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HMRC internal manual

Employment Related Securities Manual

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HM Revenue & Customs
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Employer Interface

Relief to employers for the costs of employee share schemes

General guidance on relief for the costs of employee share schemes can be found at BIM44000.

A variety of terms are used in connection with employee share schemes. There is a glossary of terms used in the guidance in the Business Income Manual at BIM44001.

Approved share Ownership plans

Guidance on the specific statutory deductions allowable under ICTA88/Sch4AA is at BIM44050 onwards. The same rules apply for accounting periods starting on or after 1 January 2003. They are not affected by either:

  • FA03/SCH23 (CT deductions for employee share acquisitions), or
  • FA03/SCH24 (restriction of deductions for EBT and other employee benefit contributions).

QUESTS:

Guidance on relief for shares provided under qualifying employee share ownership trusts (QUESTS) can be found at BIM44065.

FA03/Sch23

FA03/SCH23 gives a specific statutory corporation tax deduction, in computing the taxable profits of a business of whatever nature for accounting periods starting on or after 1 January 2003, for providing employees with shares which satisfy certain qualifying conditions (“qualifying shares”).

The statutory deduction applies on the same basis, whatever way the employing company chooses to structure and fund the employee share schemes from which its employees may benefit. It is irrelevant whether a trust is used in conjunction with a scheme, whether new shares are issued or whether existing shares are purchased in the market.

The statutory deduction overrides the accounting treatment. For periods starting on or after 1 January 2003 no other deduction for the cost of providing “qualifying shares” is allowable for any corporation tax purposes, either to the company entitled to the statutory deduction or to any other company.

Guidance on the application of FA03/Sch23 can be found at BIM44265 onwards.