PART VU.K. PROVISIONS RELATING TO THE SCHEDULE E CHARGE

CHAPTER IVU.K. OTHER EXEMPTIONS AND RELIEFS

Share option and profit sharing schemesU.K.

185 Approved share option schemes.U.K.

F1. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

186 Approved profit sharing schemes.U.K.

(1)M1The provisions of this section apply where, after 5th April 1979 [F2and before 1st January 2003], the trustees of an approved profit sharing scheme appropriate shares—

(a)which have previously been acquired by the trustees, and

(b)as to which the conditions in Part II of Schedule 9 are fulfilled,

to an individual who participates in the scheme (“the participant”).

(2)M2Notwithstanding that, by virtue of such an appropriation of shares as is mentioned in subsection (1) above, the beneficial interest in the shares passes to the participant to whom they are appropriated—

(a)the value of the shares at the time of the appropriation shall be treated as not being income of his chargeable to tax under Schedule E; and

(b)he shall not be chargeable to income tax under that Schedule by virtue of [F3section 78 or 79 of the Finance Act 1988 in respect of the shares] or by virtue of section 162 in any case where the shares are appropriated to him at an undervalue within the meaning of that section.

(3)M3Subject to the provisions of this section and paragraph 4 of Schedule 10, if, in respect of or by reference to any of a participant’s shares, the trustees become or the participant becomes entitled, before the release date, to receive any money or money’s worth (“a capital receipt”), F4. . . the appropriate percentage (determined as at the time the trustees become or the participant becomes so entitled) of so much of the amount or value of the receipt as exceeds the appropriate allowance for that year, as determined under subsection (12) below[F5 counts as employment income of the participant for the year of assessment in which the entitlement arises].

(4)M4If the trustees dispose of any of a participant’s shares at any time before the release date or, if it is earlier, the date of the participant’s death, then, subject to subsections (6) and (7) below, F6. . . the appropriate percentage of the locked-in value of the shares at the time of the disposal[F7 counts as employment income of the participant for the year of assessment in which the disposal takes place].

(5)M5Subject to paragraphs 5 and 6(6) of Schedule 10, the locked-in value of a participant’s shares at any time is—

(a)if prior to that time he has become [F8 entitled to a capital receipt (within the meaning of subsection (3) above) which is referable to those shares and—

(i)an amount calculated by reference to that capital receipt counts as his employment income by virtue of subsection (3) above, or

(ii)if the entitlement to the capital receipt arose before 6th April 2003, he was chargeable to income tax by virtue of that subsection (as it had effect before that date) in respect of that capital receipt,]

the amount by which their initial market value exceeds the amount or value of that capital receipt or, if there has been more than one such receipt, the aggregate of them; and

(b)in any other case, their initial market value.

(6)Subject to subsection (7) below, if, on a disposal of shares falling within subsection (4) above, the proceeds of the disposal are less than the locked-in value of the shares at the time of the disposal, subsection (4) above shall have effect as if that locked-in value were reduced to an amount equal to the proceeds of the disposal.

(7)If, at any time prior to the disposal of any of a participant’s shares, a payment was made to the trustees to enable them to exercise rights arising under a rights issue, then, subject to subsection (8) below, subsections (4) and (6) above shall have effect as if the proceeds of the disposal were reduced by an amount equal to that proportion of that payment or, if there was more than one, of the aggregate of those payments which, immediately before the disposal, the market value of the shares disposed of bore to the market value of all the participant’s shares held by the trustees at that time.

(8)M6For the purposes of subsection (7) above—

(a)no account shall be taken of any payment to the trustees if or to the extent that it consists of the proceeds of a disposal of rights arising under a rights issue; and

(b)in relation to a particular disposal the amount of the payment or, as the case may be, of the aggregate of the payments referred to in that subsection shall be taken to be reduced by an amount equal to the total of the reduction (if any) previously made under that subsection in relation to earlier disposals;

and any reference in subsection (7) or paragraph (a) above to the rights arising under a rights issue is a reference to rights conferred in respect of a participant’s shares, being rights to be allotted, on payment, other shares or securities or rights of any description in the same company.

(9)M7If at any time the participant’s beneficial interest in any of his shares is disposed of, the shares in question shall be treated for the purposes of the relevant provisions as having been disposed of at that time by the trustees for (subject to subsection (10) below) the like consideration as was obtained for the disposal of the beneficial interest; and for the purposes of this subsection there is no disposal of the participant’s beneficial interest if and at the time when—

(a)in England and Wales or Northern Ireland, that interest becomes vested in any person on the insolvency of the participant or otherwise by operation of law, or

(b)in Scotland, that interest becomes vested in a judicial factor, in a trustee on the participant’s sequestrated estate or in a trustee for the benefit of the participant’s creditors.

(10)If—

(a)a disposal of shares falling within subsection (4) above is a transfer to which paragraph 2(2)(c) of Schedule 9 applies, or

[F9(b)any other disposal falling within that subsection is not at arm’s length,]

(c)a disposal of shares falling within [F10that subsection] is one which is treated as taking place by virtue of subsection (9) above and takes place within the period of retention,

then for the purposes of the relevant provisions the proceeds of the disposal shall be taken to be equal to the market value of the shares at the time of the disposal.

(11)M8Where the trustees of an approved scheme acquire any shares as to which the requirements of Part II of Schedule 9 are fulfilled and, within the period of 18 months beginning with the date of their acquisition, those shares are appropriated in accordance with the scheme, section 686 shall not apply to income consisting of dividends on those shares received by the trustees; and, for the purpose of determining whether any shares are appropriated within that period, shares which were acquired at an earlier time shall be taken to be appropriated before shares of the same class which were acquired at a later time.

(12)M9For the purposes of subsection (3) above, “the appropriate allowance”, in relation to any year of assessment, means a sum which, subject to a maximum of [F11£60], is the product of multiplying £20 by 1 plus the number of years which fall within the period of [F12three years] immediately preceding the year in question and in which shares were appropriated to the participant under the scheme; and if in any year (and before the release date) the trustees become or the participant becomes entitled, in respect of or by reference to any of his shares, to more than one capital receipt, the receipts shall be set against the appropriate allowance for that year in the order in which they are received.

(13)Schedule 10 shall have effect with respect to profit sharing schemes.

187 Interpretation of sections 185 and 186 and Schedules 9 and 10.U.K.

(1)[F13M10In sections 185 and 186, this section and Schedules 9 and 10 “the relevant provisions” means those sections (including this section) and Schedules.]

(2)[F13For the purposes of the relevant provisions, except where the context otherwise requires—

• “appropriate percentage” shall be construed in accordance with paragraph 3 of Schedule 10;

• “approved”, in relation to a scheme, means approved under Schedule 9;

• “associated company” has the same meaning as in section 416, except that, for the purposes of paragraph 23 of Schedule 9, subsection (1) of that section shall have effect with the omission of the words “ or at any time within one year previously ”;

• “bonus date” has the meaning given by paragraph 17 of Schedule 9;

• “capital receipt” means money or money’s worth to which the trustees of or a participant in a profit sharing scheme become or becomes entitled as mentioned in section 186(3), but subject to paragraph 4 of Schedule 10;

• “certified contractual savings scheme” has the meaning given by section 326;

• “control” has the same meaning as in section 840;

• “grantor”, in relation to any scheme, means the company which has established the scheme;

• “group scheme” and, in relation to such a scheme, “participating company” have the meanings given by paragraph 1(3) and (4) of Schedule 9;

• “initial market value”, in relation to shares in a profit sharing scheme, has the meaning given by paragraph 30(4) of Schedule 9;

• “locked-in value”, in relation to any shares, shall be construed in accordance with section 186(5);

• “market value” has the same meaning as in Part VIII of the [F141992 Act];

• “new holding” has the meaning given by section [F14126(1)(b) of the 1992 Act];

• “participant”, in relation to a profit sharing scheme, means an individual to whom the trustees of the scheme have appropriated shares;

• “participant’s shares”, in relation to a participant in a profit sharing scheme, means, subject to paragraph 5(4) of Schedule 10, shares which have been appropriated to the participant by the trustees;

• F15. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

• “period of retention” has the meaning given by paragraph 2 of Schedule 10;

• “release date”, in relation to any of the shares of a participant in a profit sharing scheme, means the [F16third] anniversary of the date on which they were appropriated to him;

• “relevant amount”, in relation to a participant in a profit sharing scheme, means an amount which is [F17not less than £3,000 and not more than £8,000] but which, subject to that, is 10 per cent. of his salary (determined under subsection (5) below) for the year of assessment in question or the preceding year of assessment, whichever is the greater;

• “relevant requirements” has the meaning given by paragraph 1 of Schedule 9;

• “savings-related share option scheme” has the meaning given by paragraph 1 of Schedule 9;

• “scheme” means a savings-related share option scheme, a share option scheme which is not a savings-related share option scheme or a profit sharing scheme, as the context may require;

• “shares” includes stock;

• [F18“specified age”, in relation to a scheme, means the age specified in pursuance of paragraph 8A of Schedule 9 as the specified age for the purposes of the scheme;]

• “the trustees”, in relation to an approved profit sharing scheme or the shares of a participant in such a scheme, means the body of persons for the establishment of which the scheme must provide as mentioned in paragraph 30 of Schedule 9; and

• “just instrument”, in relation to an approved profit sharing scheme, means the instrument referred to in paragraph 30(1)(c) of Schedule 9.]

(3)[F13M11For the purposes of the application of the relevant provisions in relation to any share option scheme or profit sharing scheme, a person has a material interest [F19in a company if he, either on his own or with one or more associates, or if any associate of his with or without such other associates,—

(a)is the beneficial owner of, or able, directly or through the medium of other companies, or by any other indirect means to control, more than 25 per cent., or in the case of a share option scheme which is not a savings-related share option scheme more than 10 per cent., of the ordinary share capital of the company, or

(b)where the company is a close company, possesses, or is entitled 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 25 per cent., or in the case of a share option scheme which is not a savings-related share option scheme more than 10 per cent., of the assets which would then be available for distribution among the participators.]

• In this subsection “associate” has the meaning given by section 417(3) and (4) [F19and “participator” has the meaning given by section 417(1)].]

(4)[F13M12Subsection (3) above shall have effect subject to the provisions of Part VI of Schedule 9.]

(5)M13For the purposes of subsection (2) above, a participant’s salary for a year of assessment means such of the emoluments of the office or employment by virtue of which he is entitled to participate in a profit sharing scheme as are liable to be paid in that year under deduction of tax pursuant to section 203 after deducting therefrom amounts included by virtue of Chapter II of this Part.

(6)[F13M14Section 839 shall apply for the purposes of the relevant provisions.]

(7)[F13M15For the purposes of the relevant provisions a company is a member of a consortium owning another company if it is one of a number of companies which between them beneficially own not less than three-quarters of the other company’s ordinary share capital and each of which beneficially owns not less than one-twentieth of that capital.]

(8)M16Where the disposal referred to in section 186(4) is made from a holding of shares which were appropriated to the participant at different times, then, in determining for the purposes of the relevant provisions—

(a)the initial market value and the locked-in value of each of those shares, F20. . .

(b)F20. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(9)M17Any of the relevant provisions with respect to—

(a)the order in which any of a participant’s shares are to be treated as disposed of for the purposes of those provisions, or

(b)the shares in relation to which an event is to be treated as occurring for any such purpose,

shall have effect in relation to a profit sharing scheme notwithstanding any direction given to the trustees with respect to shares of a particular description or to shares appropriated to the participant at a particular time.

(10)M18In the relevant provisions “workers’ cooperative” means a [F21registered society][F22, as defined in [F23section 1119 of CTA 2010]], which is a cooperative society and the rules of which include provisions which secure—

(a)that the only persons who may be members of it are those who are employed by, or by a subsidiary of, the society and those who are the trustees of its profit sharing scheme; and

(b)that, subject to any provision about qualifications for membership which is from time to time made by the members of the society by reference to age, length of service or other factors of any description, all such persons may be members of the society;

and in this subsection “cooperative society” has the same meaning as in [F24section 2 of the Co-operative and Community Benefit Societies Act 2014] or, as the case may be, [F25section 1 of] the M19Industrial and Provident Societies Act (Northern Ireland) 1969.

[F26 Contributions in respect of share option gainsU.K.

187A Relief for contributions in respect of share option gains.U.K.

F27. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Retirement benefits etc.U.K.

188 Exemptions from section 148.U.K.

F28. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

189 Lump sum benefits on retirement.U.K.

F29. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

190Payments to MPs and others.U.K.

F30. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

191 Job release scheme allowances not to be treated as income.U.K.

F31. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F32 Removal expenses and benefitsU.K.

F33191A Removal expenses and benefits.U.K.

F34. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F35191B Removal benefits: beneficial loan arrangements.U.K.

F36. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Foreign emoluments and earnings, pensions and certain travel facilitiesU.K.

192 Relief from tax for foreign emoluments.U.K.

F37. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F38192A Foreign earnings deduction for seafarers.U.K.

F39. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

193 Foreign earnings and travel expenses.U.K.

F40. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

194 Other foreign travel expenses.U.K.

F41. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

195 Travel expenses of employees not domiciled in the United Kingdom.U.K.

F42. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

196 Foreign pensions.U.K.

F43. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197 Leave travel facilities for the armed forces.U.K.

F44. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F45197A Car parking facilitiesU.K.

F46. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F47197AA Works bus services.U.K.

F48. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197AB Support for public transport road services.U.K.

F49. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F50197AC Provision of cycle or cyclist’s safety equipment.U.K.

F51. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F52 Mileage allowancesU.K.

197AD Mileage allowance paymentsU.K.

F53. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197AE Passenger paymentsU.K.

F54. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197AF Mileage allowance reliefU.K.

F55. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197AG Giving effect to mileage allowance reliefU.K.

F56. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197AH Interpretation of sections 197AD to 197AGU.K.

F57. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F58 Mileage allowancesU.K.

197B. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F59. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197C. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F60. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197D. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F61. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197E. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F62. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

197F. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F63. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F64 Sporting and recreational facilitiesU.K.

197G Sporting and recreational facilities.U.K.

F65. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

Other expenses, subscriptions etc.U.K.

198 Relief for necessary expenses.U.K.

F66. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F67198A. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .U.K.

F68. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

199 Expenses necessarily incurred and defrayed from official emoluments.U.K.

F69. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200 Expenses of Members of Parliament.U.K.

F70. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F71200ZA Expenses of members of Scottish Parliament, National Assembly for Wales or Northern Ireland Assembly.U.K.

F72. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F73200AA Incidental benefits for holders of certain offices etc.U.K.

F74. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F75200A Incidental overnight expenses.U.K.

F76. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F77200B Work-related training provided by employers.U.K.

F78. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200C Expenditure excluded from section 200B.U.K.

F79. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200D Other work-related training.U.K.

F80. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F81200E Education and training funded by employers.U.K.

F82. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200F Section 200E: exclusion of expenditure not directly related to training.U.K.

F83. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200G Section 200E: exclusion of expenditure if contributions not generally available to staff.U.K.

F84. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200H Section 200E: exclusion of expenditure otherwise relieved.U.K.

F85. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200J Education or training funded by third parties.U.K.

F86. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

201 Fees and subscriptions to professional bodies, learned societies etc.U.K.

F87. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F88201AA Employee liabilities and indemnity insurance.U.K.

F89. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

[F90201A Expense of entertainers.U.K.

F91. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .]

202 Donations to charity: payroll deduction scheme.U.K.

F92. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .