Income Tax Act 2007 section 488

Application of section 479 to trustees of Schedule 2 share incentive plans

Section 488 sets out the circumstances in which the special trust tax rates under section 479 apply to income received by trustees of Schedule 2 share incentive plans, specifically dividends and distributions on qualifying shares.

• The section applies where trustees of a Schedule 2 share incentive plan receive dividends or other distributions on shares that meet the qualifying share requirements under Part 4 of Schedule 2 to ITEPA 2003.
• The special trust tax rate charge under section 479 only kicks in if the applicable period for the shares expires without the shares being awarded to a participant (condition A), or if the trustees dispose of the shares before the applicable period ends (condition B).
• Where trustees hold shares of the same class acquired at different times, the earlier-acquired shares are treated as being awarded to participants before the later-acquired shares (a first-in, first-out approach).
• References to shares being awarded to a participant include shares acquired on behalf of the participant as dividend shares, ensuring that reinvested dividends also count as awards for the purposes of this section.