Finance Act, 1986

Approved share option schemes.

10.—(1) The provisions of this section shall apply where, on or after the 6th day of April, 1986, an individual obtains a right to acquire shares in a body corporate—

(a) by reason of his office or employment as a director or employee of that or any other body corporate; and

(b) in accordance with the provisions of a scheme approved under the Second Schedule .

(2) If the individual exercises the right in accordance with the provisions of the scheme at a time when it is approved under the Second Schedule

(a) tax shall not be chargeable under section 9 in respect of any gain realised by the exercise of the right,

(b) if, but for this paragraph, section 9 of the Capital Gains Tax Act, 1975 , would apply, that section shall not apply in calculating the consideration for the acquisition of the shares by him or for any corresponding disposal of them to him, and

(c) as respects shares to which subsection (3) applies, and which were acquired by an individual by the exercise of the right, the period of ownership of those shares for the purposes of subsection (3) of section 3 of the Capital Gains Tax Act, 1975 , shall be construed, notwithstanding subsection (4) of that section, as if the shares were acquired by the individual on the date on which he acquired the right.

(3) (a) This subsection applies to shares which are acquired pursuant to the exercise of a right to acquire shares in a company which, at the time the right was obtained, was a qualifying company.

(b) For the purposes of this subsection, a company is a qualifying company at any time if, throughout the period of twelve months ending at that time or, if the company commenced to trade during that period, throughout the period of twelve months commencing on the date the company so commenced to trade, it existed solely for the carrying on of a specified trade.

(4) For the purposes of subsection (3), “specified trade” means a trade which consists wholly or mainly of—

(a) the manufacture of goods (including activities which would, if the company carrying on the trade were to make a claim for relief in respect of the trade under Chapter VI of Part I of the Finance Act, 1980 , fall to be regarded for the purposes of that Chapter as the manufacture of goods), or

(b) exempted trading operations within the meaning of Part V (Profits from Trading within Shannon Airport) of the Corporation Tax Act, 1976 .

(5) For the purposes of subsections (3) and (4), a trade shall be regarded, as respects a period of twelve months, as consisting wholly or mainly of particular activities if, but only if, the total amount receivable by the company carrying on the trade from sales made or, as the case may be, in payment for services rendered in the course of those activities in the period of twelve months is not less than 75 per cent. of the total amount receivable by the company from all sales made or, as the case may be, in payment for all services rendered in the course of the trade in that period.

(6) Schedule 15 of the Income Tax Act, 1967 , is hereby amended by the insertion in Column 2 of “Finance Act, 1986, paragraph 14 of the Second Schedule ”.