Introduction Details of the Schedule Part 2, 'Good Leavers' (other than Retirees)
11.Paragraph 18 introduces amendments to the rules in Part 7 of ITEPA that govern when those leaving employment (other than on retirement) can qualify for favourable tax treatment as 'good leavers'.
12.Paragraphs 19 - 29 address two issues across the three schemes. First, they lay down simpler and more consistent rules for SAYE and CSOP to govern when employees who leave employment other than on retirement are entitled to favourable tax treatment under the schemes. Second, they set out new rules for SIP, SAYE and CSOP for certain cases where there is a cash takeover of the company whose shares are scheme shares.
13.Paragraph 19 amends section 498 by inserting new subsections (3) - (13), to provide that there will be no income tax liability where shares are withdrawn from a SIP during the holding period, on certain cash takeovers of companies. Various conditions have to be satisfied as to the circumstances in which the shares are withdrawn, the assets available to the participant in exchange for their shares and the nature of the offer that constitutes the cash takeover. By virtue of subsection (6) of section 498, favourable tax treatment is not available where it is reasonable to suppose that the shares would not have been awarded had the cash takeover not been in place or under consideration.
14.Paragraph 20 makes consequential changes to paragraph 37 of Schedule 2 (concerning the power of participants in SIP schemes to direct trustees to accept certain takeover offers). Sub-paragraph (7) clarifies when a qualifying 'general offer' takes place for the purposes of this paragraph. SIP schemes approved before these changes come into force are to be treated as if relevant provisions included the modifications made by this paragraph.
15.Paragraph 21 amends section 519 and inserts new subsections (3A) - (3J), which provide that there will be no income tax liability where an SAYE option is exercised before the third anniversary of grant on certain cash takeovers of companies. Various conditions have to be met as to the circumstances in which the option is exercised, the assets available to the participant in exchange for the shares under option and the nature of the offer that constitutes the cash takeover. By virtue of new subsections (3A)(d) and (3A)(e) of section 519, favourable tax treatment is not available where the cash takeover was in place or under consideration at the time it was decided to grant the option. New subsection (3A)(g) makes availability of this favourable tax treatment subject to an anti-avoidance condition.
16.Paragraph 23 inserts new sub-paragraphs (2)(c) and (d) into paragraph 34 of Schedule 3, to provide that the scheme rules must allow for exercise of SAYE options when employment ceases in relation to a transfer within the meaning of Transfer of Undertakings (Protection of Employment) Regulations, and certain cases of companies ceasing to be associated with the company organising the scheme on a change of control.
17.Paragraphs 24 and 25 amend paragraphs 37 and 38 Schedule 3 to extend the circumstances in which exercise of SAYE options is permitted on the occurrence of certain company events within the Companies Act 2006. Sub-paragraphs (2) of paragraph 24 and (3) of paragraph 25 clarify when a qualifying 'general offer' can take place for the purposes of paragraphs 37 and 38. SAYE schemes approved before these changes come into force are to be treated as if relevant provisions included the modifications made by this paragraph.
18.Paragraph 26 amends section 524 concerning CSOP.
19.Sub-paragraphs (2) - (4) make amendments to subsection (2B) of section 524, to extend the circumstances in which favourable tax treatment is available where CSOP options are exercised before the third anniversary of the date on which they were granted. New subsections (2B)(a)(ii) and (a)(iii) apply to those exercising CSOP options when employment ceases in relation to a transfer within the meaning of Transfer of Undertakings (Protection of Employment) Regulations; and in the case of group schemes where the company employing an individual ceases to be controlled by the company organising the scheme. Several consequential changes are also made.
20.Sub-paragraph (5) of paragraph 26 inserts new subsections (2E) - (2N) in section 524, which provide that there will be no income tax liability where a CSOP option is exercised before the third anniversary of grant on certain cash takeovers of companies. Various conditions have to be met as to the circumstances in which the option is exercised, the assets available to the participant in exchange for the shares under option and the nature of the offer that constitutes the cash takeover. By virtue of new subsections (2E)(d) and (2E)(e) of section 524, favourable tax treatment is not available where the cash takeover was in place or under consideration at the time it was decided to grant the option. New subsection (2E)(g) makes availability of this favourable tax treatment subject to an anti-avoidance condition.
21.Paragraphs 27 and 28 make consequential changes to Part 5 of Schedule 4.
22.Paragraph 29 extends the circumstances in which exercise of CSOP options is permitted, to cover certain company events within the Companies Act 2006 and certain offers to acquire the share capital of the company.
23.Paragraph 30 amends paragraph 26 Schedule 4 to extend the circumstances in which exchange of CSOP options is permitted on company reorganisation, to include certain company events within the Companies Act 2006. It also clarifies when a 'general offer' will be a company reorganisation for the purposes of this paragraph. CSOP schemes approved before this change comes into force are to be treated as if relevant provisions included the modifications made by this paragraph.
24.Paragraph 31 is concerned with the circumstances in which EMI options can be exercised on the occurrence of certain company reorganisations. It clarifies when a 'general offer' will be a company reorganisation for the purposes of paragraph 39 of Schedule 5. Paragraph 31 takes effect from a date to be specified by Treasury Order.