Corporation tax relief and employee share schemes
Produced in partnership with Laura Gould
Corporation tax relief and employee share schemes

The following Share Incentives practice note Produced in partnership with Laura Gould provides comprehensive and up to date legal information covering:

  • Corporation tax relief and employee share schemes
  • Corporation tax deduction for costs incurred in setting up and operating employee share schemes
  • Specific legislative provisions
  • General provisions
  • Cash cancellation of shares
  • Statutory corporation tax deduction under Part 12
  • Conditions for relief
  • The employment
  • The business
  • The shares acquired
  • More...

Corporation tax deduction for costs incurred in setting up and operating employee share schemes

Costs incurred in setting up and operating an employees’ share scheme may be deductible for corporation tax (CT) purposes either under a specific legislative provision or under the general provisions dealing with corporate expenditure. The deductibility of these costs will depend upon the type of employee share scheme the company operates.

For further more general details on corporation tax, including details of the rates and applicability, see Practice Note: What is the basis of corporation tax?

Specific legislative provisions

Share incentive plans (SIPs)

A share incentive plan (SIP) is an employee share scheme arrangement that allows employees to acquire shares in their employer (or their employer's parent company) that are held in a SIP trust for a period of time. For further information on SIPs, see Practice Note: What is a share incentive plan?

An employer company is allowed a deduction for CT purposes in respect of

  1. expenses incurred in setting up a Schedule 2 SIP

  2. contributions to the SIP trustees’ expenses in running a Schedule 2 SIP

  3. contributions to SIP trustees to acquire shares where the SIP trust holds at least 10% of the share capital of the relevant company

  4. any free or matching shares awarded to its employees, and

  5. the acquisition of partnership shares where the market value of shares acquired by the SIP

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