§ Mr. Yeoasked the Chancellor of the Exchequer if he will make a statement on the material interest rules in sections 285 and 303 Income and Corporation Taxes Act 1970, in particular as they apply to approved employee share schemes.
§ Mr. Norman LamontYes. The present rules require that, where an individual has an interest in a trust, any shares in that trust and the personal holdings of the trust's other beneficiaries have to be aggregated with the individual's own holdings, and those of his close relatives, in determining whether he has a "material interest" in a company. It has been suggested that this rule may operate too restrictively in connection with approved employee share schemes — employees who have a "material interest" in a company cannot participate in such schemes. To remove any possible doubts about the operation of the "material interest" rules, which apply to various parts of the tax code, we propose introducing in next year's Finance Bill:
- (i) a minor modification to section 303 as it applies for all purposes, and
- (ii) minor amendments to the approved employee share scheme legislation.
Further details, including the proposed starting dates for these changes, are given in an Inland Revenue press release, copies of which I am placing in the Library. This also outlines some complementary arrangements which do not require legislation.