| Financial Benefits to Encourage Employee Participation |
15 |
These take account of options and replacement options and has a rule linking certain transactions to form one transaction.34 |
There is an elaborate duty to provide information, backed up by a list of reportable events, and of persons obliged to report.35 |
16A.3 Share Purchase Incentive Schemes |
Share purchase incentive schemes were introduced to avoid section 476 (135). Instead of being given an option to buy a share for £1—the current market value of the share which might in due course be worth £3—E would be issued with a share which ordinarily would have had a current market value of £3 but which was subject to restrictions making it was worth only £1. At a later date the restrictions would be removed. The increase in value could not be subject to tax under what is now section 476 (TA 1988, section 135), since the employee did not realise a gain by exercising a right to acquire shares—the shares were already owned. If the company capitalised its profits to pay them up, there would be a charge under the residual charge for the director etc in part 3 (the benefits code) chapter 10 ie ITEPA section 203, ex TA 1988, section 154 on the employee on the amount so spent, but this would usually be much less than the gain realised. |
Faced with such schemes the legislature provided two sets of rules. Set one, §16A.4.1 and 2 which was introduced in 1998, clarified the treatment of conditional acquisitions of shares and the conversion of convertible shares. Set two, §16A.4.3, which was introduced in 1988 |