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HMRC internal manual

Business Income Manual

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HM Revenue & Customs
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Specific deductions: employee share schemes: providing shares to employees: qualifying shares: requirements for relief

S1007, S1015 Corporation Tax Act 2009

For relief to be available, requirements must be satisfied relating to:

  • the kind of shares acquired,
  • the company whose shares are acquired,
  • the income tax position of the employee,
  • the business for the purposes of which the share options were granted or the share awards were made.

The first two requirements determine whether the shares acquired are ‘qualifying shares’, see BIM44285 onwards. In practice these are the main requirements in determining whether relief is available.

Income tax position of the employee

Guidance on the required Income Tax position of the employee acquiring the shares is at BIM44320. In practice there are very few circumstances in which this requirement will not be satisfied.

Business for purposes of which options or awards granted

The business for the purposes of which the share options were granted or share awards were made must be carried on by the employing company, and the employing company either must be chargeable to Corporation Tax on its profits from that business or would be so chargeable but for the exemption for foreign permanent establishments under S18A Corporation Tax Act 2009.

Guidance on the required business test is at BIM44305. In practice there are very few circumstances in which this requirement will not be satisfied.