Paragraph 9

Paragraph 7 of Schedule 8 (no payments for employees with materialinterest in company) shall be amended as follows.

In sub-paragraph (1), the words “, or is an associate of a person who has,” shall be omitted.

In sub-paragraph (3), after the words “section 417(3) and (4)” thereshall be inserted the words “, but subject to sub-paragraph (4) below”.

The following sub-paragraphs shall be added at the end—

“(4)

For the purposes of this paragraph, where an employee of a company has aninterest in shares or obligations of the company as a beneficiary of anemployee benefit trust, the trustees shall not be regarded as associates ofhis by reason only of that interest unless sub-paragraph (8) below applies inrelation to him.

(5)

A trust is an employee benefit trust for the purposes of this paragraphif—

(a)

all or most of the employees of the company are eligible to benefit underit, and

(b)

none of the property subject to it has been disposed of on or after 14thMarch 1989 (whether by sale, loan or otherwise) except in the ordinary courseof management of the trust or in accordance with sub-paragraph (6) below.

(6)

Property is disposed of in accordance with this sub-paragraph if—

(a)

it is applied for the benefit of—

(i)

individual employees or former employees of the company,

(ii)

spouses, former spouses, widows or widowers of employees or formeremployees of the company,

(iii)

relatives, or spouses of relatives, of persons within sub-paragraph (i)or (ii) above, or

(iv)

dependants of persons within sub-paragraph (i) above,

(b)

it is applied for charitable purposes, or

(c)

it is transferred to the trustees of an approved profit sharing scheme(within the meaning of section 187), of another employee benefit trust, or ofa qualifying employee share ownership trust (within the meaning of Schedule5 to the Finance Act 1989),

and the property applied or transferred consists of any of the ordinaryshare capital of the company or of money paid outright.

(7)

In sub-paragraph (6)(a)(iii) above “relative” means parent or remoter forebear, child or remoterissue, brother, sister, uncle, aunt, nephew or niece.

(8)

This sub-paragraph applies in relation to an employee if at any time onor after 14th March 1989—

(a)

the employee, either on his own or with any one or more of his associates,or

(b)

any associate of his, with or without other such associates,

has been the beneficial owner of, or able (directly or through the mediumof other companies or by any other indirect means) to control, more than 25per cent. of the ordinary share capital of the company.

(9)

Where—

(a)

on or after 14th March 1989 an employee of a company, or an associate ofhis, receives a payment (“the relevant payment”) from the trustees of anemployee benefit trust, and

(b)

at any time during the period of three years ending with the day on whichthe relevant payment is received, the property subject to the trust consistsof or includes any part of the ordinary share capital of the company,

the employee or associate shall be treated for the purposes ofsub-paragraph (8) above as if he were the beneficial owner of the appropriatepercentage of the ordinary share capital of the company on the day on whichthe relevant payment is received (in addition to any percentage of that sharecapital of which he is actually the beneficial owner on that day).

(10)

For the purposes of sub-paragraph (9) above, the appropriate percentageis—

$$\frac{Ax100}{B}$$

where—

• A is the smaller of—

  • (a) the aggregate of the relevant payment and any other paymentsreceived by the employee or associates of his from the trustees of the trustduring the period of 12 months ending with the day on which the relevant payment is received, and

  • (b) the aggregate of the distributions made to the trustees of the trustby the company in respect of its ordinary share capital during the period ofthree years ending with the day on which the relevant payment is received; and

• B is the aggregate of—

  • (a) any distributions made by the company in respect of its ordinaryshare capital during the period of 12 months ending with the day on which therelevant payment is received,

  • (b) any distributions so made during the period of 12 months immediatelypreceding that mentioned in paragraph (a) above, and

  • (c) any distributions so made during the period of 12 months immediately preceding that mentioned in paragraph (b) above,

divided by the number of the periods mentioned in paragraphs (a) to(c) above in which distributions were so made.

(11)

Where—

(a)

an employee or associate is treated by sub-paragraph (9) above as if hewere the beneficial owner of a percentage of the ordinary share capital of acompany by reason of receiving the relevant payment from the trustees of atrust, and

(b)

that employee, or an associate of his, has, during the period of 12 monthsending with the day on which the relevant payment is received, received oneor more payments from trustees of another employee benefit trust or trustssatisfying the requirement in paragraph (b) of sub-paragraph (9) above,

that sub-paragraph shall have effect in relation to the employee orassociate mentioned in paragraph (a) above as if he had received the paymentfrom the trustees of the trust or of each of the trusts mentioned in paragraph(b) above (or where more than one payment has been received from the trusteesof a trust, the last of the payments) on the day on which the relevant paymentis received.

(12)

In sub-paragraphs (8) to (11) above “associate”, in relation to an employee, does not include thetrustees of an employee benefit trust by reason only that the employee has aninterest in shares or obligations of the trust.”