Income and Corporation Taxes Act 1988

Withdrawal of deduction under paragraph 9 U.K.

10 (1) The Inland Revenue may by notice direct that the benefit of a deduction made under paragraph 9 is withdrawn where—

(a) fewer than 30 per cent of the shares acquired by virtue of the payment in respect of which the deduction is made have been awarded under the plan before the end of the period of 5 years beginning with the date of acquisition, or

(b) not all the shares acquired by virtue of that payment have been so awarded before the end of the period of 10 years beginning with that date.

(2) The effect of a direction under sub-paragraph (1)(a) or (b) is that the amount of the deduction is treated as a trading receipt of the company for the period of account in which the direction is given.

(3) However, where—

(a) the Inland Revenue give a direction under sub-paragraph (1)(a) or (b) in respect of any deduction, and

(b) at any time after the giving of the direction, all the shares acquired by virtue of the payment in respect of which the deduction was made are awarded under the plan,

a further deduction is allowed under this sub-paragraph to the company which made the payment.

(4) A deduction under sub-paragraph (3)—

(a) is of an amount equal to the amount of the payment referred to in that sub-paragraph, and

(b) must be made for the period of account in which sub-paragraph (3)(b) is first satisfied.

(5) No other deduction is allowed in respect of any amount for which a deduction has been made under sub-paragraph (3).

(6) Sub-paragraph (8) applies where—

(a) a deduction is made under paragraph 9 (deduction for contribution to plan trust) or sub-paragraph (3) in respect of a payment for the acquisition of shares, but

(b) shares are awarded under the plan to an individual at a time when the earnings from the required employment are not (or would not be if there were any) chargeable earnings.

(7) In sub-paragraph (6) “required employment” and “chargeable earnings”, in relation to an individual, have the same meanings as they have in paragraph 4(2) (cases in which no deduction is allowed).

(8) An amount equal to the appropriate proportion of the deduction is treated as a trading receipt of the company for the period of account in which the shares are so awarded.

(9) For the purposes of sub-paragraph (8), the appropriate proportion of the deduction is the proportion which the number of shares awarded to the individual bears to the total number of shares acquired by virtue of the payment.

(10) For the purposes of this paragraph, where shares are acquired by the trustees on different days, it shall be assumed that those acquired on an earlier day are awarded to employees under the plan before those acquired by the trustees on a later day.