Section 19.
1Where an acquisition of shares or of an interest in shares in a body corporate is made as mentioned in subsection (1) of the principal section and the acquisition is made in pursuance of such arrangements as are mentioned in subsection (8) of that section, then, if the arrangements were made or modified after 22nd March 1973, subsections (2)(b) and (3)(b) of that section shall not be sufficient to exclude the application of subsections (4) and (7) of that section unless—
(a)the arrangements satisfy the condition stated in paragraph 2 below; and
(b)the shares comply with paragraph 3 of Part II of the principal Schedule and satisfy the condition stated in paragraph 3 below.
2The condition referred to in paragraph 1(a) above is that the, arrangements allow every full-time employee of the company concerned who—
(a)has been a full-time employee of that company for a continuous period of not less than five years ; and
(b)is chargeable to tax in respect of his employment under Case I of Schedule E ; and
(c)is not less than twenty-five years old ;
to acquire shares or interests in shares of the same class on similar terms.
3The condition referred to in paragraph 1(b) above is that the shares—
(a)are not subject to such restrictions as will or may result in the person acquiring the shares or an interest in the shares obtaining a benefit through an increase, subsequent to the acquisition, of the value or the value to him of the shares or interest; and
(b)cannot (whether by one transaction or a series of transactions) be exchanged for or converted into shares which are subject to such restrictions.
4(1)In relation to an acquisition of shares in a body corporate made after 22nd March 1973 the principal section shall have effect as if—
(a)the following were substituted for paragraph (c) of subsection (2):—
“(c)the acquisition was an acquisition of shares and either of the following conditions was satisfied immediately after the acquisition, namely—
(i)that the shares were not subject to such restrictions as are specified in subsection (2A) below, and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class was acquired otherwise than as mentioned in subsection (1) above ; or
(ii)that the shares were not subject to such restrictions as are specified in paragraph (a) or (b) of subsection (2A) below, and were not exchangeable for shares subject to such restrictions, and the majority of the available shares of the same class were acquired by persons who were or had been employees or directors of, or of a body controlled by, the body in which they were shares and who were together able as holders of the shares to control that body.
For the purposes of this paragraph shares in a body are available shares if they are not held by or for the benefit of an associated company of that body ; and shares are exchangeable for other shares if (whether by one transaction or a series of transactions) they can be exchanged for or converted into the other shares”; and
(b)the following were inserted after subsection (2):—
“(2A)The restrictions referred to in subsection (2) above are—
(a)restrictions not attaching to all shares of the same class ; or
(b)restrictions ceasing or liable to cease at some time after the acquisition ; or
(c)restrictions depending on the shares being or ceasing to be held by directors or employees of any body corporate (other than such restrictions imposed by a company's articles of association as require shares to be disposed of on ceasing to be so held);”and
(c)in subsection (6)(c) for the words from " any restriction" to " class " there were substituted the words " such restrictions as are specified in subsection (2A) above.
(2)Subsection (4) of the principal section shall not apply, and shall be deemed never to have applied, to an acquisition of shares made before 23rd March 1973 if the condition specified in sub-paragraph (ii) of subsection (2)(c) (as substituted by sub-paragraph (1) of this paragraph) was satisfied immediately after the acquisition.
5Subject to paragraph 7 below, in determining for the purposes of the principal section, the principal Schedule and this Schedule (including any valuation made for those purposes) whether shares which, or interests in which, have been acquired after 18th October 1972 or are acquired or to be acquired by any person are subject to any restrictions, there shall be regarded as a restriction attaching to the shares any contract, agreement, arrangement or condition by which his freedom to dispose of the shares or any interest in them or to exercise any right conferred by them is restricted or by which such a disposal or exercise may result in any disadvantages to him or a person connected with him, except where the restriction is imposed as a condition of a loan which is not a related loan as defined by paragraph 6 below.
6(1)Subject to sub-paragraph (2) below, a loan made to any person is a related loan for the purposes of paragraph 5 above if it is made, arranged, guaranteed or in any way facilitated by the body corporate of which he is a director or employee, or by an associated company of that body or, if that body or an associated company of it is a close company, by any person having a material interest in the close company ; and a loan made to a person connected with another person is a related loan for the purposes of paragraph 5 above if it would be such a loan had it been made to that other person.
(2)A loan made to a person by the body corporate or associated company mentioned in sub-paragraph (1) above, or by a person having such a material interest as is mentioned therein, is not a related loan for the purposes of paragraph 5 above if the body or person making the loan carries on a business of making personal loans and the loan is made in the ordinary course of that business.
7For the purposes of subsection (2)(c) of the principal section, shares acquired by any person shall not, by virtue of paragraph 5 above, be regarded as subject to any restriction by reason only of any contract, agreement, arrangement or condition providing for either or both of the following, that is to say—
(a)the deposit of the shares with trustees as security for a loan repayable not later than seven years after the acquisition nor later than the time when that person ceases to hold the office or employment by virtue of which he obtained the right or was given the opportunity to acquire the shares ; and
(b)the disposal of the shares, when that person ceases to hold that office or employment, to a person nominated in accordance with the contract, agreement, arrangement or condition ;
if, in the case of sub-paragraph (a) above, he acquired the shares at market value and, in the case of sub-paragraph (b) above, he is required to dispose of them at a price not exceeding their market value.
8In so far as paragraphs 5 and 6 above apply in relation to a share option scheme or share incentive scheme they shall so apply notwithstanding that the scheme was approved before the commencement of this Act; but in relation to a scheme so approved the power of the Board under paragraph 4 of Part I of the principal Schedule to withdraw their approval shall not be exercised by reason only that by virtue of this paragraph a condition ceases to be satisfied, if before 6th April 1974 the scheme is varied so as to satisfy the condition.
9In paragraph 5 of Part IV of the principal Schedule the words from " and where part of the price " to the end of sub-paragraph (1) and, in sub-paragraph (2)(b), the words " and that price" and the words from " both " to " thereof and " shall be omitted.
10This Part of this Schedule applies to any share incentive scheme under which directors or employees pay for part of the shares or interests acquired by them under the scheme, or repay a loan made to them for the purpose of the acquisition, out of repayments made to them under a certified contractual savings scheme within the meaning of section 415 of the Taxes Act, and for this purpose a repayment may be taken as either including or as not including a bonus or interest.
11In relation to a scheme to which this Part of this Schedule applies the principal Schedule shall have effect subject to the following provisions of this Part of this Schedule.
12Paragraph 6 of Part II of the principal Schedule shall have effect as if at the end there were added the words " and every full-time employee of that company who is chargeable to tax in respect of his employment under Case I of Schedule E must be entitled to participate in the scheme to a reasonable extent if he is not less than twenty-five years old and has been a full-time employee of that company for a continuous period of not less than five years ".
13Paragraph 5 of Part II of the principal Schedule (limitation on issue of shares) shall not apply and any shares issued under a scheme to which this Part of this Schedule applies shall be treated for the purposes of that paragraph as issued otherwise than under a scheme approved under that Schedule.
14Paragraph 15 below shall apply in lieu of paragraphs 1 to 3 of Part IV of the principal Schedule.
15The acquisition by any person of shares or interests in shares under the scheme must be so limited that—
(a)not less than 95 per cent, of the consideration for the acquisition either is payable after the acquisition or is paid out of a loan which is repayable after the acquisition ; and
(b)so much of the consideration for the acquisition as is payable after the acquisition or is payable out of a loan must not exceed the repayment due to that person under the certified contractual savings scheme out of which it is payable, the amount of the repayment being taken as the amount payable at the earliest time at which the maximum bonus is payable under the contractual savings scheme and to include that bonus.
16Paragraph 5(1)(b) of Part IV of the principal Schedule shall have effect as if for " 80 per cent. " there were substituted " 70 per cent. ".
17Paragraph 6 of Part IV of the principal Schedule shall have effect as if for the words " seven years ", in both places, there were substituted the words " eight years ".
18The conditions mentioned in paragraph 1 of Part I of the principal Schedule shall be deemed to include the conditions stated in paragraphs 19 and 20 below, and the condition stated in paragraph 4 of Part IV of the principal Schedule shall apply only to the extent that it does not prevent the condition stated in paragraph 20 below from being satisfied.
19Subject to paragraph 20 below the scheme must provide for a participant's contributions under the certified contractual savings scheme to be payable under arrangements made with the company of which he is a director or employee and to be of such amounts as to secure as nearly as may be repayment of the amount required to discharge his obligation to pay the deferred part of the consideration for the shares or interest acquired by him, or, as the case may be, to repay the loan made to him for the purpose of the acquisition, the amount of the repayment under the contractual savings scheme being taken for this purpose as the amount payable at the earliest time at which a bonus or the maximum bonus is payable under it and as either including the bonus or as not including it.
20A person acquiring shares or an interest in shares under the scheme must have the right, at the time payment of the deferred part of the consideration or repayment of the loan is due, to discharge his obligation by surrendering the shares or his interest.
21The conditions specified in Part V of the principal Schedule shall be deemed to include the condition that the director or employee must not, while participating in a scheme to which this Part of this Schedule applies, participate in any share incentive scheme which is approved under the principal Schedule but to which this Part of this Schedule does not apply nor in any share option scheme which is approved under the principal Schedule and to which Part III of this Schedule does not apply.
22This Part of this Schedule shall come into force on such day as the Treasury may by order made by statutory instrument appoint.
23This Part of this Schedule applies to any share option scheme under which—
(a)directors and employees pay for the shares acquired by them in pursuance of rights obtained under the scheme out of repayments made to them under a certified contractual savings scheme within the meaning of section 415 of the Taxes Act; and
(b)subject to paragraph 24 below, the rights obtained under the share option scheme are not capable of being exercised earlier than at the time when repayments under the certified contractual savings scheme are due.
24A right obtained by a director or employee under the share option scheme may be capable of being exercised earlier than mentioned in paragraph 23(b) above if he ceases to hold the office or employment by virtue of which he is eligible to participate in the scheme—
(a)not earlier than three years after obtaining the right, or
(b)by reason of injury, disability, redundancy or death.
25For the purposes of paragraph 23 above—
(a)repayment under a certified contractual savings scheme may be taken as including or as not including a bonus or interest; and
(b)the time when repayment is due shall be, where repayment is taken as including the maximum bonus, the earliest time at which the maximum bonus is payable and, in any other case, the earliest time at which a bonus is payable under the scheme ;
and the question what is to be taken as so included must be required to be determined at the time when rights under the share option scheme are obtained.
26In relation to a scheme to which this Part of this Schedule applies the principal Schedule shall have effect subject to the following provisions of this Part of this Schedule and section 78 of the [1972 c. 41.] Finance Act 1972 shall have effect as if subsections (2) and (3) thereof were omitted.
27Paragraph 6 of Part II of the principal Schedule shall have effect as if at the end there were added the words " and every full-time employee of that company who is chargeable to tax in respect of his employment under Case I of Schedule E must be entitled to participate in the scheme to a reasonable extent if he is not less than twenty-five years old and has been a full-time employee of that company for a continuous period of not less than five years. ".
28Paragraph 5 of Part II of the principal Schedule (limitation on issue of shares) shall not apply and any shares issued in pursuance of rights conferred under the scheme shall be treated for the purposes of that paragraph as issued otherwise than in pursuance of such rights.
29Paragraphs 1 to 3 of Part III of the principal Schedule shall not apply.
30Paragraph 4 of Part III of the principal Schedule shall have effect as if for the reference to seven years after a right is obtained there were substituted a reference to six months after the time which, under paragraph 25(b) above, is for the purposes of paragraph 23 above the time when repayment is due.
31Paragraph 6 of Part III of the principal Schedule shall have effect as if the words " 90 per cent, of" were inserted before the words " the market value ".
32The conditions mentioned in paragraph 1 of Part I of the principal Schedule shall be deemed to include the condition that the scheme must provide for a participant's contributions under the certified contractual savings scheme to be payable under arrangements made with the company of which he is a director or employee and to be of such amounts as to secure as nearly as may be repayment of an amount equal to that for which shares may be acquired in pursuance of rights obtained by him under the share option scheme; and for this purpose the amount of the repayment under the contractual savings scheme shall be determined as mentioned in paragraph 25 above.
33The conditions specified in Part V of the principal Schedule shall be deemed to include the condition that the director or employee must not, while participating in a scheme to which this Part of this Schedule applies, participate in any share option scheme which is approved under the principal Schedule but to which this Part of this Schedule does not apply nor in any share incentive scheme which is approved under the principal Schedule and to which Part II of this Schedule does not apply.
34This Part of this Schedule shall come into force on such day as the Treasury may by order made by statutory instrument appoint.
35Paragraphs 6 to 9 of Part VII of the principal Schedule shall apply as if this Schedule were part of that Schedule.
36In this Schedule " the principal section " means section 79 of the [1972 c. 41.] Finance Act 1972 and " the principal Schedule " means Schedule 12 to that Act.