Section 534 — Income Tax (Earnings and Pensions) Act 2003: Disqualifying events relating to relevant company

Disqualifying events relating to relevant company 534 1 The following events relating to the relevant company are disqualifying events in relation to a qualifying option—

a when the relevant company becomes a 51% subsidiary of another company;

b when the relevant company comes under the control of—

i another company, or ii another company and any other person connected with that other company, without becoming a 51% subsidiary of that other company;

c when the relevant company ceases to meet the trading activities requirement (see paragraphs 13 to 23 of Schedule 5).

2 But where a replacement option has been granted, an event within subsection (1)(a) or (b) is not a disqualifying event in relation to the old option (see paragraph 41(2) of Schedule 5) if the event occurs at any time during the period—

a beginning at the same time as the period within which the replacement option had to be granted (see paragraph 42 of Schedule 5),

and b ending with the release of the rights under the old option.

3 A disqualifying event is to be treated as occurring in relation to a qualifying option if the circumstances mentioned in subsection (4) arise.

4 The circumstances are that—

a the relevant company was a qualifying company at the time when the option was granted as a result only of preparations to carry on a qualifying trade;

and b either—

i the preparations cease to be carried on, or ii the initial period comes to an end, without the relevant company (or, if it is a parent company, any member of the group) beginning to carry on that qualifying trade. 5 “ The initial period ” means the period of two years after the date when the option was granted.

6 Paragraph 41(5)(b) of Schedule 5 has the effect that a replacement option is to be treated as granted on the date when the original option was granted.

7 Subsection (1)(a) and (b) do not apply where the relevant company is subject to an employee-ownership trust (within the meaning of paragraph 27(4) to (6) of Schedule 2).