§ Mr. CarringtonTo ask the Chancellor of the Exchequer if he has any proposals concerning the existing income tax exemption for directors and employees who derive a benefit from being given priority rights in a public offer of shares; and if he will make a statement.
§ Mr. MaudeThe existing provisions concerning priority share allocations remove the possibility of a tax charge on directors and employees arising solely because, where a public offer is oversubscribed, they get more shares than members of the public who apply for the same number. The exemption is available only in the context of a genuine public offer, of which the priority allocation to directors and employees forms a small part—10 per cent. or less—and where other conditions are met.
Most public offers comprise shares in just one company, and in these cases this rule causes no difficulty. But where a public offer consists of a package of shares in two or more companies, and directors and employees are entitled to priority allocations of shares in just one or only some of them, the exemption is not available. This is because the package offer to the public and the single company share offer or offers to employees cannot be treated under the existing provisions as a single public offer.
Since the Government do not believe that it would be right to charge tax in such circumstances we propose to extend the present tax exemption to cover them. We propose that the extension to the relief should apply to any public offer of shares made on or after today. Legislation to effect this will be included in the Finance Bill 1991.