Corporation Tax Act 2009

Deductions relating to provision of certain types of shares

994 Deduction for providing free or matching shares

(1) This section applies if, under an approved share incentive plan, shares are awarded to employees as free or matching shares because of their employment with a company (“the employing company”).

(2) A deduction is allowed to the employing company for the period of account in which the shares are awarded to the employees.

(3) The amount of the deduction is an amount equal to the market value of the shares awarded to the employees.

(4) But if the shares are awarded to the employees under a group plan, the amount of the deduction is an amount equal to the relevant proportion of the total market value of the shares included in the award.

(5) The relevant proportion is the proportion that the number of shares awarded to the employees bears to the total number of shares included in the award.

(6) For the purposes of this section—

(a) the market value of shares is their market value when they are acquired by the trustees of the plan trust, and

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

(7) No deduction, other than one under this section, is allowed to the employing company or any associated company in relation to the provision of the shares awarded to the employees.

(8) But subsection (7)—

(a) does not prevent a deduction being allowed under section 987 in relation to expenses incurred by a company in setting up a share incentive plan, and

(b) is subject to section 988.

(9) If the shares are awarded to the employees because of their employment with two or more companies, only one of those companies can make a deduction under this section in relation to the award.

(10) This section is subject to section 996.

995 Deduction for additional expense in providing partnership shares

(1) This section applies if—

(a) under an approved share incentive plan, partnership shares are awarded to employees because of their employment with a company (“the employing company”), and

(b) the market value of the shares when they were acquired by the trustees of the plan trust exceeds the partnership share money paid by the participants to acquire those shares.

(2) A deduction is allowed to the employing company for the period of account in which the shares are awarded.

(3) The amount of the deduction is an amount equal to the excess mentioned in subsection (1)(b).

(4) No deduction, other than one under this section, is allowed to the employing company or any associated company in relation to the provision of the shares.

(5) But subsection (4)—

(a) does not prevent a deduction being allowed under section 987 in relation to expenses incurred by a company in setting up a share incentive plan, and

(b) is subject to section 988.

(6) If the shares are awarded to the employees because of their employment with two or more companies, only one of those companies may make a deduction under this section in relation to the award.

(7) This section is subject to section 996.

996 Shares excluded from sections 994 and 995

(1) No deduction is allowed under section 994 or 995 in relation to shares to which any of exclusions 1 to 5 applies.

(2) Exclusion 1 applies to shares awarded to an excluded employee.

(3) For the purposes of subsection (2) an employee is excluded if, at the time the shares are awarded to the employee, the earnings from the employee’s employment with the employing company are not (or would not be if there were any) chargeable 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.

(4) Exclusion 2 applies to shares in a company that are liable to depreciate substantially in value for reasons that do not apply generally to shares in that company.

(5) Exclusion 3 applies to shares in relation to which a deduction has been made by the employing company or an associated company in relation to the provision of the shares for the plan trust or for another trust.

(6) For the purposes of subsection (5)—

(a) it does not matter upon what basis that deduction was made or what the nature or purpose of the other trust is, and

(b) if the trustees of the plan trust acquire shares on different days, in determining whether the same shares have been provided to more than one trust, assume that shares acquired on an earlier day are awarded under the plan trust before those acquired on a later day.

(7) Exclusion 4 applies to shares acquired by the trustees of the plan trust as a result of a payment in relation to which a deduction is made under section 989 or 991.

(8) Exclusion 5 applies to shares awarded after having been forfeited by a participant.

997 No deduction for expenses in providing dividend shares

(1) No deduction is allowed to a company for expenses in providing shares that are acquired on behalf of employees under an approved share incentive plan as dividend shares.

(2) This is subject to section 988.