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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

From
HM Revenue & Customs
Updated
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Schedule 3 SAYE option schemes: Shares to which schemes can apply: Control by another company

The scheme shares must not be in an unlisted company which is under the control of another company unless the other company is listed and not close or the shares are in a company, which is subject to an employee-ownership trust.

  • ‘Control’ for this purpose has the meaning given by Section 719 ITEPA (see ETASSUM33050+).
  • ‘Company’ is defined in Section 992 ITA 2007 as any body corporate or unincorporated association but does not include a partnership, a local authority or a local authority association.
  • ‘Close company’ has the meaning given by Section 989 of ITA 2007 (see ETASSUM33160).

To determine whether an unlisted company (whose shares are to be scheme shares) is under the control of another company, it is necessary to consider the share holdings, voting rights, and other powers of the companies in the share holding ladder above it. 

A company may be under the control of more than one other company, for example it may have an immediate parent company and an ultimate parent company. For the shares of the subsidiary to be used in a tax advantaged share scheme at least one of those ‘controlling’ companies must be listed.

It is not sufficient for the unlisted subsidiary to be under the control of an unlisted company which is owned by a consortium of listed companies, none of which has control.

If a company is controlled by a corporate trustee it will be under the control of another company. The fact that the trust company may be acting in a fiduciary capacity does not mean that it will not have control.

If a company is controlled by a limited partnership it may be necessary to look through the limited partnership to the corporate partners to ensure that none of them has the power, on its own, to control the company whose shares are to be scheme shares.

Shares in an unlisted subsidiary of a mutual life company cannot be used in a Schedule 3 SAYE option scheme. Mutual Life companies have no share capital.