Schedule 3 SAYE option schemes: Option Notifications: Alterations
Where a company makes an alteration to a “key feature” of the scheme or where there is a variation of share capital within paragraph 28(3), (see ETASSUM35220), it must provide details of this in its annual return for the tax year in which the alteration or variation is made. It must also certify in the return that the alteration does not result in the scheme no longer meeting the requirements of parts 2-7 of Schedule 3 (paragraph 40B(6) to (8)).
A “key feature” is any provision of the SAYE scheme which is necessary in order for the requirements of Parts 2-7 of this Schedule to be met in relation to the SAYE scheme (paragraph 40B(8)). This therefore includes changes to the eligibility of individuals, changes to eligible shares and amendments to existing options, (these changes may arise in various circumstances including although not limited to company reconstructions).
Failure to include an alteration or variation in a return will lead to a penalty of up to £5,000.
For alterations that result in existing options conferring new rights see CIR v Eurocopy plc (see ETASSUM47260).
Amendments affecting existing options
Unless expressed otherwise, amendments made to scheme rules will generally be intended to apply:
- from the date of the amendment,
- to options granted in the future and not to options already in existence.
If amendments are to apply to existing options it is important that such amendments do not alter the rights of subsisting option holders or provide new rights. Any amendments to existing options which create new rights or alter existing rights will cause these options to lose their tax advantaged status.
Amendments to existing options which will likely be acceptable, include alterations to take account of a variation in share capital, where such alterations are permitted by the plan rules at grant (see ETASSUM35220). Generally specific alterations not anticipated at grant will not be acceptable.
New & Old options
If alterations would change the rights of subsisting option holders, they can only apply in respect of options granted subsequent to the alterations coming into effect.