Beta This part of GOV.UK is being rebuilt – find out what this means

HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

From
HM Revenue & Customs
Updated
, see all updates

Schedule 3 SAYE option schemes: Option Notifications: Introduction

This section explains the layout of the guidance notes on Schedule 3 SAYE option schemes and gives a brief explanation of the main requirements. These schemes are also known as Savings Related Share option schemes.

The legislation relating to Schedule 3 SAYE option schemes was introduced by Finance Act 1980 and is now consolidated in Schedule 3 Income Tax (Earnings and Pensions) Act 2003 (ITEPA). Under these schemes employees and directors are granted share options which give them rights to acquire shares. If certain conditions are satisfied no liability to income tax arises when the options are exercised. Prior to 6 April 2014, the scheme organiser had to obtain HMRC approval that the scheme met the conditions of Schedule 3 before the company could operate the scheme. From 6 April 2014, the scheme organiser is required to notify the scheme to HMRC and self certify that the scheme meets these conditions.

Unlike Schedule 4 CSOP schemes, Schedule 3 SAYE option schemes must be open to all employees.

The relevant requirements for Schedule 3 SAYE option schemes are contained within Schedule 3 of ITEPA and are concerned with:

  • providing participants with legally enforceable rights to acquire shares in compliance with the purpose test (paragraph 5);
  • who can participate in the scheme (paragraphs 9 - 16);
  • the nature of the shares over which options can be granted (paragraphs 17 - 20 and 22);
  • the requirement for a linked savings arrangement (paragraphs 23 – 26);
  • setting limits on contributions by each participant (paragraph 25);
  • the price at which options can be exercised (paragraph 28);
  • circumstances where participants must be able to exercise their options (paragraphs 30 and 32 and 34);
  • the possible facility to exchange options on a takeover (paragraphs 38 and 39);

Statutory provisions and requirements

The statutory provisions and requirements relate to:

 

### Subject ### Legislation ### ETASSUM References
     
General requirements Paragraphs 4 – 8 31000-31090
Eligibility of individuals Paragraphs 9 – 16 32000-32300
Shares to be used Paragraphs 17 – 20 and  22 33000-33240
Requirement for linked savings arrangement Paragraphs 23 – 26 34000-34230
Requirements of options Paragraphs 27 – 37 35000-35540
Exchange of options Paragraphs 38 – 39 36000-36170
Notification of schemes, annual returns and enquiries Paragraphs 40 -
Taxation Sections 471 - 484, 516 – 520, 700 – 702 ITEPA   -
Supplementary & defined terms Paragraphs 45 – 49 -