What does section 1024 of the Corporation Tax Act 2009 do?

Section 1024 redirects corporation tax relief when a qualifying business is transferred within a corporate group during the option period. If the original employing company no longer carries on the business when shares are acquired, relief passes to the successor company that now operates the qualifying business.

What conditions must be met for section 1024 to apply?

Two conditions must be satisfied. First, all transfers of the qualifying business must be group transfers between companies in the same corporate group. Second, by the end of the option period when the employee acquires shares, substantially the whole qualifying business must be carried on by successor companies other than the original employer.

What happens if the qualifying business is transferred to multiple successor companies?

If the qualifying business is split across several successor companies within the group, those companies must nominate one of themselves to receive the corporation tax relief. The nominated company then steps into the shoes of the original employing company for the purposes of calculating and claiming the deduction under section 1021.

What is the option period for the purposes of section 1024?

The option period is the window of time beginning when the employee obtains the share option and ending when the employee acquires the shares. Only transfers of the qualifying business occurring within this specific window are caught by section 1024 for the purpose of redirecting corporation tax relief to successor companies.

Corporation Tax Act 2009 section 1024

Transfer of qualifying business by group transfers

Section 1024 deals with how corporation tax relief under Chapter 3 is redirected when the qualifying business is transferred within a group of companies during the period between an employee obtaining a share option and acquiring the shares.

Where substantially the whole of a qualifying business is transferred within a group during the option period (from option grant to share acquisition), relief is redirected from the original employing company to the successor company or companies
All transfers must be group transfers — that is, transfers between companies within the same corporate group as defined in section 1004(3)
By the end of the option period, the qualifying business must be carried on by one or more successor companies, none of which is the original employing company
If there are multiple successor companies, they must nominate one of themselves to receive the relief, and that nominated company is then treated as the employing company for the purposes of how the relief is given

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