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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Specific deductions: employee share schemes: providing shares to employees: overview

Deductions for providing shares to employees fall into the following categories:

  • Providing shares through Share Incentive Plans (SIPs), see BIM44251.
  • Providing shares (other than through a SIP) which meet the qualifying conditions for a statutory Corporation Tax deduction (referred to in this guidance as ‘qualifying shares’), see BIM44260.
  • Providing shares which are not qualifying shares (referred to in this guidance as ‘non-qualifying shares’), see BIM44450.

Qualifying shares

‘Qualifying shares’ for this purpose are those which meet the qualifying conditions for a statutory CT deduction. These are shares which give the employees a real stake in the company or group by which they are employed. Full details of the qualifying requirements are at BIM44285.

In practice it is reasonable to assume that shares provided under HMRC-approved schemes (see BIM44010) will be qualifying shares. The qualifying conditions in are very similar to those for shares which can be provided under HMRC-approved schemes.

Shares provided under unapproved schemes (see BIM44005) may also be qualifying shares.

Non-qualifying shares

The following are not qualifying shares:

  • Partly-paid shares.
  • Redeemable shares.
  • Preference shares.
  • Unlisted shares in a subsidiary company (unless its parent company is a listed and non-close company).
  • Shares in a company which is not sufficiently linked to the employing company at the date the employee acquires the shares, or at any earlier date on which the employee was given a right (such as a share option) to acquire the shares.