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HMRC internal manual

Business Income Manual

Specific deductions: employee share schemes: costs of setting up schemes

S987, S999, S1000 Corporation Tax Act 2009 (CTA 2009)

The costs of setting up employee share schemes and employee share ownership trusts are capital expenditure and not an allowable deduction in computing taxable profits under ordinary principles. This includes the initial amount settled to bring a trust into existence.

However, specific statutory deductions are given for the costs of setting up the following ‘approved’ schemes:

  • Share Incentive Plans (SIP) - S987 CTA 2009.
  • Savings-related share option schemes (SAYE) - S999 CTA 2009.
  • Company Share Option Plans (CSOP) - S999 CTA 2009.

These specific statutory deductions are given for the accounting period in which the expenditure is incurred if the Relevant Date is within nine months after the end of that period, otherwise it is given instead in the period in which the Relevant Date falls. The Relevant Date is the date the scheme organiser provides HMRC with a self-certification declaration confirming that the scheme satisifies the necessary conditions for a Schedule 2 SIP, or the date of the first award if earlier, see etassum11300 

Although the spefic statutory deduction for contributions to a qualifying employee share ownership trust (QUEST) was abolished from 2003, there remains a specific statutory deduction for the costs of setting up a QUEST given by S1000. In practice it is unlikely that a new QUEST would now be set up.