Corporation Tax Act 2009

Deductions relating to payments used to acquire shares U.K.

989 Deduction for contribution to plan trust U.K.

(1) A deduction is allowed to a company (“the paying company”) if—

(a) the paying company makes a payment to the trustees of [F1 a Schedule 2] share incentive plan to enable them to acquire shares in the paying company or a company that controls it,

[F2 (aa) the payment is not made pursuant to tax avoidance arrangements,]

(b) the trustees apply the payment to acquire such shares,

(c) the trustees do not acquire the shares from a company, and

(d) at the end of the interim period the condition in subsection (2) is met in relation to the company in which the trustees acquire the shares.

(2) The condition is that the trustees hold shares in the company for the plan trust that—

(a) constitute at least 10% of the ordinary share capital of the company, and

(b) carry rights to at least 10% of—

(i) any profits available for distribution to shareholders of the company, and

(ii) any assets of the company available for distribution to shareholders on a winding up.

(3) For the purposes of subsection (2) shares that have been appropriated to, and acquired on behalf of, an employee under the plan are to be treated as held by the trustees for the plan trust so long as the shares are still subject to the plan.

(4) The deduction is allowed for the period of account in which the interim period ends.

(5) The amount of the deduction is an amount equal to the payment mentioned in subsection (1)(a).

(6) If the deduction is made, no other deduction is allowed in relation to the payment (except as specified in section 991).

[F3 (6A) For the purposes of this section the payment mentioned in subsection (1)(a) is made pursuant to tax avoidance arrangements if—

(a) it is made pursuant to arrangements entered into by the paying company, and

(b) the main purpose, or one of the main purposes, of the paying company in entering into the arrangements was to obtain a deduction or an increased deduction.

(6B) In subsection (6A) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.]

(7) In this section “the interim period” means the period of 12 months beginning with the date on which the trustees acquire the shares as mentioned in subsection (1)(b).

Textual Amendments

F1 Words in s. 989(1)(a) substituted (6.4.2014) by Finance Act 2014 (c. 26), Sch. 8 paras. 78, 89 (with Sch. 8 paras. 90-96)

F2 S. 989(1)(aa) inserted (with effect in relation to payments made on or after 24.3.2010) by Finance Act 2010 (c. 13), s. 42(5)(8)

F3 S. 989(6A)(6B) inserted (with effect in relation to payments made on or after 24.3.2010) by Finance Act 2010 (c. 13), s. 42(6)(8)

990 Withdrawal of deduction under section 989 U.K.

(1) If—

(a) a deduction is made under section 989, and

(b) condition A or B is met,

an officer of Revenue and Customs may by notice direct that the deduction is withdrawn.

(2) Condition A is that less than 30% of the acquired shares have been awarded under the plan before the end of the period of 5 years beginning with the date on which the trustees acquire them.

(3) Condition B is that not all the acquired shares have been awarded under the plan before the end of the period of 10 years beginning with the date on which the trustees acquire them.

(4) If a direction is made, the paying company is treated as receiving an amount equal to the deduction.

(5) The amount is treated as received when the direction is made.

(6) For the purposes of this section and sections 991 to 993—

(a) “the acquired shares” means the shares acquired by the trustees as mentioned in section 989(1)(b), and

(b) if the trustees acquire shares on different days, assume that shares acquired on an earlier day are awarded under the plan before those acquired on a later day.

991 Another deduction to be allowed if all acquired shares are awarded U.K.

(1) This section applies if—

(a) a direction is made under section 990, and

(b) at any time after the making of the direction the condition in subsection (2) is met.

(2) The condition is that all the acquired shares are awarded under the plan.

(3) A deduction is allowed to the paying company for the period of account in which the condition is first met.

(4) The amount of the deduction is an amount equal to the payment mentioned in section 989(1)(a).

992 Award of shares to excluded employee U.K.

(1) This section applies if—

(a) a deduction is made under section 989 or 991, and

(b) a number of the acquired shares are awarded under the plan to an excluded employee.

(2) An employee is excluded if, at the time the shares are awarded to the employee, the earnings from the relevant employment are not (or would not be if there were any) general earnings—

(a) to which section 15 of ITEPA 2003 applies, or

(b) to which a section listed in section 20(1) of ITEPA 2003 applies.

(3) “The relevant employment” means the employment because of which the shares are awarded to the employee.

(4) The paying company is treated as receiving an amount equal to the relevant proportion of the deduction.

(5) The relevant proportion is the proportion that the number of shares awarded to the excluded employee bears to the total number of the acquired shares.

(6) The amount is treated as received when the shares are awarded to the excluded employee.

993 Plan termination notice U.K.

(1) This section applies if—

(a) a deduction has been made under section 989,

(b) the deduction has not been withdrawn under section 990,

(c) the paying company issues a plan termination notice under paragraph 89 of Schedule 2 to ITEPA 2003 in relation to the plan, and

(d) not all the acquired shares have been awarded under the plan before the issue of that notice.

(2) The paying company is treated as receiving an amount equal to the relevant proportion of the deduction.

(3) The relevant proportion is the proportion that the number of the acquired shares not awarded bears to the total number of the acquired shares.

(4) The amount is treated as received when the paying company issues the plan termination notice.