Section 502 — Income Tax (Earnings and Pensions) Act 2003: Meaning of “capital receipt” in section 501

Meaning of “capital receipt” in section 501 502 1 This section applies for determining whether any money or money’s worth is a “ capital receipt ” for the purposes of section 501.

2 The general rule is that any money or money’s worth is a “ capital receipt ” for the purposes of section 501.

3 The general rule is subject to the following exceptions.

4 Money or money’s worth is not a capital receipt for the purposes of section 501 to the extent that—

a it constitutes income in the hands of the recipient for the purposes of income tax or would do so but for sections 489 to 498 (SIPs: tax advantages) or section 770 of ITTOIA 2005 (exemption for amounts applied by SIP trustees acquiring dividend shares or retained for reinvestment) , b it consists of the proceeds of disposal of the plan shares mentioned in section 501, or c it consists of new shares within the meaning of paragraph 87 of Schedule 2 (company reconstructions).

5 If, as a result of a direction given by or on behalf of the participant for the purposes of paragraph 77 of Schedule 2 (power of trustees to raise funds to subscribe for rights issues), the trustees—

a dispose of some of the rights under a rights issue, and b use the proceeds of that disposal to exercise other such rights, the money or money’s worth constituting the proceeds of that disposal is not a capital receipt for the purposes of section 501.