevocable disclaimer or release executed by the beneficiary, or

(ii) the irrevocable exercise by the trustees of a power to exclude the beneficiary from the objects of the trust,

(d) immediately after the beneficiary ceased to be so eligible, no associate of the beneficiary was interested in the shares or obligations of the company that were subject to the trust, and

(e) during the period of 12 months ending with the date on which the beneficiary ceased to be so eligible, neither the beneficiary nor any associate of the beneficiary received any benefit under the trust.

(2) The beneficiary is not, as a result only of the matters referred to in sub-paragraph (1)(a) and (b), to be regarded as having been interested in the shares or obligations of the company at any time during that period of 12 months.

(3) In sub-paragraph (1) “associate” has the meaning given by paragraph 12(1) but with the omission of paragraph (c).

Part 4 — Shares to which schemes can apply

15

(1) A CSOP scheme must meet the requirements of—

paragraph 16 (shares must be ordinary shares of certain companies),

paragraph 17 (requirements as to listing) , and

paragraph 18 (shares must be fully paid up and not redeemable) ...

(1A) Sub-paragraph (1) and the other paragraphs of this Part are subject to paragraph 25A(7B).

(2) In this Part “eligible shares” means shares which may be acquired by the exercise of share options under the scheme.

Shares must be ordinary shares of certain companies

16

Eligible shares must form part of the ordinary share capital of—

(a) the scheme organiser,

(b) a company which has control of the scheme organiser, or

(c) a company which either is, or has control of, a company which is a member of a consortium owning either the scheme organiser or a company having control of the scheme organiser.

Requirements as to listing

17

(1) Eligible shares must be —

(a) shares of a class listed on a recognised stock exchange, ...

(b) shares in a company which is not under the control of another company, ..., or

(ba) shares in a company which is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).

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

Shares must be fully paid up and not redeemable

18

Eligible shares must be—

(a) fully paid up, and

(b) not redeemable.

Only certain kinds of restriction allowed

19

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Requirements as to other shareholdings

20

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

21

(1) A CSOP scheme must meet the requirements of—

paragraph 21A (general requirements as to terms of option),

paragraph 22 (requirements as to price for acquisition of shares), and

paragraph 23 (share options may not be transferred).

(2) A CSOP scheme may make any provision authorised by—

paragraph 24 (exercise of options: ceasing to be director or employee), ...

paragraph 25 (exercise of options: death) , or

paragraph 25A (exercise of options: company events)

Requirements as to price for acquisition of shares

22

(1) The price at which shares may be acquired by the exercise of a share option granted under the scheme—

(a) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(b) must not be manifestly less than the market value of shares of the same class —

(i) at the time when the option is granted, or

(ii) at such earlier time as may be determined in accordance with guidance issued by the Commissioners for Her Majesty's Revenue and Customs.

This is subject to sub-paragraph (3).

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

(3) The scheme may provide for one or more of the following—

(a) the price at which shares may be acquired by the exercise of a share option granted under the scheme,

(b) the number of shares which may be so acquired, or

to be varied so far as necessary to take account of a variation in the share capital of which the shares form part.

(3A) If the scheme makes provision under sub-paragraph (3), the variation or variations made under that provision to take account of a variation in any share capital must (in particular) secure—

(a) that the total market value of the shares which may be acquired by the exercise of the share option is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations, and

(b) that the total price at which those shares may be acquired is immediately after the variation or variations substantially the same as what it was immediately before the variation or variations.

(3B) Sub-paragraph (3) does not authorise any variation which would result in the requirements of the other paragraphs of this Schedule not being met in relation to the share option.

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

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) For the purposes of this paragraph the market value of shares subject to a restriction is to be determined as if they were not subject to the restriction.

23

(1) The scheme must ensure that share options granted to a participant are not capable of being transferred by the participant.

(2) Paragraph 25 provides for the exercise of the options where the participant has died.

Exercise of options: ceasing to be director or employee

24

(1) The scheme may provide that an individual may exercise share options under it after ceasing to be a full-time director or qualifying employee.

(2) “Qualifying employee” has the same meaning as in paragraph 8 (the employment requirement).

Exercise of options: death

25

(1) The scheme may provide that, if a participant dies before exercising the options, they may be exercised on or after the date of death ....

(2) Provision made under sub-paragraph (1) must permit the exercise of the options at any time on or after the date of death but not later than 12 months after that date.

Exchange of options on company reorganisation

26

(1) A CSOP scheme may provide that if—

(a) there is a company reorganisation affecting a scheme company (that is, a company whose shares may be acquired by the exercise of share options obtained under the scheme: see paragraph 16), and

(b) a participant has obtained share options under the scheme which are to acquire shares of the scheme company (“the old options”),

the participant may agree with the acquiring company to release the old options in consideration of the participant being granted new share options.

(2) For the purposes of this paragraph there is a company reorganisation affecting a scheme company if another company (“the acquiring company”)—

(a) obtains control of the scheme company—

(i) as a result of making a general offer to acquire the whole of the issued ordinary share capital of the scheme company which is made on a condition such that, if it is met, the person making the offer will have control of that company, or

(ii) as a result of making a general offer to acquire all the shares in the scheme company which are of the same class as those subject to the old options;

(b) obtains control of the scheme company as a result of a compromise or arrangement sanctioned by the court under section 899 or 901F of the Companies Act 2006 (court sanction for compromise or arrangement);

(ba) obtains control of the scheme company as a result of a non-UK company reorganisation arrangement which has become binding on the shareholders covered by it; or

(c) becomes bound or entitled to acquire shares in the scheme company under sections 979 to 982 or 983 to 985 of the Companies Act 2006 (takeover offers: right of offeror to buy out minority shareholder etc).

Reading this document does not replace reading the official text published on legislation.gov.uk. Contains public sector information licensed under the Open Government Licence v3.0. We assume no responsibility for any inaccuracies arising from the conversion of the original CLML XML to this format.

This text is published under legislation.gov.uk's own terms of reuse, not a Legalize or public-domain licence. legislation.gov.uk
Open Government Licence v3.0 (attribution required)
© Crown and database right. Derived from content available under the Open Government Licence v3.0 from legislation.gov.uk.

Income Tax (Earnings and Pensions) Act 2003

Consequences of company reconstructions

87

Treatment of shares acquired under rights issue

88

Termination of plan

89

Effect of plan termination notice

90

Jointly owned companies

91

Determination of market value

92

Power to require information

93

Meaning of “associated company”

94

Meaning of participant ceasing to be in relevant employment

95

Meaning of shares being withdrawn from plan

96

Meaning of shares ceasing to be subject to plan

97

Meaning of “the specified retirement age”

98

Minor definitions

99

Index of defined expressions

100

SCHEDULE 3

Part 1 — Introduction

Approval of SAYE option schemes

1

SAYE option schemes

2

Group schemes

3

Part 2 — General requirements ...

General requirements for approval: introduction

4

General restriction on contents of scheme

5

All-employee nature of scheme

6

Participation on similar terms

7

No preferential treatment for directors and senior employees

8

Part 3 — Eligibility of individuals to participate in scheme

Requirements relating to the eligibility of individuals: introduction

9

The employment requirement

10

The “no material interest” requirement

11

Meaning of “material interest”

12

Material interest: options and interests in SIPs

13

Meaning of “associate”

14

Meaning of “associate”: trustees of employee benefit trust

15

Meaning of “associate”: trustees of discretionary trust

16

Part 4 — Shares to which schemes can apply

Requirements relating to shares that may be subject to share options: introduction

17

Shares must be ordinary shares of certain companies

18

Requirements as to listing

19

Shares must be fully paid up and not redeemable

20

Only certain kinds of restriction allowed

21

Requirements as to other shareholdings

22

Part 5 — Requirement for linked savings arrangement

Requirements as to linked savings scheme: introduction