Part 11Relief for particular employee share acquisition schemes
Chapter 1Share incentive plans
Introductory
983Overview of Chapter
1
This Chapter is about deductions relating to approved share incentive plans.
2
Section 984 relates to the interpretation of this Chapter.
3
Sections 985 and 986 set out—
a
how effect is given to deductions allowed under this Chapter, and
b
how amounts treated as received under this Chapter are dealt with.
4
Sections 987 and 988 deal with deductions allowed for the costs of setting up plans and their running expenses.
5
Sections 989 to 993 deal with deductions allowed for payments used to acquire shares for plan trusts.
6
Sections 994 to 997 deal with other deductions relating to free shares, matching shares, partnership shares and dividend shares.
7
Section 998 deals with the withdrawal of deductions if approval for a plan is withdrawn.
984Chapter to form part of SIP code etc
1
This Chapter forms part of the SIP code (see section 488 of ITEPA 2003).
2
Therefore expressions used in this Chapter and contained in the index at the end of Schedule 2 to ITEPA 2003 have the meaning indicated by that index.
3
Subsection (4) applies if any of a participant's plan shares are forfeited.
4
For the purposes of this Chapter the shares are treated as acquired by the trustees—
a
when the forfeiture occurs, and
b
for no consideration.
Deductions and receipts: general
985References to a deduction being allowed to a company
1
References in this Chapter to a deduction being allowed to a company are to be read in accordance with this section (and references to a deduction being made are to be read in that light).
2
If a deduction is allowed to a company, the deduction is made in calculating for corporation tax purposes the profits of a trade or property business carried on by the company.
This is subject to subsections (3) and (4).
3
If the company is a company with investment business (as defined in section 1218), the amount of the deduction is treated as expenses of management of the company.
But this subsection does not apply if the company's business is a property business (in which case subsection (2) applies instead).
4
If the company is a company in relation to which section 76 of ICTA (expenses of insurance companies) applies, the amount of the deduction is treated as expenses payable falling to be brought into account at Step 1 in subsection (7) of that section.
5
So far as this Chapter provides for a deduction to be allowed, it has effect despite section 53 (no deduction for items of a capital nature in calculating trading profits), including that section as applied by section 210 to the calculation of profits of a property business.
986Treatment of receipts under Chapter
1
This section applies if a company is treated under this Chapter as receiving an amount.
2
If the company is carrying on a trade or property business in respect of which it is within the charge to corporation tax, the amount is treated as a receipt of that trade or business.
3
If the company has permanently ceased to carry on a trade or property business in respect of which it was within the charge to corporation tax, the amount is treated as a post-cessation receipt of that trade or business (see Chapter 15 of Part 3).
4
Otherwise, the amount is treated as a receipt chargeable under the charge to corporation tax on income.
Deductions relating to setting up and running costs
987Deduction 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.
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 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.
988Deductions for running expenses of an approved share incentive plan
1
This section applies if a company incurs expenses in contributing to the 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 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—
i
fees,
ii
commission,
iii
stamp duty,
iv
stamp duty reserve tax, and
v
other incidental costs similar to any mentioned in sub-paragraphs (i) to (iv).
Withdrawal of approval for a plan
998Withdrawal of deductions if approval for share incentive plan withdrawn
1
This section applies if—
a
a deduction is made by a company under section 989, 991, 994 or 995 in relation to an approved share incentive plan, and
b
the approval for the plan is withdrawn.
2
An officer of Revenue and Customs may by notice direct that the deduction is withdrawn.
3
If a direction is made, the company is treated as receiving an amount equal to the deduction.
4
The amount is treated as received when the direction is made.