Corporation Tax Bill

House of Commons

Session 2008 - 09
Internet Publications
Other Bills before Parliament

Corporation Tax Bill

Corporation Tax Bill
Part 11 — Relief for particular employee share acquisition schemes
Chapter 1 — Share incentive plans
465

Deductions relating to setting up and running costs
987
Deduction for costs of setting up an approved share incentive plan
(1)
This section applies if a company incurs expenses in setting up a share
incentive plan that is approved by an officer of Revenue and Customs.
(2)
A deduction for the expenses is allowed to the company.
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(3)
But no deduction is allowed under this section if before the approval—
(a)
an employee acquires rights under the plan, or
(b)
the trustees acquire shares for the purposes of the plan.
(4)
If the approval is given more than 9 months after the end of the period of
account in which the expenses are incurred, the deduction is allowed for the
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period of account in which the approval is given.
(5)
No other deduction is allowed in respect of expenses for which a deduction is
allowed under this section.
988
Deductions for running expenses of an approved share incentive plan
(1)
This section applies if a company incurs expenses in contributing to the
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expenses of the trustees in running an approved share incentive plan.
(2)
This Chapter does not affect the deductions that, apart from this Chapter, are
allowed to the company in relation to those expenses incurred by it.
(3)
For the purposes of this section expenses of the trustees in running an
approved share incentive plan do not include expenses incurred in acquiring
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shares for the purposes of the plan other than expenses within subsection (4).
(4)
The expenses within this subsection are—
(a)
interest paid on money borrowed by the trustees for the purpose of
acquiring the shares, and
(b)
any of the following—
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(i)
fees,
(ii)
commission,
(iii)
stamp duty,
(iv)
stamp duty reserve tax, and
(v)
other incidental costs similar to any mentioned in sub-
30
paragraphs (i) to (iv).
Deductions relating to payments used to acquire shares
989
Deduction for contribution to plan trust
(1)
A deduction is allowed to a company (“the paying company”) if—
(a)
the paying company makes a payment to the trustees of an approved
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share incentive plan to enable them to acquire shares in the paying
company or a company that controls it,
(b)
the trustees apply the payment to acquire such shares,
(c)
the trustees do not acquire the shares from a company, and

Corporation Tax Bill
Part 11 — Relief for particular employee share acquisition schemes
Chapter 1 — Share incentive plans
466

(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
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(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.
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(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.
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(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).
(7)
In this section “the interim period” means the period of 12 months beginning
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with the date on which the trustees acquire the shares as mentioned in
subsection (1)(b).
990
Withdrawal of deduction under section 989
(1)
If—
(a)
a deduction is made under section 989, and
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(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
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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
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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
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(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.

Corporation Tax Bill
Part 11 — Relief for particular employee share acquisition schemes
Chapter 1 — Share incentive plans
467

991
Another deduction to be allowed if all acquired shares are awarded
(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.
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(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).
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992
Award of shares to excluded employee
(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.
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(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.
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(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
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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
(1)
This section applies if—
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(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
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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.
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Corporation Tax Bill
Part 11 — Relief for particular employee share acquisition schemes
Chapter 1 — Share incentive plans
468

(4)
The amount is treated as received when the paying company issues the plan
termination notice.
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
5
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
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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
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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
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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.
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(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.
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(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
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(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
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of the plan trust exceeds the partnership share money paid by the
participants to acquire those shares.

Corporation Tax Bill
Part 11 — Relief for particular employee share acquisition schemes
Chapter 1 — Share incentive plans
469

(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
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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
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(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.
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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
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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.
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(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
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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
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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
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or 991.
(8)
Exclusion 5 applies to shares awarded after having been forfeited by a
participant.