Corporation Tax Act 2009 section 1038A

Exclusion of deductions for share options: shares not acquired

Section 1038A restricts corporation tax deductions relating to employee share options where the shares are never actually acquired under those options.

• No corporation tax deduction is allowed for costs relating to a share option, or matters connected with it, unless the shares are actually acquired pursuant to that option.
• The restriction applies to options obtained by employees because of their employment, as well as replacement options connected with such options (for example, new options issued on a company takeover).
• Certain costs remain deductible regardless, including scheme set-up and administration costs, borrowing costs, and incidental acquisition expenses such as stamp duty and broker fees.
• Deductions are also preserved for amounts on which the employee is (or would have been) subject to an income tax charge under employment income tax rules.