Corporation Tax Act 2009 section 988

Deductions for running expenses of a Schedule 2 share incentive plan

Section 988 clarifies that a company's contributions towards the day-to-day running costs of a Schedule 2 share incentive plan (SIP) are not blocked from being deducted by the special restrictive rules elsewhere in this Chapter.

• Where a company contributes to the trustees' expenses of running a Schedule 2 SIP, any deductions that would normally be available under general tax principles are preserved and not overridden by the restrictive rules in this Chapter.
• The section does not itself create a new deduction — it simply ensures that the prohibitive rules in the Chapter (such as those in section 994(7)) do not prevent a deduction that would otherwise be allowable on first principles.
• Running expenses do not include the cost of actually acquiring shares for the plan, except for certain incidental costs: interest on money borrowed to acquire the shares, fees, commission, stamp duty, stamp duty reserve tax, and other similar incidental costs.
• Because the SIP is operated for the benefit of employees, the running costs contributed by the employing company would typically qualify as a normal deductible business expense when calculating the company's taxable profits.