Commentary

B4.191 Transfer pricing and employee share schemes

Business tax
Business tax | Commentary

B4.191 Transfer pricing and employee share schemes

Business tax | Commentary

B4.191 Transfer pricing and employee share schemes

It is common for parent companies to run share option schemes and make them available to employees of their subsidiary companies (often levying a charge to the subsidiary for this). The interaction of the transfer pricing regime with such charges is set out below.

There are typically two aspects to payments made in relation to share option schemes:

  1.  

    •     a charge for the share award, and

  2.  

    •     a charge for administration associated with the employee share plan

The price for these two components should reflect an arm's length price in line with other services provided intra-group, see B4.147.

This was illustrated by Waterloo plc and others v HMRC1. In this case the appellant company devised, set up, funded and operated a facility whereby the employees of its overseas subsidiary companies were

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