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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 4 Company Share Option Plan (CSOP): Eligibility of individuals to participate: The 'no material interest' requirement: Close companies

The ‘interests’ in shares which have to be tested to see whether they are material are interests in shares in a ‘close company’ which:

  • is the company whose shares are used in the Schedule 4 CSOP scheme (the ‘scheme share’ company), or
  • controls the ‘scheme share’ company, or
  • is a member of a consortium which owns the ‘scheme share’ company (in this situation the ‘scheme share’ company might not itself be close).

The basic test is whether the company is under the control of:

  • 5 or fewer participators (i.e. shareholders), or
  • under the control of participators who are directors of the company.

The relevant provisions are in Chapter 2 of Part 10 CTA 2010 (Section 442(a) and Sections 446/447 CTA 2010 being disregarded for the purposes of the CSOP code). 

If a company is not close when options are to be granted, but was close earlier in the preceding 12 months, no person who held a material interest at the earlier time may be granted an option (or may exercise an existing option) until 12 months have passed since the company ceased to be close.