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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

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HM Revenue & Customs
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Schedule 3 SAYE option schemes: Option Notifications: Notifying a Schedule 3 SAYE option scheme

From 6 April 2014 a SAYE scheme is a “Schedule 3 SAYE option scheme” if the company has given notice of the scheme to HMRC within the appropriate time limit, and has confirmed that the scheme meets the requirements of parts 2-7 of Schedule 3 (paragraph 40A). The scheme is a Schedule 3 SAYE option scheme from the date of the notice or, if notice is given after the date of the first grant of option, from the date of the first grant of option (paragraph 40A(4)).

Notice must be given by 6 July following the end of the tax year in which the first grant of option is made under the scheme. If notice is given after this date, the SAYE scheme can only be a “Schedule 3 SAYE option scheme” from the tax year in which the notice is given (paragraph 40A(5)).

The notice must contain a declaration by the company confirming that the SAYE scheme meets the requirements of parts 2-7 of Schedule 3 at the time the notice is given. 

Where notice is given after the date of the first grant, the company must certify that the requirements were met:

  • at the time of the first grant; and
  • at all other times after the first grant where options remain exercisable after that date.

Options granted before 6 April 2014 under an SAYE scheme which had been approved by HMRC before that date are deemed to be granted at the time when the scheme is a Schedule 3 SAYE option scheme (paragraph 154(5)/(6) Schedule 6 FA 2014). The tax exemptions and other provisions within Chapter 7 of ITEPA therefore apply to these options as long as the notification requirement is met.

In the case of schemes approved by HMRC prior to 6 April 2014, they will cease to attract tax advantages if companies do not notify and self-certify them by 6 July 2015. In that event, however, the interests of SAYE participants granted options prior to 6 April 2014 will be protected, and companies must continue to submit an annual return for these schemes.

As a notice under paragraph 40A of Schedule 3 must contain a declaration by the company confirming that the SAYE scheme meets the requirements of parts 2-7 of Schedule 3 at the time the notice is given, it is important that notice is given prior to any event that might cause a scheme to cease to meet the statutory requirements. For example when a scheme is set up and options are granted, companies might become aware beforehand that an imminent takeover could cause the shares to cease to meet the statutory conditions (and so cause the plan to fail to meet the statutory requirements). In these circumstances if the company still wants to notify the scheme to HMRC (because tax relief may still be available), it must make the notification before the takeover takes place. After the takeover the company will be unable to sign the declaration at paragraph 40A(3), as the requirements of Schedule 3 will not be met after that time. In these circumstances the scheme will only meet the requirements of parts 2-7 of Schedule 3 for the period from the date of first grant of option until the date of the relevant company event and only options granted in that period will attract tax advantages.

The review document (formerly checklist) (review document (Word 125kb)$attachments/etassum39090_checklist.doc) can be used when considering whether the legislation governing Schedule 3 SAYE option schemes is satisfied).

Guidance on establishing schemes is at ETASSUM37020.

Foreign companies may wish to establish schemes for employees of their UK subsidiary companies. Whilst it will be rare for a foreign scheme to satisfy the requirements of Schedule 3, it may be possible for:

  • the subsidiary company or companies to set up free-standing schemes which fully satisfy Schedule 3, or
  • an addendum to be made to the parent company’s foreign scheme, to disapply the unacceptable features of the foreign scheme and to import the rules which are required to satisfy Schedule 3 (see ETASSUM37020).

 

Guidance on registering and self-certifying schemes can be found here: https://www.gov.uk/topic/business-tax/employment-related-securities