Commentary Section 4: Consequential changes to tax relief provisions
36.Subsection (1) applies where the employer has previously agreed with the employed earner to transfer the liability for secondary contributions to the employed earner and a notice is given under section 1 of this Act to make a special contribution in respect of the share option right.
37.Subsection (2) ensures that tax relief will continue to be available to the employed earner, under section 187A of the Income and Corporation Taxes Act 1988, in respect of the employee’s liability for special contributions on a share option right arising under this Act, as it would have applied for any employee’s liability to a secondary contribution on a gain on the exercise, assignment or release of that right. This subsection continues to allow the tax relief to be given at the time a gain is made on exercise, assignment or release of the share options included within the notice to pay the special contribution.
38.Subsection (3) prevents double tax deductions. It prohibits tax relief from being given for a secondary Class 1 liability that has arisen when that liability is replaced by a special contribution under this Act. It also prevents tax relief from being given for a special contribution where the payment following a notice is not made within 92 days from the passing of this Act. In the latter case Section 187A of the Income and Corporation Taxes Act 1988 would allow tax relief for the employee’s secondary Class 1 liability that is not displaced.
39.Subsection (4) disapplies the provisions of Section 203FB(6A) of the Income and Corporation Taxes Act 1988, in relation to relief for special contributions. This disapplication is required because relief for the special contribution is given at the time of option exercise and not at the time of payment of that special contribution. It is not therefore practical for the relief to be given through PAYE because of this timing difference.