Corporation Tax Act 2009 section 994

Deduction for providing free or matching shares

Section 994 provides the rules for how an employing company can claim a corporation tax deduction when free or matching shares are awarded to employees under a Schedule 2 share incentive plan (SIP).

• The employing company may deduct the market value of free or matching shares awarded to employees, taken at the date the plan trustees acquired those shares, in the period of account when the shares are awarded.
• Where shares are awarded under a group plan, the deduction is limited to the company's proportionate share of the total market value of all shares included in the award, based on the number of shares awarded to its employees relative to the total.
• No other deduction is available to the employing company or any associated company for providing the awarded shares, although separate deductions for plan set-up costs and running expenses are preserved.
• Where employees receive shares because of their employment with more than one company, only one of those companies may claim the deduction for that award.