Introduction Summary
1.Section 39 counters avoidance arrangements which are being used to circumvent the financial limit in the Company Share Option Plan (CSOP) legislation. The avoidance involves arrangements being used which fall under the general description of “geared growth” and which can be used to deliver additional reward to individuals, beyond that intended under the CSOP legislation.
2.Section 39 amends paragraph 17 of Schedule 4 to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA) so that share options can no longer be granted under CSOP over shares in an unlisted company which is under the control of a listed company.
3.This change has effect from 24 March 2010, so that options granted on or after that date will no longer qualify for exemption from the charge to income tax and National Insurance contributions in respect of the exercise of the option.
4.Options over shares in an unlisted company which is under the control of a listed company which were granted before 24 March 2010 in accordance with the provisions of an approved CSOP scheme will continue to qualify for the exemption from the charge to income tax in respect of the exercise of the option, provided the other requirements of the CSOP code are met.
5.Where the rules of an approved CSOP scheme provide that a company may grant options over shares in an unlisted company which is under the control of a listed company, a six month transitional period will be allowed for the scheme rules to be amended in order to meet these changes to the legislation. However, any options granted over shares in an unlisted company which is under the control of a listed company during that six month transitional period will not qualify for the exemption from the charge to income tax in respect of the exercise of the option.