FINANCE BILL 2000

CLAUSE 47 AND SCHEDULE 8 : EMPLOYEE SHARE OWNERSHIP PLANS

SUMMARY

1. This clause and Schedule introduce a new all-employee share ownership plan. Companies can provide up to three different types of shares to their employees under a plan. There is no tax charge if shares are held in the plan for 5 years, and companies can also claim corporation tax reliefs. The schedule sets out the conditions which must be satisfied before the plan can be approved by the Inland Revenue. Plans can be approved after Royal Assent.(*Rev3)

DETAILS OF THE CLAUSE AND SCHEDULE

Clause 47

2. Clause 47 introduces the Schedule 8

Schedule 8

PART I: INTRODUCTORY

3. Paragraph 1 introduces the term "employee share ownership plan" for the purposes of this Schedule. Such a plan is one established by a company, arranging for "free shares" to be provided to employees without payment, or for "partnership shares" to be acquired for employees with sums deducted from their salary. A plan which provides for partnership shares may also provide "matching shares" to be awarded to employees without payment, in proportion to their purchase of partnership shares. A plan may provide all, or more than one, of the types of share to employees, and that the company may decide when the provisions relating to each type of share may take effect.

4. Paragraph 2 allows that an employee share ownership plan, established by a company (the "parent company") which controls other companies, may be extended to any or all of these other companies. Such a plan is called a "group plan". In a group plan, the parent company and any other company to which the plan is extended are called "participating companies."

5. Paragraph 3 provides that, for the purposes of the Schedule, where free and matching shares are appropriated to employees, or partnership shares are acquired on behalf of employees this is termed an "award of shares". An individual participates in an award of shares when he receives free or matching shares, or when partnership shares are acquired on his behalf. An individual to whom shares have been awarded under the plan is called "a participant".

6. Paragraph 4 states that, on the application of the company, the Inland Revenue will approve an employee share ownership plan which has been established, , if they are satisfied that it meets the requirements of this Schedule. An application for approval must contain any particulars, and be supported by any evidence, required by the Inland Revenue.

7. Paragraph 5 allows the company to appeal to the Special Commissioners if the Inland Revenue refuse to approve a plan.. The company must give notice of an appeal to the Inland Revenue within 30 days of the date when the refusal was notified to the company. if the Special Commissioners allow the appeal, they may direct the Inland Revenue to approve the plan with effect from a given date, provided that this date is not earlier than the application for approval.

PART II: GENERAL REQUIREMENTS

8. Paragraph 6 provides that an employee share ownership plan must meet the requirements of this Part of the Schedule.

9. Paragraph 7 states that the purpose of the plan must be to provide benefits to employees in the nature of shares in a company which give them a continuing stake in that company. The plan and its operation must not contain features which are neither essential nor reasonably incidental to that purpose.

10. Paragraph 8(1) and (2) require the plan to provide that every employee who meets the eligibility requirements of Part III, and is chargeable to tax under Case I of Schedule E in respect of that employment is eligible to participate in the plan. It also requires that all these employees must be invited to participate., and that the plan must not contain any feature which would discourage any of these employees from participating in the plan.

11. Paragraph 8(3) states that that an employee who meets the eligibility requirements of Part III, but is not chargeable to tax under Case I of Schedule E is eligible to participate in the plan and may be invited to do so.

12. Paragraphs 9(1) and (2) require every employee invited to participate in the plan to be invited to do so on the same terms, and that those who do participate must do so on the same terms. The same terms requirement is infringed if free shares are awarded by reference to factors other than those listed in sub-paragraph (3).

13. Paragraphs 9(3) and (4) provide that using an employee's remuneration or length of service or hours worked as a factor for calculating the award of free shares does not infringe the same terms rules, as long as those factors, when used together, are added rather than multiplied.

14. Paragraph 9(5) provides that in an award of free shares using performance allowances the same terms rules have effect as described in paragraphs 28 and 29

15. Paragraph 10 requires that the plan must not have features which confer, or are likely to confer benefits wholly or mainly on directors and employees receiving higher levels of remuneration . But awarding free shares using remuneration as a factor does not break this rule. .It also requires that the identity of the company or participating companies in a group plan must not be such that the plan confers or is likely to confer benefits wholly or mainly on directors or employees receiving higher levels of remuneration. However, awarding free shares using remuneration as a factor does not break this rule.

16. Paragraph 11 states that only those conditions required or permitted by this Schedule may be imposed on an employee's participation in an award of shares under the plan.

17. Paragraph 12 prohibits the arrangements for the plan from making any provision, or being in any way associated with any provision, for loans to some or all of the employees of the company or any participating company in a group plan. The operation of the plan must not be associated with such loans.

PART III: ELIGIBILITY OF INDIVIDUALS

18. Paragraphs 13(1) and (2) require that a plan must provide that an individual may only participate in an award of free shares if he is eligible to participate at the time the award is made. And he may only participate in an award of partnership or matching shares if he is eligible to participate at the time partnership share money relating to the award is deduced or, if there is an accumulation period, at the time it is first deducted in relation to that award. . In the case of matching shares, the award is by reference to the deduction of partnership share money relating to the partnership shares in respect of which the matching shares relate.

19. Paragraph 13(3) provides that an individual is eligible to participate in an award of shares only if he satisfies the requirements of Part III as regards employment, material interest and participation in other schemes. Employees not within Case I of schedule E also have to fulfil any further eligibility requirements of the plan.

20. Paragraph 14(1) states that the plan must provide that an individual is not eligible to participate in an award of shares unless he is an employee of the company or, in the case of a group plan, of a participating company. It also states that where there is a qualifying period, the plan must provide that an individual is not eligible to participate unless he has been a member of the company or participating company for the whole of this period.

21. Paragraphs 14(2) and 14(3) state that in the case of free shares, any qualifying period must be no more than eighteen months, ending with the date on which the award is made. And in the case of partnership and matching shares when there is no accumulation period, the qualifying period must be no more than eighteen months from the date when the partnership share money relating to the award is deducted. If there is an accumulation period, the qualifying period must be no more than six months from the beginning of the accumulation period relating to the award.

22. Paragraph 14(4) and (5) states that the qualifying period in relation to an award must be the same for all employees of the company or of the participating companies in a group plan, and allow companies to specify different qualifying periods for different awards of shares.

23. Paragraph 15 deals with eligibility where the employee has a material interest in a close company whose shares may be awarded under the plan, or in a company which controls such a close company, either alone or as a member of a consortium. The plan must provide that an employee is not eligible to participate if he has such a material interest, or has had one within the last twelve months. For this purpose, an individual is regarded as having a material interest if he or any of his associates have a material interest in the company.

24. Paragraph 16(1) prevents an employee from participating in an award of free shares if he has been awarded shares in the same tax year under an approved profit sharing scheme established by the company or a connected company, or under any other plan approved under this Schedule..

25. Paragraph 16(2) prevents an employee from taking part in an award of partnership or matching shares if during that tax year he has participated in an award of shares under another employee share ownership plan approved under this Schedule and established by the company or a connected company.

26. Paragraph 16(3) specifies that for the purposes of this paragraph, an individual is treated as having participated in an award of free shares under an employee share ownership plan if he would have participated in that award but for his failure to obtain a performance allowance, as defined in Paragraph 24.

27. Paragraph 16(4) defines "connected company" for the purposes of this paragraph. A connected company is any company which controls or is controlled by the company establishing the plan. It also includes a company controlled by the same company which controls the company establishing the plan, and a company which is a member of a consortium which controls or is partly owned by the company establishing the plan as a member of a consortium.

28. Paragraph 17 defines "material interest" for the purposes of paragraph 16 as beneficial ownership of, or the direct or indirect ability to control, 25% of the ordinary share capital of the company. It also includes, in the case of a close company, possession of, or entitlement to acquire, the right to more than 25% of the company's assets in the event of it being wound up. It also defines the terms "close company" and "participator" for the purposes of paragraph 17(1). The paragraph supplemented by paragraphs 18 and 20.

29. Paragraph 18 sets out that for the purposes of paragraph 17 a right to acquire shares is treated as a right to control them. In order to calculate whether an individual's share holding exceeds 30% of the company's share capital the number of unissued shares which he holds under option is added to the share capital . This is only the case, however, if the shares acquired by exercising the right were previously unissued, and the company is bound contractually to issue them when the right is exercised.

30. References to shares attributed to an individual are to the shares which are taken into account in accordance with paragraph 31(1)(a) in determining whether their number exceeds a particular percentage of the company's ordinary share capital.

31. Paragraph 19 provides for the interest of the trustees in any shares held under a profit-sharing scheme approved under Schedule 9 to the Taxes Act 88, or any employee share ownership scheme approved under Schedule{j201s} to this Act, to be disregarded for the material interest test. This applies only where the shares have not yet been appropriated to, or acquired on behalf of an individual. It also provides for any rights exercisable by the trustees by regard of any such an interest to be disregarded.

32. Paragraph 20 defines "associate" in relation to an individual as being

any relative or partner of that individual or
the trustee(s) of any settlement of which the individual or a relative (living or dead) is or was a settlor; and
where that individual has an interest in any shares or obligations of the company which is subject to any trust, or are part of the estate of a deceased person, "associate" also includes the trustee(s) of the settlement, or the personal representatives of the deceased.

33. "Relative" is defined as a husband or wife, parent or remoter forebear, child or remoter issue and "settlor" and "settlement" are defined as having the meaning given in Chapter 1A of Part XV of the Taxes Act 1988 (section 660G (1) and (2))

34. Paragraph 21 applies for the purposes of paragraph 34(1)(c), which deals with situations where trustees of trusts in which an individual has an interest are deemed to be his associates. It states that this paragraph deals with situations where the individual is the beneficiary of an employee benefit trust. It also defines certain terms used in this paragraph: "the beneficiary" means the individual concerned, and "the relevant company" means the company in which shares or obligations are held by the employee benefit trust.

35. Trustees of the employee benefit trust are not regarded as associates of the individual, providing neither he nor any of his associates, acting together or alone, have ever been owned or been able to control more than 30% of the relevant company's ordinary share capital.

36. It defines which trusts are regarded as employee benefit trusts for the purposes of this paragraph. A trust is e an employee benefit trust if it satisfies two conditions. The first is that all or most of the relevant company's employees must be able to benefit from the trust. The second is that none of the trust's property has been disposed of except in the ordinary course of management of the trust, or in accordance the other methods listed in sub-paragraph (4).

37. Other purposes are listed by which a trust can dispose of its property and still be seen as an employee benefit trust for the purposes of this paragraph.

for the benefit of individual employees or former employees of the relevant company (or to these employees? or former employees? spouses, former spouses, widows, widowers, relatives, spouses of relatives or dependants.)
for charitable purposes
for transferral to the trustees of an approved profit-sharing scheme, to another employee benefit trust or to a qualifying employee share ownership trust.

38. "Approved profit-sharing scheme" is defined as having the meaning given under section 187 of the Taxes Act 1988, and the term "qualifying employee share ownership trust" is defines as having the meaning given under Schedule 5 to the Finance Act 1989. "Relative" used in sub-paragraph (4) as a parent or remoter forebear, child or remoter issue, brother, sister, uncle, aunt, nephew or niece. "Associate" used in sub-paragraph (2) has the meaning given in paragraph 34, but without sub-paragraph (1)(c), which deals with trusts and estates.

39. Paragraph 22 applies for the purposes of paragraph 20(1)(c), which deals with situations where trustees of trusts in which an individual has an interest are deemed to be his associates. It deals with situations where the individual is one of the objects of a discretionary trust. It also defines certain terms used in this paragraph: "the beneficiary" means the individual concerned, and "the relevant company" means the company in which shares or obligations have ever been held by the discretionary trust.

40. If the beneficiary has ceased to be eligible to benefit from the discretionary trust due to an irrevocable disclaimer or relief executed by him, or an irrevocable power exercised by the trustees, he is not regarded to have been interested in the company for this reason alone. This is only the case provided that no associate of the beneficiary's has been interested in the shares or obligations held by the trust since the beneficiary ceased to be eligible to benefit, and in if the period of 12 months before he ceased to be eligible, neither he nor any associate actually received any benefit from the trust.

41. "Associate" is defined as having the meaning given in paragraph 34, but without sub-paragraph (1)(c), which deals with trusts and estates.

PART IV: FREE SHARES

42. Paragraph 23 introduces Part IV of the Schedule, which deals with free shares. It states that if a plan is to provide free shares, it must comply with this Part of the Schedule.

43. Paragraph 24 states that the initial market value of shares appropriated to a participant may not exceed £3,000 per tax year. It defines the "initial market value" of shares as their market value on the day they are appropriated, and states that in determining the market value of shares subject to risk of forfeiture those shares are treated as if there were no risk of forfeiture. "Risk of forfeiture" has the same meaning as in section 140C of the Taxes Act 1988.

44. Paragraph 25 introduces performance allowances for free shares, defining them as awards of shares where either the amount of free shares, or whether or not the individual will receive free shares, depends on whether performance targets are met. It also provides that if this paragraph applies, the requirements of paragraphs 26-28 and either 29 or 30 must be complied with.

45. Paragraph 26 requires that if the plan provides for a performance allowance it must provide for all eligible employee to take part.

46. Paragraph 27 states that if a plan provides for performance allowances, the requirements of this paragraph must be met. These are that the performance measures used must be based on business results or other objective criteria, and be fair and objective, that performance targets must be set for performance units containing one or more employees. Finally, an employee must not be a member of more than one performance unit for an award

47. Paragraph 28 provides that if a plan provides for performance allowances the must company to notify each employee participating in the award of the targets and measures which will determine his allocation of free shares as soon as practicable. The company must also notify every eligible employee in the company, in general terms, of the performance measures. The paragraph also allows the company to exclude from the notices any information which the company reasonably considers would compromise commercial confidentiality.

48. Paragraph 29 details the first method under which free shares may be allocated on the basis of performance. It states that at least 20% of the free shares allocated in the award must be allocated on the same terms without reference to performance. The remaining shares may be allocated on the basis of performance, but the highest number of performance-based shares appropriated to an individual must not be more that four times the highest number of shares allocated without reference to performance. In method 1 the shares allocated without reference to performance have to be allocated on the same terms, in accordance with paragraph 9. The shares are treated as a separate award of free shares and not part of the whole performance allowance in order to determine if the requirements of paragraph 9 have been met. But the requirement of paragraph 9 (participation on same terms) does not apply to the shares allocated in accordance with performance targets. If free shares of different classes are appropriated, the requirements of paragraph 28(1) apply separately to each class of shares.

49. Paragraph 30 details the second method of awarding free shares on the basis of performance. It states that all or some of the shares must be appropriated on the basis of performance, and that this appropriation, in relation to eligible employees who are members of the same performance unit, must meet the requirement of paragraph 9. For the purposes of determining whether the shares meet the requirement of participation on the same terms, the shares of each performance unit are treated as a separate award of free shares. If this method is used the appropriation of shares to different performance units does not have to be on the same terms.

50. Paragraph 31 provides that the plan must specify a "holding period" during which participants agree by contact to allow their free shares to remain in the trust, and not to assign, charge or dispose of their interest in the shares. The holding period must be at least three years, but not more than five years. It must be the same for all shares in the same award. The company may change the holding period, but increase the holding period for shares which have already been awarded provides that the participant's obligations under the holding period come to an end if he ceases to be in relevant employment. Obligations under the holding period are subject to paragraph 31 (power to authorise the trustees to accept a general offer etc); 71 (meeting PAYE obligations etc); and 117 (the termination of the plan: early removal of shares with the participant's consent).

51. Paragraph 32 allows the participant to direct the trustee to accept certain offers for his free shares during the holding period. These offers are:

an offer which means the participant will receive a new holding of shares which is equivalent to his original holding for capital gains tax purposes;
an offer of a qualifying corporate bond, either alone or with other assets and cash, if the offer forms part of a general offer as described above.
a transaction related to a compromise, arrangement or scheme which affects all of shares of the same class as his free shares, or all the ordinary share capital of the company;
a cash offer, or an offer cash and other assets for his free shares, if this is part of a general offer which is made to all the holders of similar shares, and which results in the person making the offer having control of the company.

PART V: PARTNERSHIP SHARES

52. Paragraph 33 introduces Part V of this Schedule, which deals with partnership shares. It states that if a plan is to provide partnership shares, it must comply with this Part of the Schedule.

53. Paragraph 34 provides for companies to enter into "partnership share agreements" with employees, under which the employee authorises the company to make deductions from his salary, and the company agrees to arrange for partnership shares to be awarded to the employee.

54. Paragraph 35 defines "partnership share money" as money deducted from the employee's salary as and provides for the partnership share agreement to be given effect by the deductions from salary. The partnership share agreement must specify the amount of money, or a percentage of the employee's salary, to be deducted, and how often it is to be deducted. But the company and the employee can agree to change either of these. allows the partnership share agreement to specify a percentage of the employee's salary rather than an amount in cash. The employer company is required to calculate the amounts and intervals which apply in paragraph 36, which deals with the maximum amount which can be deducted from the employee's salary. The term "employer company" is defined as the company by reference to which the employee meets the employment requirement of paragraph 14.

55. Paragraph 36 sets the maximum amount of partnership share money which can be deducted in any month at £125. If the salary is not paid monthly, the maximum amount of partnership share is apportioned accordingly. The amount of partnership share money deducted must not exceed 10% of an employee's salary. Where the plan has an accumulation period this means 10% of an employee's total salary over an accumulation period, and where a plan does not provide for an accumulation period, 10% of each salary payment. The company may set lower salary limits than the maximum. Different limits are allowed for different awards of shares. Any amount deducted which exceeds the limit must be returned to employees as soon as practicable.

56. Paragraph 37 allows the plan to set a minimum amount, of not more than £10, to be deducted per month. This amount applies whatever the pay intervals.

57. Paragraph 38 provides for information to go to employees on the possible effects of the deduction of partnership share money (which is deducted out of pre-tax and pre NIC salary) on their benefit entitlement. It requires that wording to this effect must be included in the partnership share agreement, and includes a power for the wording to be set out in Regulations.

58. Paragraph 39 provides that partnership share money is paid to the trustees as soon as practicable, and is held by the trustees in an account with a bank, building society or relevant European institution until they use the money to purchase partnership shares for the employee. This is subject to paragraphs 39(4)(b) and 41(5(b), which deal with the obligation to pay surplus money to employees. The paragraph also provides that references in this Schedule to the trustees acquiring shares for employees also include them appropriating shares already held by them to employees. If the partnership share money is held in an interest-bearing account, the plan must require the trustees to account for the interest to the employee.

59. Paragraph 40 states that if the plan does not provide for an accumulation period, the partnership share money must be used by the trustees to purchase shares on the acquisition date. The "acquisition date" is defined as the date set by the trustees on which shares are acquired. It must be within 30 days of the last deduction of partnership share money. The number of shares acquired for each employee is determined according to the market value of the shares on the acquisition date. Any remaining partnership share money after the acquisition must be returned to the employee, unless the employee agrees to allow it to be held over and added to the amount of the next deduction. The paragraph is subject to paragraph 43 which allows a plan to specify the maximum number of shares to be awarded as partnership shares.

60. Paragraph 41 provides for "accumulation periods" lasting up to twelve months. It requires the partnership share agreement to specify when each accumulation period begins and ends. It also allows the partnership share agreement to specify that an accumulation period may come to end if a specified event occurs. Each accumulation period must be the same for all employees eligible to participate in the award.

61. Paragraph 42 sets out how the plan will work where there is an accumulation period. The partnership share money deducted in each period is to be used by the trustees to purchase partnership shares on the acquisition date, defined as a date set by trustees on which partnership shares are purchased. This date may not be more than 30 days after the end of the relevant accumulation period. The number of shares acquired for each employee is determined according to the market value of the shares on the acquisition date. Any partnership share money remaining after the trustees purchase shares may be carried forward to the next accumulation period, with the employee's agreement. If the employee does not agree to this, the money must be returned to him as soon as is practicable.

62. When an employee leaves during the accumulation period, or when an accumulation period ends because of a specific event, any partnership share money which has been deducted must be returned to him as soon as practicable. The paragraph is subject to paragraph 43 which allows a plan to specify the maximum number of shares to be awarded as partnership shares.

63. Paragraph 43 allows the plan to authorise the company to specify the maximum number of shares which can be awarded as partnership shares. This number is referred to as the "award maximum." This number may vary for different awards of shares. The company must inform participants of any award maximum, and notice has to be given before the beginning of the accumulation period. If there is no accumulation period, the notice must be given before the deduction of partnership share money. If the number of partnership shares which would have been awarded exceeds the award maximum, the number of shares awarded to each participant must be proportionally reduced.

64. Paragraph 44 requires the plan to allow employees to stop deductions at any time, by giving notice in writing to the company. It also allows employees who have stopped deductions to re-start them, by giving notice in writing to the company. Employees may not, however, make up any deductions which they have missed, and the plan may prevent employees re-starting deductions more than once in any accumulation period. The company must cease deductions within 30 days of receiving a notice to do so, and restart deductions on the first deduction within 30 days of receipt of a notice to do so. This applies unless the notice specifies a longer period in either case.

65. Paragraph 45 requires the plan to allow an employee to withdraw from the partnership share agreement at any time, by giving notice in writing to the company. Unless the notice specifies a later date, a notice of withdrawal takes effect 30 days after the company receives it. When an employee leaves the plan, any partnership share money held on his behalf must be returned to him as soon as is practicable.

66. Paragraph 46 provides that if approval of the plan is withdrawn, or a plan termination notice is issued, any partnership share money held on an employee's behalf must be returned to him within 60 days of the notice of withdrawal being given to the company. If a plan termination notice is issued, the partnership share money must be returned within 60 days of the termination notice being given to the trustees.

67. Paragraph 47 requires the plan to allow an employee to withdraw any or all of his partnership shares from the plan at any time, and notes that if partnership shares are withdrawn, there may be a charge to tax under paragraph.

68. Paragraph 48 defines "salary" for the purposes of this Part of the Schedule.

PART VI: MATCHING SHARES

69. Paragraph 49 provides that a plan which includes matching shares must comply with this Part of the Schedule.

70. Paragraph 50 lists the general requirements for matching shares. They must be:

of the same class as the partnership shares
appropriated on the same day as the partnership shares, and
appropriated on the same basis to all participants.
and the matching shares can be subject to the restrictions provided for in paragraphs 64(2) and (3).

71. Paragraph 51 provides that the partnership share agreement (see paragraph 33) must specify the ratio of matching shares to partnership shares, and the way in which the company can change the ratio. It also limits the ratio to two matching shares for each partnership share, and requires the company to notify the ratio to the participants before partnership shares are acquired.

72. Paragraph 52 states that regarding the holding period and related matters, the same rules apply to matching shares as to free shares (see paragraphs 31 and 32).

PART VII: REINVESTMENT OF CASH DIVIDENDS

73. Paragraph 53 allows the company to provide for all cash dividends paid on plan shares to be reinvested in further "dividend shares" on the participants? behalf, or to allow each participant to choose whether they want their cash dividends to be reinvested. Cash dividends not used for reinvestment must be paid over to the participant. The company can choose to end the facility to reinvest dividends.

74. Paragraph 54 sets the limit for reinvestment at £1,500 per tax year for each participant. This limit includes amounts reinvested by trustees in respect of that company's plan and amounts reinvested by trustees of other approved plans established by any associated company.. Any excess amounts are to be repaid to the employee.

75. Paragraph 55 requires dividend shares to be shares of the same class with the same rights as the shares on which the dividends were paid, and not subject to forfeiture.

76. Paragraph 56 provides that in acquiring shares, trustees must treat participants fairly and equally. The trustees are required to acquire the dividend shares on an acquisition date set by them, which must be within 30 days of receipt of the cash dividend, and at the market value of the shares at that date. The trustees can appropriate shares they already hold to satisfy this obligation, and this paragraph does not affect the carrying forward of any amounts remaining after the acquisition of the shares under paragraph 58.

77. Paragraph 57 provides that the same holding period and related matters apply to dividend shares as they do to free and matching shares (see paragraphs 31 and 32).

78. Paragraph 58 allows the trustees to carry forward, as a separately identifiable amount, amounts that could not be reinvested. These amounts must be repaid to the participant if not reinvested within 3 years of the payment of the dividend, or on cessation of employment or termination of the plan, if earlier.

PART VIII: TYPES OF SHARES THAT MAY BE USED

79. Paragraph 59 provides that the shares must meet the requirements of

paragraphs 60-63 and 67 to be eligible shares for the purposes of the plan.

80. Paragraph 60 provides that eligible shares must be ordinary shares of the company, or of a company controlling it, or of a consortium member owning the company or its parent.

81. Paragraph 61 limits eligible shares to shares of a class listed on a recognised stock exchange, or shares in a company which is not under the control of another company, unless that company's shares are listed on a recognised stock exchange (provided that company is not, or would not be if UK resident, a close company).

82. Paragraph 62 requires eligible shares to be fully paid up, carrying no undertaking to pay cash to the company in the future, and non-redeemable at any future date (except in relation to shares in a workers' co-operative).

83. Paragraph 63 provides that the only allowable restrictions on eligible shares are

those relating to the holding period (see paragraphs 30, 52 and 57),
those affecting all the ordinary shares in the company, or
those specifically permitted by the schedule, involving voting rights (paragraph 64), forfeiture (paragraph 65), or pre-emption (paragraph 66).

84. Restrictions include any contract, agreement or condition which restricts a person's freedom to dispose of their shares or their interest in them, or their exercise of any right connected with the shares. It also includes anything which would mean that a sale of shares or exercise of any right would lead to the disadvantage of the person or someone connected with them. Any directors? discretion under the articles of association of the company to refuse to accept the transfer of shares is not regarded as a restriction, as long as the directors have undertaken not to exercise their discretion in a way which would discriminate against participants, and have notified all qualifying employees about the undertaking. Contracts, agreements and arrangements similar to those in the Model Code set out in the listing rules issued by the competent authority for listing under S143(6) of the Financial Services Act 1986, are not regarded as restrictions for this paragraph.

85. Paragraph 64 allows for the use of shares with no, or limited, voting rights.

86. Paragraph 65 provides for free and matching shares to be subject to forfeiture if the participant leaves or withdraws free or partnership shares from the plan during the forfeiture period, other than for reasons listed in paragraph 87(2) (illness, retirement etc). The "forfeiture period" cannot be more than 3 years from the date on which the participant receives the shares, and cannot be linked to performance. The same forfeiture provisions must apply to all free or matching shares in the same award.

87. Paragraph 65(6) defines "forfeiture" for this Schedule.

88. Paragraph 66 allows eligible shares held by employees or permitted transferees (in accordance with the Articles of Association) to be subject to the restriction that they must be offered for sale if the employee leaves. The Articles of Association must provide that the shares must be offered for sale at a specified consideration, and the same conditions must apply to all employees.

89. Paragraph 67 provides that shares in an "employer company" cannot be used for the purposes of the plan. An "employer company" is one whose business is substantially the provision of the services of its employees to businesses, including partnerships, which control the company, or to associated companies. The rules extend to a company that has control of an employer company, where both are controlled by the business for which the services of the employees are being provided. Control is in accordance with S416(2) to (6) of the Taxes Act 1988, and companies are treated as associated if they are under the control of the same person or persons.

PART IX: THE TRUSTEES

90. Paragraph 68 (1) provides that the plan must establish a UK resident trust to acquire free, matching shares, partnership and dividend shares in accordance with the plan, and appropriate them to or acquire them on behalf of, employees. The trustees must be regulated by a trust constituted under UK law and satisfying the requirements of this part of the schedule. The trust deed must not contain any terms which are neither essential nor reasonably incidental to the requirements of this Part of the Schedule.

91. Paragraph 69 gives the trustees the power to borrow to acquire shares for the purposes of the plan, and any other purposes set out in the trust deed.

92. Paragraph 70 requires the trust to make provision for the following notices to be given by trustees:

Paragraph 70 (2) notice to participants on appropriation of free or matching shares including the number, description, market value and holding period applicable to them.
Paragraph 70 (3) notice of acquisition of partnership shares including the number, description, partnership share money applied, and market value.
Paragraph 70 (4) notice of acquisition of dividend shares including the number, description, market value, holding period applicable to them, and any amounts not reinvested and carried forward.
Where any foreign cash dividend is received in respect of plan shares, the trustees must notify any foreign tax deducted from any foreign cash dividend.

93. Paragraph 71 requires the trustees to act only in accordance with the direction of the participants in disposing of or dealing with rights in respect of plan shares. The trustees are prevented from disposing of a participant's shares during the holding period, unless the participant leaves the employment. This is subject to the trustees being able to dispose of shares in certain specified circumstances:

paragraph 32 (general offers)
paragraph 72 (rights issues)
paragraph 73 (meeting PAYE obligations)
paragraph 120 (termination of plan).

94. The trustees must over to participants as soon as practicable any money or money's worth received in respect of those shares, except where this is new shares within paragraph 115in a company reconstruction. This is subject to the trustees? own PAYE obligations, their obligations in connection with the employer's obligations, and reinvestment of cash dividends.

95. Paragraph 72 allows trustees, subject to the participant's direction, to raise funds to exercise rights issues, by disposing of rights under rights issues attached to shares under the plan.

96. Paragraph 73 requires the plan to provide that any PAYE obligations of the trustees can be met by either selling the participant's plan shares or obtaining payment from the participant. It includes those obligations under paragraph 91 (PAYE: shares ceasing to be subject to the plan). Trustees buying the participant's shares is included as a disposal of the shares by the trustees. A disposal of any of the participant's plan shares to meet PAYE obligations may give rise to a charge to tax under paragraphs 81, 86 or 93 (charge on free (or matching), partnership, or dividend shares ceasing to be subject to the plan).

97. Paragraph 74 treats the disposal of the beneficial interest in any plan shares by the participant, as a disposal by the trustees at that time for the same amount as was obtained for the disposal of the beneficial interest. This does not apply in cases of insolvency. Where disposals are not at arm's length, market value is substituted for the disposal proceeds.

98. Paragraph 75 explains the duties of trustees in relation to PAYE liabilities. They must retain sufficient records for their own PAYE liability, and for the obligations of the employer which relate to the plan. Where participants have any liability under Case V of schedule D (foreign dividends). Schedule E or schedule F (dividends) the trustees must give them information relevant to that liability

99. Paragraph 76 provides that shares transferred to the plan trust from a qualifying employee share ownership trust must not be awarded as partnership shares. Such shares must be awarded to participants as free or matching shares in priority to other shares.

PART X: INCOME TAX

100. Paragraph 77 explains that the income tax provisions described in this Part apply to approved plans. However, they do not apply to participants who were not chargeable to income tax under Schedule E at the time of the award in respect of the employment from which they were awarded the shares.

101. Paragraph 78 exempts participants from income tax when shares are appropriated to them or acquired on their behalf under the plan.

102. Paragraph 79 charges participants to income tax when they receive a capital receipt within 5 years of receiving a free matching or partnership share, or 3 years of receiving a dividend share. For this purpose, "capital receipt" is any money or money's worth except:

income subject to income tax,
proceeds of disposal of the shares, or
new shares under paragraph 115 (company reconstructions),
the proceeds of disposals under paragraph 72(1) (rights issues), or
amounts received by the personal representatives after the participant's death.

103. Paragraph 80 gives three special income tax exemptions:

free and matching shares subject to forfeiture (see paragraph 64) are exempt from the charge which could otherwise arise under s140A ICTA88 or section 78 FA88 (charge on removal of restriction).
the ending of the holding period under the plan is not an event giving rise to a charge under s78 FA88 (removal of a restriction) , and
any increase in the value of plan shares is exempt from a charge which could otherwise arise under s79 FA88 (chargeable increase in value).

104. Paragraph 81 imposes income tax when free and matching shares cease to be subject to the plan. The charge depends on the length of time the shares have been held in the plan:

When shares are withdrawn within 3 years income tax is charged on the market value of the shares at the time of withdrawal.
When shares are withdrawn between 3 and 5 years the tax charge is limited to the lesser of;

(a) the market value of the shares when awarded , and
(b) their market value on withdrawal.

The amount of tax under (a) above is reduced by any tax paid on any capital receipts in respect of those shares.

105. There is no charge when shares are withdrawn five or more years after they were awarded.

106. There is no income tax under this paragraph when any free or matching shares are forfeited. Those who leave under circumstances in paragraph 84 (illness, retirement etc) are exempt from charges under this paragraph.

107. Paragraph 82 imposes a charge to income tax under Schedule E when shares cease to be subject to the plan as a result of the participant breaching the obligations with regard to the holding period (paragraph 31). The charge is on the market value of the shares when they cease to be subject to the plan, reduced by any amount of tax paid on capital receipts (paragraph 79).

108. Paragraph 83 provides that partnership share money deducted in accordance with the Schedule is not regarded as income chargeable to tax. But the deduction is disregarded for the purposes of calculating pension and annuity contribution limits.

109. Paragraph 84 charges income tax on the repayment of excess or surplus partnership share money, or refunds when the accumulation period is terminated, the plan is terminated, or the employee leaves or withdraws from the plan. The tax charge arises at the time the amount is paid over.

110. Paragraph 85 charges income tax on any money a participant receives on cancelling his partnership agreement.

111. Paragraph 86 imposes income tax when partnership shares cease to be subject to the plan. The charge depends on the length of time the shares have been held in the plan:

when shares are withdrawn within 3 years the charge is on the market value of the shares at the time of withdrawal;
when shares are withdrawn between 3 and 5 years the charge is limited to the lesser of;

(a) the amount used to buy the shares, and
(b) their value on withdrawal.

The amount of tax under (a) above is reduced by the tax paid on any capital receipts in respect of those shares.

112. There is no charge when shares are withdrawn five or more years after they were awarded. Those who leave under circumstances in paragraph 87 (illness, retirement etc) are exempt from charges under this paragraph.

113. Paragraph 87 exempts from tax shares withdrawn at any time if the participant leaves the relevant employment because of injury or disability, redundancy, take over of the company, retirement, or death,

For this purpose, "retirement age" must be the same for men as women, and must be not less than 50.

114. Paragraph 88 exempts from the special trust dividend rate of tax any dividend income if the trustees appropriate those shares to a participant within the plan in the period applicable to the shares. The applicable period is two years from acquisition by the trustees.

115. This two year time limit is extended if at the time the shares were acquired by the trustees none of the company's shares are readily convertible assets, in which case the period is

five years,
or, if earlier, two years from the date the shares become readily convertible assets.

116. Shares are identified on a "first in first out" basis for this paragraph and shares which have been forfeited are treated as being acquired by the trustees when the forfeiture takes place.

117. Paragraph 89 exempts the employee from tax on any of the cash dividends reinvested in dividend shares. The employee is not entitled to tax credits on the dividends reinvested. This exemption does not prevent a tax charge under paragraph 90 if the dividend shares cease to be subject to the plan. Where dividend shares are acquired, the trustees do not have to provide statutory information about the dividends.

118. Paragraph 90 provides that the statutory information about dividends, as required by S234A ICTA 1988 must be provided where excess cash dividends are paid over to the participant under paragraph 53.

119. Paragraph 91 explains that amounts retained under paragraph 58 (cash not reinvested) are not treated as income of the participant. The participant has no entitlement to a tax credit in respect of these amounts. This does not apply if there are tax charges under paragraph 92 (cash dividends retained and later paid out) or paragraph 93 (dividend shares no longer in the plan).

120. Paragraph 92 charges tax on unreinvested cash dividends returned to the participant under paragraph 58(2). It describes how any tax credit is to be calculated and requires the trustee to provide information under s234A(4) to (7) of the Taxes Act in respect of the returned amounts.

121. Paragraph 93 charges tax when dividend shares cease to be subject to the plan within 3 years from the date of acquisition. The charge is on the amount of the dividend used to acquire the shares. A tax credit is allowed and the paragraph describes how this is calculated and lists the information the trustees are required to provide about dividends brought into charge.

122. The tax charge is reduced by any tax already paid on any capital receipts in respect of those shares. There is no other tax charge arises on dividend shares withdrawn from the plan apart from under this paragraph. Those who leave under circumstances in paragraph 87 (illness, retirement etc) are exempt from charges under this paragraph.

123. Paragraph 94 brings S203F ICTA 1988 (PAYE: tradeable assets) into effect for PAYE purposes when shares cease to be subject to the plan and a participant is chargeable under this Part of the Schedule.

124. Paragraphs 95 (1) to (6) deal with PAYE obligations in respect of Schedule E tax charges when shares cease to be subject to the plan. The plan may require the participant to pay to the employing company sufficient money to meet the PAYE liability. To the extent that it does not make such a requirement, the trustee must pay that amount to the employing company. The trustees release the funds by the mechanism described in paragraph 73. The PAYE deduction is made from the sums paid to the employer and any balance is repaid to the participant.

125. Paragraphs 95(7) & (8) provide that where there is no employer company the trustees must make the PAYE deduction. This also applies if the Inland Revenue consider it would not be practical for the employer company to operate PAYE. In such a case, the PAYE rules of S203C ICTA 1988 are disapplied.

126. Paragraph 95(9) provides that the proceeds on a deemed disposal of a participant's interest in shares for the purposes of paragraph 74 are treated as a receipt by the trustees for PAYE under this paragraph.

127. Paragraph 95(10) defines a "PAYE deduction" as one required under S203 ICTA 1988.

128. Paragraph 96 deals with PAYE when there is a Schedule E charge in respect of money received by the trustees as a capital receipt under the plan. The trustees are required to pay to the employer company the amount that is chargeable to tax. The employer company makes the PAYE deduction and pays the balance to the participant. The trustees must make the PAYE deduction if there is no employer company or when the Inland Revenue consider it would not be practical for the employer company to operate PAYE.

PART XI : CAPITAL GAINS TAX

129. Paragraph 97 specifies that this Part of this Schedule applies for capital gains tax purposes for an approved employee share ownership plan.

130. Paragraph 98 applies to gains accruing to the trustees in respect eligible shares. These are not chargeable gains provided the shares are awarded to employees in accordance with the plan within two years from the date on which they were acquired by the trustees. However, if at the time the shares were acquired by the trustees they are not readily convertible assets, the period is extended to

five years,
or, if earlier, two years from the date the shares become readily convertible assets.
A "first in first out" rule for share identification applies for the purposes of this paragraph.

131. Paragraph 99 treats a participant for capital gains tax purposes as absolutely entitled as against the trustees to any shares awarded to him under the plan.

132. Paragraph 100 describes how plan shares are treated for capital gains tax share identification purposes. It provides that a participant's plan shares are treated as being of a different class from any other shares a participant may have that are not in the plan. Shares transferred to the trustees by a qualifying transfer within paragraph 76 (employee share ownership trusts) that have not been awarded to participants under the plan are treated as a different class from any shares they hold that were not acquired by such a transfer.

133. Paragraph 101 provides that shares that cease to be subject to a plan are treated as having been disposed of and immediately reacquired by the participant at market value. The gain on that disposal is not a chargeable gain.

134. Paragraph 102 provides that any of the participant's plan shares that are forfeited are treated as having been disposed of by the participant and acquired by the trustees at market value on the day of forfeiture. The gain on that disposal is not a chargeable gain.

135. Paragraph 103 deals with the acquisition by the plan trustees of shares from the trustees of an approved profit-sharing scheme. The transaction is treated as being made for a sum that results in neither a gain nor a loss on the disposal. And the relevant period for the purposes of paragraph 98 starts when the shares were acquired by the other trust.

136. Paragraph 104 exempts from charge any gain on the disposal of rights where the trustees have used their paragraph 72 But only if similar rights are conferred in respect of all ordinary shares in the company.

PART XII : CORPORATION TAX DEDUCTIONS

137. Paragraph 105 introduces this Part of the Schedule, for deductions made by a company in calculating the profits of its trade for corporation tax and the expenses of management of investment companies.

138. Paragraph 106 allows a deduction to a company where free or matching shares are awarded to employees under the plan. The deduction

is an amount equal to the market value of the shares at the time they are acquired by the trustees, and
is made for the period of account in which the shares are awarded.

Shares are treated as awarded in the order that the trustees acquire them.

139. In the case of a group plan, the market value is the total market value of the shares in the award and each company has a deduction for the proportion that the number of shares in the award to its own employees bears to the total number in the award. Deductions can not be made by more than one company for the same shares.

140. No other deduction is available for the company or an associated company for the provision of the shares, except deductions allowed by paragraph 111 and 112. Paragraph 108 provides certain other restrictions on the deductions that can be made

141. Paragraph 107 allows relief for additional expenses if the market value of the partnership shares awarded to the employees of the company exceeds the partnership share money paid by the participants to acquire the shares. The amount of the deduction is the excess and is made in the period of account in which the shares are awarded to the employees.

142. Deductions cannot be made by more than one company for the same shares and no other deduction is available for the company or an associated company for the provision of the shares, except deductions allowed by paragraph 111 and 112. Paragraph 108 provides certain other restrictions on the deductions that can be made

143. Paragraph 108 introduces restrictions for the purposes of paragraphs 106 and No deduction is allowed in respect of :

shares awarded to an individual who is not chargeable to tax under Schedule E,
shares that are liable to depreciate substantially
shares provided to the plan trust or another trust if a deduction has already been given to the company or an associated company in respect of those shares.

144. Paragraph 109 prevents a deduction for expenses in providing dividend shares under the plan.

145. Paragraph 110 treats forfeited shares as acquired by the trustees when the forfeiture occurs and for no consideration. no deduction is allowed when these shares are subsequently awarded under the plan.

146. Paragraph 111 allows a company to make a deduction in calculating its profits for corporation tax for the expense of establishing an approved employee share ownership plan. But no deduction may be made if the plan is used before the Inland Revenue approves it. Where the approval is given more than 9 months after the accounting period in which the expense of establishing a plan happened, the deduction is given in the accounting period when the plan gets approval.

147. Paragraph 112 confirms that deductions are allowed for a company's contributions to the expenses of the trustees in operating an approved plan. Those expenses include payments of interest on money borrowed by the trustees to operate the plan but not the expense in acquiring the shares, other than incidental acquisition costs, such as fees, stamp duty and commission.

148. Paragraph 113 allows for a claw-back of any deductions given under paragraphs 106 or 107 if approval of a plan is withdrawn. If the Inland Revenue give such a direction, the aggregate amount of the deductions is treated a trading receipt for the period of account in which the notice of withdrawal of approval is given to the company.

149. Paragraph 114 allows investment and insurance companies to treat the deductions allowed under this Part in calculating the profits of a trade as expenses of management. If a notice of withdrawal of approval of the plan is given, paragraph 113 applies and any amount clawed-back is chargeable under Case VI of Schedule D.

PART XIII : SUPPLEMENTARY PROVISIONS

150. Paragraph 115 deals with company reconstructions. The participant's plan shares are referred to as "the original holding" before any company reconstruction. It applies where a new holding is equated with the original holding for the purposes of capital gains tax. It also applies where a qualifying corporate bond (QCB) is received in return for the shares, but if the bond had been shares the new holding would be equated with the old for capital gains tax. In these cases the new holding (or QCB) is treated as if they were the original shares, and are "plan shares" for the purposes of the schedule, but with some exceptions. The exceptions are redeemable shares or securities under S209(2)(c) ICTA 1988, bonus issues shares followed by a repayment of share capital under S210(1) ICTA, and stock dividends treated as income under S249 ICTA.

151. Paragraph 116 provides that shares acquired by the exercise of rights ("rights shares") which arise on plan shares will themselves be plan shares with 2 exceptions. These are where the rights were exercised using funds other than from the sale of the rights in accordance with paragraph 72; and where funds were obtained by the sale of rights, where the rights did not apply to all ordinary shares of the company.

152. Paragraph 117 provides the Inland Revenue's power to require information. This must be such information as the Inland Revenue reasonably needs to perform their functions under this Schedule. It must be information that the person named in the notice either has or can reasonably obtain. It specifies that the Inland Revenue's information power extends particularly to three areas:

to enable them to decide to approve a plan or withdraw an existing approval;
to obtain information to enable the Inland Revenue to determine the tax liability of any plan participant; and
to obtain information about the administration of a plan and any changes proposed to it.

153. The notice must give a specified date for the return of the information which must not be less than 3 months from the date of the notice. Penalties may be imposed for the late submission of the annual return.

154. Paragraph 118(1) and (2) provide that where a disqualifying event affects an approved plan the Inland Revenue may send a notice withdrawing approval with effect from the date of the disqualifying event or a later date which the Inland Revenue may specify.

155. The disqualifying events are:

the plan or the plan trust is not operated in such a way as to meet the requirements of this Schedule;
alterations are made to key features of the plan or in the terms of the plan trust without the approval of the Inland Revenue;
where method two is used for awarding shares based on performance, performance targets are set cannot be viewed, at the time they are set, as reasonably comparable;
any alteration to the share capital of the company whose shares are used in the plan, or in the rights attaching to any shares of that company , that materially affects the value of the participants shares;
a participant's plan shares being treated differently from other shares of the same class;
the trustees, the company, or in the case of a group plan, a company which is or has been a participating company, failing to provide the information required by the Inland Revenue.

156. Paragraph 118(3) specifies that if the plan, altered as proposed would meet the normal approval requirements the Inland Revenue will not withhold their approval.

157. Paragraph 118(4) specifies the meaning of broadly comparable for target setting. Performance targets are broadly comparable if it is broadly likely that the performance units to which they apply will be able to meet them.

158. Paragraph 118 (5) specifies the particular circumstances where shares being treated differently are not allowed. Plan shares must not be treated differently from other shares of the same class not in the plan for:

the dividend payable;
repayment;
the restrictions attaching to shares, or
any offer of substituted or additional shares, securities or rights of any description for the shares.

159. Paragraph 118 (6) gives details of the circumstances in which alteration of share capital or rights materially affecting plan shares, does not apply. These are:

where the difference in treatment is from a key feature of the plan or from any of the participant's shares being subject to forfeiture;
where shares which have been newly issued receive less favourable dividend treatment.

160. Paragraph 118 (7) specifies shares awarded participants in the plan up until the date when approval is withdrawn continue to receives the benefits of the plan.

161. Paragraph 119 deals with a company's right to appeal to the Special Commissioners against the withdrawal of approval. A company may appeal against the following Inland Revenue decisions:

a decision to withdraw approval from a plan;
a decision to make a direction to withdraw corporation tax deductions on withdrawal of approval from a plan;
a decision to refuse approval where approval of an alteration to a plan or a plan trust has been sought.

162. The company must appeal to the Inland Revenue within 30 days after the notice of the Inland Revenue's decision is given to the company

163. Paragraph 120 provides for a company to terminate a plan at any time. It specifies that the company has to notify the Inland Revenue, the trustees, participants, and those who have entered into a partnership share agreement.

164. Paragraph 121 specifies the effect of plan termination notice. Once the notice has been issued no further shares may be appropriated to or acquired on behalf of an individual under a plan. The trustees must remove the plan shares from the plan as soon as practicable after the termination notice is issued or if later, the first date on which the shares may be removed from the plan tax-free. The trustees must return any partnership money or any cash dividend which has not been reinvested to participants as soon as practicable. If the participant agrees, the trustees may remove the participant's shares from the plan at an earlier date than the point at which they become tax free.

165. Paragraph 122(1) and (2) define the meaning of shares being withdrawn from a plan. A participant's shares are withdrawn from the plan

when the participant tells the trustees to transfer the shares to himself or to another person or
when a participant disposes of his beneficial interest in the shares or
when the participant tells the trustees to dispose of the shares and account, or be ready to account for the proceeds to himself or to another person

166. Where the participant has died, the references are to his personal representatives.

167. Paragraph 122 (3) provides a definition of shares ceasing to be subject to a plan. A participant's shares cease being subject to the plan:

when the participant withdraws shares from the plan;
the participant ceases to be in relevant employment while shares are subject to the plan, or
the trustees dispose of plan shares to meet PAYE obligations.

168. Paragraph 122 (4) and (5) provide that where an individual leaves employment during the acquisition period for partnership shares, he is treated for sub-paragraphs (3) and (7) as leaving immediately after the shares are acquired on his behalf. The acquisition period is defined as the period between the end of the accumulation period, or the deduction from salary where there is no accumulation period, and the date the shares are acquired.

169. Paragraph 122 (6) provides that, in order to determine any charge to income tax the shares cease to be subject to the plan in the order in which they were appropriated to, or acquired on behalf of, the participant. If this happened on the same day, the shares are treated as ceasing to be subject to the plan in the order which results in the lowest charge to income tax for the participant.

170. Paragraph 122 (7) specifies that where a participant ceases employment his plan shares cease to be subject to the plan on his date of leaving.

171. Paragraph 123 specifies that relevant employment means employment by the company or any associated company specifies that a participant does not cease to be in relevant employment if he remains in the employment of the company or any associated company, so employees can move around within a group without ceasing to be in relevant employment.

172. Paragraph 124 provides that references in this Schedule to "the Inland Revenue" are to any officer of the Board.

173. Paragraph 125 specifies that the "market value" of shares is determined by using capital gains tax rules And provides that the Inland Revenue and the trustees may agree what dates to use when determining the market value of shares. They may agree that the market value will be determined by reference to a particular date or dates, or to an average of the values on a number of dates

174. Paragraph 126 specifies that one company is an "associated company" of another company if one has control of the other or both are under the control of the same person or persons and specifies that whether a person controls a company is determined in accordance with section 416 (2) to (6) of the Taxes Act 1988.

175. Paragraph 127 deals with jointly owned companies for group plans. It specifies that each joint owner of a jointly owned company is treated as controlling the jointly owned company and any company controlled by that company. It defines a "jointly owned company" as a company of which 50% of the issued share capital is owned by one person and 50% by another, which is not controlled by any one person. It also specifies that a jointly owned company may not be a participating company in more than one group plan.

176. Paragraph 128 defines the meaning of "workers? co-operative" and "registered industrial and provident society

177. Paragraph 128 defines the meaning of "readily convertible asset" for the purposes of this Schedule as having the same meaning as the PAYE definition for tradable assets and that any market created by the trustees acquiring shares for the purposes of the plan does not make the shares readily convertible assets.

178. Paragraph 130 provides minor definitions for the purposes of the plan. It also specifies that in this Schedule "shares" include fractions of shares forming part of the share capital of a company registered in a country hose laws recognise such fractions. The meaning of a member of a consortium is also given in this paragraph.

179. Paragraph 131 provides an index of defined expressions and details in which paragraph the definition may be found.

BACKGROUND NOTE

Clause 47 & Schedule 8

There are at present three approved, tax-relieved, employee share schemes designed to encourage employees to identify with the success and growth of the companies for which they work.

Following research showing a link between improvements in productivity and employee share ownership the Government decided to review the existing approved schemes. The Government's aim was to double the number of companies offering all their employees the chance to become shareholders. This.

This plan has been designed to meet that aim, providing greater flexibility for all companies and features to help smaller companies to implement the plan.

Finance Bill 2000 index of clauses