Corporation Tax Act 2009 section 1019

Calculation of relief if shares are restricted or convertible

Section 1019 explains how to calculate the corporation tax relief available to a company when an employee acquires restricted shares, convertible shares, or shares that are both restricted and convertible, through the exercise of a share option.

• The relief amount is based on the amount that counts as employment income for the employee when the shares are acquired, broadly being the market value of the shares less any consideration paid and acquisition expenses
• Where the option is a qualifying EMI option, the relief is calculated ignoring the EMI code's special rules, ensuring the company gets a deduction based on market value at acquisition rather than being limited to the discount amount the employee is taxed on
• If shares are both restricted and convertible, the company claims the higher of the two separately calculated relief amounts — one calculated under the restricted shares rules and the other under the convertible shares rules
• If the employee has died before the shares are acquired, the relief is calculated as though the employee were still alive, so the company does not lose its entitlement to relief