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HMRC internal manual

Business Income Manual

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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, except where the scheme is approved more than nine months after the end of that period. In that case the expenditure should be disallowed for the period of payment, and allowed instead in the period in which the scheme is finally approved. If a scheme has been used to grant options or transfer shares before the date of approval, the costs of setting up the scheme are not allowable.

The Employee Shares and Securities Unit deals with the approval of schemes and notifies offices dealing with participating companies when schemes are approved.

A specific statutory deduction for the costs of setting up a qualifying employee share ownership trust (QUEST) is given by S1000. In practice it is unlikely that a new QUEST would now be set up.