Income Tax (Earnings and Pensions) Act 2003 sections 77–83

Enterprise management incentives

Sections 77 to 83 set out the transitional rules for enterprise management incentive (EMI) share options, ensuring that options qualifying under the old Finance Act 2000 regime continued to be recognised under the new ITEPA 2003 EMI code from 6th April 2003 onwards, and addressing how disqualifying events, share capital alterations, tax charges, and replacement options are treated during the changeover.

• Share options that qualified under Schedule 14 to Finance Act 2000 before 6th April 2003 are automatically treated as qualifying EMI options under ITEPA 2003, even where the original qualifying conditions differed from those in Schedule 5.
• Disqualifying events under the old regime remain relevant: the Finance Act 2000 rules continue to apply for April 2003 calculations, and any disqualifying event occurring at the end of tax year 2002–03 is carried forward as a disqualifying event under the new Schedule 5.
• For share capital alterations made before 11th May 2001, simplified rules apply — an alteration is only a disqualifying event if it falls within section 537 and was made without prior HMRC approval, and section 537 itself is modified to remove certain provisions for those earlier alterations.
• Where an EMI option was granted or exercised before 6th April 2003, specific adjustments apply to the tax treatment on acquisition of shares, the calculation of relief on exercise, and the rules for replacement options under company reorganisations.

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