How is corporation tax relief calculated under section 1010 when shares are neither restricted nor convertible?

Under section 1010 of the Corporation Tax Act 2009, the relief equals the market value of the shares at the date of acquisition minus any consideration paid by any person to acquire them. This deduction reflects the economic cost of providing shares to an employee, and may be subject to further reduction under section 1012.

Does an employee's performance of work duties count as consideration for shares under section 1010?

No. Under section 1010, the performance of employment duties is not treated as consideration given for the shares. This means the relief cannot be reduced by arguing the employee effectively paid for the shares through their work. Only actual payments or things of value given specifically for the acquisition count as consideration.

How is mixed consideration treated when calculating relief under section 1010?

Where consideration relates partly to the share acquisition and partly to other matters, a just and reasonable apportionment must be made. Only the portion of the consideration attributable to the share acquisition is deducted from the market value when calculating the relief. The resulting amount may then be further reduced under section 1012.

Can the relief calculated under section 1010 be reduced further?

Yes. The amount of corporation tax relief calculated under section 1010 of the Corporation Tax Act 2009 may be subject to further reduction under the rules in section 1012. Employers should therefore check section 1012 to determine whether any additional limitations apply to the deduction available for shares provided to employees.

Corporation Tax Act 2009 section 1010

Calculation of relief if shares are neither restricted nor convertible

Section 1010 explains how to calculate the amount of corporation tax relief available when an employee acquires shares that are neither restricted shares nor convertible shares.

Relief equals the market value of the shares at the date of acquisition, minus any consideration paid by any person to acquire them
The performance of employment duties does not count as consideration given for the shares
Where consideration relates partly to the share acquisition and partly to other matters, a just and reasonable apportionment must be made
The amount of relief calculated under this section may be subject to further reduction under section 1012

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