Corporation Tax Act 2009 section 997

No deduction for expenses in providing dividend shares

Section 997 prevents companies from claiming a tax deduction for the cost of providing dividend shares to employees under a share incentive plan.

• No corporation tax deduction is allowed for expenses incurred in providing dividend shares under a Schedule 2 share incentive plan (SIP)
• Dividend shares are shares acquired by SIP trustees using reinvested cash dividends paid on plan shares already held on behalf of participating employees
• The restriction applies specifically to the cost of acquiring these dividend shares, not to the general running costs of the plan
• Running expenses of the share incentive plan may still be deductible under the separate rules in section 988