| Financial Benefits to Encourage Employee Participation |
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16A.1 General Introduction |
16A.1.1 Legislative History: The Statute outlined |
This chapter deals with part 7 of ITEPA which is now, ie after FA 2003, entitled ‘Employment income; income and exemptions relating to securities’. Despite its length and complexity part 7 is not all embracing; it begins (section 418) by warning the reader that these provisions are not the only ones that may be relevant and specifically mentions section 62 and part 3 chapter 10 (the old section 154); see further §16A.1.4. |
Part 7 has two main purposes. First, it wants to restrict the use of securities, interests in securities and options to avoid tax, whether an employment income under ITEPA, NICs or PAYE. The use of the term securities is deliberately wider than shares. The tax treatment of options in relation to assets which are not on the list of securities, eg land, remain subject to general principles of the Act. Secondly, part 7 wants to recognise the use of shares as an acceptable method of remuneration and so provide appropriate tax exemptions. The twin aims make for complicated rules. Part 7 relates to the structure of ITEPA through section 7(2) which classifies part 7 income as which ‘counts as’ employment income. Those chapters of part 7(5–10) which provide rules for the use of securities (usually shares) as remuneration do not apply to office holders.1 There are also special rules narrowing the normal international scope of ITEPA.2 FA 2003 was enacted after the ITEPA had come into force and provides a major overhaul of the legislation in this area. One may regret that the overhaul haven’t done earlier since the resulting scarring of the statute book is not attractive. There are three principal changes. The first is the overdue extension of the rules to cover all securities and not just shares. The second is a new set of chapters, 3A–3D, dealing with acquisitions above or below market value and the manipulation of values; this enables the repeal of a number of other rules in ITEPA, such as the old growth in value charge FA 1988 section 77 §16.4.3 and the two chapters of the benefits Code—part 3 chapters 8 and 9— |