The Income Tax (Earnings and Pensions) meaning

A share incentive plan (SIP) enables employees to obtain shares in their employer, or a parent company of the employer, in a tax‑efficient manner, under a statutory scheme. The legislative framework for SIPs is found primarily in the following provisions: Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), which describes how a SIP can be run and the principal conditions that must be met for the SIP to be a ‘Schedule 2 SIP’; ITEPA 2003, Pt 6 Ch 7 (ITEPA 2003, ss 488–515), which sets out the income tax treatment of shares obtained under a SIP. For more general background and context on SIPs, see Practice Note: What is a SIP? Set out below is a checklist of the key matters to consider before establishing or operating a SIP. It proceeds on the basis that the SIP Trust Deed and Rules comply with ITEPA 2003, Sch 2. See Precedents: SIP rules and SIP trust deed. Preliminary...

To grant save as you earn (SAYE) options, several conditions must be met at the grant date, relating to: the company issuing the options the employees receiving them the shares placed under option the options themselves the SAYE scheme itself This Flowchart focuses on employee eligibility, set against the income tax relief in Chapter 7 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). For other conditions, see Practice Notes: SAYE—companies which qualify to operate an SAYE scheme, and SAYE—requirements for the options and timing for exercise SAYE—flowchart to determine employee's eligibility This Flowchart outlines the statutory tests at the date of grant for an employee to: be eligible for SAYE options and required to be invited to each operation of the SAYE scheme be eligible for SAYE options and eligible to be invited to join the scheme, or be ineligible for...

R (oao UBS AG) v HMRC and another [2024] UKUT 242 (TCC) As part of JW’s reward package, UBS and JW (then an employee) entered into three options over gilts in 2002. The options were not taken up until 2012, after JW had left the business, and delivery of the gilts did not occur until 2016/17 because of valuation problems. HMRC issued a determination under regulation 80 of the PAYE Regulations requiring the company to account for PAYE. The company disputed that determination, advancing a number of lines of attack, one of which asked HMRC to exercise its discretion under section 684(7A) of the Income Tax (Earnings and Pensions) Act 2003. HMRC responded that it was not appropriate to decide whether to deploy that discretionary power at that juncture, as the ultimate liability had not yet been fixed. UBS sought judicial review of...

In this issue: Employment taxes VAT International Individuals and income tax Taxes management and litigation Daily and weekly news alerts New and updated content Dates for your diary Trackers Useful information Employment taxes Appeal court rules that loans advanced through a remuneration trust were chargeable as disguised remuneration and that the linked costs were non-deductible (Marlborough DP Limited v HMRC). In Marlborough DP Ltd, the Court of Appeal dismissed the taxpayer’s case and upheld the Upper Tribunal (UT). It found that amounts lent to a director under a remuneration trust fell within the disguised remuneration regime in Part 7A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), as they were made in connection with employment. The Court further concluded that the associated payments were not allowable for corporation tax, since they were not incurred wholly and exclusively for the purposes of the company’s trade. See News Analysis: Court of Appeal...

In this issue: Probate Court of Protection UK taxes for Private Client HMRC Manuals updates Tax avoidance, evasion and non-compliance Insolvency—Private Client Digital assets and cryptoassets Charity and philanthropy Contentious trusts and estates Pensions, insurance and tax efficient investments International Question of the week Additional Private Client updates this week Daily and weekly news alerts LexTalk®Private Client: a Lexis®PSL community New and updated content Dates for your diary Trackers Latest Q&As Useful information Probate HMCTS probate enquiry line—temporary reduced hours From 14 February 2024, and for 12 weeks, the HMCTS probate helpline will run on reduced hours: 9am to 1pm, Monday to Friday. The HMCTS Probate Service remains available via web‑chat from 9am to 5pm, Monday to Friday. Source: HMCTS Probate LinkedIn post. MoJ urges those entitled to claim dormant funds held by CFO to act now The Ministry of Justice...

Firms sometimes extend low-interest (or interest-free) borrowing to directors or staff as part of a remuneration package, or on particular occasions, to assist the individual with major financial outlays. As with any other form of employment reward, where a loan is made by a third party rather than by the employer, the disguised remuneration rules in Part 7A of Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) must be considered first, since those provisions take precedence over most mechanisms for charging employment income to tax (including the benefits code). For further information, see: Disguised remuneration and EBTs—overview and, also, regarding the loan charge within the disguised remuneration rules, refer to Practice Note: Disguised remuneration—history of the loan charge. If no third party is involved (eg where the employer itself advances the loan), or an exemption from the disguised remuneration regime applies, the provisions in the benefits code for employment-related loans outlined below may instead govern the position for the particular loan in question...

Introduction and context This Practice Note provides a summary of the taxation of internationally mobile employees in relation to securities options (Options) charged to tax within Chapter 5 of Part 7 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). On 30 October 2024, as part of the Autumn Budget 2024 announcements, the Labour government confirmed that it would proceed with the former Conservative government’s plans to abolish the remittance basis of taxation and replace it with a residence‑based regime, scheduled to commence on 6 April 2025. These changes were enacted through Finance Act 2025 (FA 2025) and have also affected, in particular, the availability and operation of overseas workday relief. This Practice Note reflects the current position under the new tax regime; however, the previous regime is still relevant for Options granted before 6 April 2025, because any elements of the Options’ ‘relevant period’ (see discussion below—broadly, the vesting period) that occur before 6 April 2025 remain subject to certain aspects of the earlier rules. For...

The main types of income are: employment income pension income social security income trading income property income savings and investment income miscellaneous income Traditionally, applying income tax required first identifying the income’s source and then confirming that it fell within one of the Schedules specified in the Income and Corporation Taxes Act 1988 (ICTA 1988). The Act initially arranged the categories of income liable to income tax into six historic Schedules: A, B, C, D, E and F. In 1996, the Tax Law Rewrite Project was launched to recast primary direct tax legislation. Following its completion, the Schedules were abolished for both income tax and corporation tax, with the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003), the Income Tax (Trading and other Income) Act 2005 (ITTOIA 2005) and the Income Tax Act 2007 (ITA 2007) introducing the new heads of charge to income tax...

[ insert name of company ] Trust deed [ insert name of company ] Share Incentive Plan This Deed is dated and entered into BETWEEN [ INSERT NAME OF COMPANY ], a company registered in England and Wales under number [ insert company number ] (the Company), whose registered office is at [ insert address of company ]; [ INSERT NAME OF TRUSTEE ], a company registered in England and Wales under number [ insert company number ] whose registered office is [ insert address of trustee ] (the Trustee). Whereas: The Company intends to establish a share incentive plan titled the [ insert name of company ] Share Incentive Plan (the Plan), which meets the requirements of Schedule 2 to the Income Tax (Earnings and Pensions) Act 2003. The creation of the Plan was authorised by a resolution of the Board passed on [ insert date on which the board resolution was passed ]. The...

That: the [ insert name of company ] Share Incentive Plan (SIP), together with the trust deed and rules summarised on pages [ insert page number ] to [ insert page number ] of this Notice of General Meeting, produced to the meeting and initialled by the Chair for identification, be and are hereby approved, and the directors are hereby authorised to adopt them (subject to any amendments they deem necessary or desirable to ensure the SIP complies with Schedule 2 to the Income Tax (Earnings & Pensions) Act 2003); and the directors be and are hereby authorised to: carry out all actions and matters they consider necessary or desirable to implement and give effect to the SIP; and establish further plans derived from the SIP, adjusted for use in overseas jurisdictions to accommodate local tax, exchange control or securities laws, provided that any ordinary shares made available under such further plans are counted against any individual or overall...

[To appear on the client’s headed paper or bearing the client’s logo] Status determination statement This status determination statement is issued in line with the requirements of section 61NA of the Income Tax (Earnings and Pensions) Act 2003, and concerns the off-payroll rules. The off-payroll rules may apply where a worker (often described as a contractor) supplies their services through their own limited company (commonly called a personal service company, or PSC), or via another form of intermediary, to a client that is a public authority, or a medium or large private sector organisation with a UK connection. The rules take effect if a worker delivers services to a client through an intermediary but, if engaged directly, would be treated as an employee for tax purposes; they ensure such individuals pay broadly the same tax and National Insurance contributions (NICs) as employees. These provisions are known as the ‘large and public client off-payroll rules’, which sit within the IR35 regime...

Termination payments qualifying for £30,000 exemption As set out in Practice Note: Termination payments qualifying for £30,000 exemption, where a compensation payment for loss of office or employment is made in circumstances where it does not fall to be taxed as: earnings within section 62 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) (see Practice Note: Termination payments taxed as earnings) benefits-in-kind (see Practice Note: How employment income is taxed—non-cash earnings or benefits) benefits from an employer-financed retirement benefits scheme employment-related securities (see: Employment-related securities—overview) disguised remuneration, where termination payments or benefits are provided by a third party (such as an employee benefit trust) rather than the employer (see: Disguised remuneration and EBTs—overview) restrictive undertakings (see Practice Note: Taxation of payments for restrictive covenants or undertakings) and for terminations for loss of office since 6 April 2018...

The appropriate section of the HMRC annual return to complete hinges on whether the relevant share appreciation right (SAR) or restricted stock unit (RSU) constitutes a securities option for the purposes of s 420(8) of the Income Tax (Earnings and Pensions) Act 2003. In both scenarios, the award counts as a securities option if it grants a legal entitlement to obtain shares, and this, in turn, is determined in practice by the precise terms of the award concerning the method by which settlement may actually occur...

Under the enterprise management incentives (EMI) legislation There is no requirement to register an EMI scheme with HMRC until the point at which the first EMI option(s) are granted under the arrangement (see paragraph 44 of Schedule 5, Part 7 of the Income Tax (Earnings and Pensions) Act 2003, and HMRC guidance at ETASSUM56010). That said, in practical terms, an EMI scheme can be regarded as ‘existing’ from the moment it has been duly adopted by the company in accordance with its constitution—regardless of whether any options have then been granted under it at all...