Introduction Details of the Schedule New section 236C of TCGA: Only first £50,000 of shares under associated agreements to be exempt
34.New subsection (1) provides that an employee shareholder share is exempt if, when it is acquired, the total value of all employee shareholder shares acquired under the relevant employee shareholder agreement, and under certain other employee shareholder agreements, does not exceed £50,000.
35.New subsections (2) and (3) provide that for the purpose of applying the £50,000 limit in new subsection (1), any shares acquired under previous employee shareholder agreements with the same employing company, or with associated companies, are taken into account.
36.New subsection 4(a) defines two companies as associated if either one has control of the other, or both are under the control of the same person or persons. New subsection (4)(b) provides that where one company controls another when an employee shareholder agreement is made with an individual, that control is treated as continuing if a subsequent employee shareholder agreement is made with the same individual.
37.New subsection (5) excludes from new subsection 4(b) certain cases where a person who was an employee shareholder with a company that has been dissolved becomes an employee shareholder with an associated company. This is subject to two years having passed between the dissolution of the company in question and the subsequent employee shareholder agreement, during which time that individual has not been employed or engaged by any company associated with the dissolved company.
38.New subsections (6) and (7) provide a means of determining which employee shareholder shares are treated as exempt where the number of shares acquired on a day takes the recipient over the £50,000 limit. The shares are deemed to be acquired in two tranches, one of which consists of the maximum number which may be acquired without breaching the £50,000 limit.
39.New subsections (8) and (9) provide for the value ascribed to shares on their acquisition to be their unrestricted market value and define ‘unrestricted market value’ as what the shares’ market value would be but for any restrictions which apply to them (that is to say, any provision relating to the shares made by any contract, agreement, arrangement or condition). ‘Restriction’ follows the definition in section 432(8) of ITEPA.