Corporation Tax Act 2009 section 1038

Exclusion of other deductions

Section 1038 prevents companies from claiming any corporation tax deduction outside this Part of the Act for the cost of providing shares (or granting options over shares) to employees, where relief under this Part is or could be available.

• Where relief under this Part is available (or would be available but for the employee's income tax position), no other corporation tax deduction may be claimed in respect of providing the shares or granting the related option, regardless of the accounting period in which the deduction would otherwise fall.
• Where shares are acquired under an employee share scheme, the blocked deductions specifically include any amounts paid by the employing company in connection with the employee's participation in the scheme.
• Certain running costs remain deductible despite this restriction: expenses of setting up and administering the scheme, borrowing costs for scheme purposes, and incidental acquisition costs such as fees, commission, stamp duty and stamp duty reserve tax.
• Where convertible securities give rise to relief under Chapter 5 of this Part, the restriction does not prevent deductions relating to the provision of those convertible securities themselves.