Part 11

Relief for particular employee share acquisition schemes
Chapter 1

Share incentive plans

Deductions relating to payments used to acquire shares

Deduction for contribution to plan trust
989
1
A deduction is allowed to a company (“the paying company”) if—
a
the paying company makes a payment to the trustees of a Schedule 2 share incentive plan to enable them to acquire shares in the paying company or a company that controls it,
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).
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).
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)
Pt. 11 applied by 2010 c. 8, s. 425(1) (as inserted (with effect in accordance with Sch. 5 para. 25(1)-(3) of the amending Act) by Finance (No. 2) Act 2017 (c. 32), Sch. 5 para. 1 (with Sch. 5 paras. 27, 32-34))
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)
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)