Income Tax (Earnings and Pensions) Act 2003 Schedule 2 paragraph 29

Prohibited shares

Paragraph 29 sets out which types of company shares are prohibited from being used as eligible shares in a share incentive plan, specifically targeting service companies and their controlling parent companies.

• Shares in a service company — one whose business consists substantially of supplying its employees' services — cannot be eligible shares in a share incentive plan.
• Shares in a parent company that controls a service company are also prohibited, where that parent is itself controlled by the same person or persons who control the service company.
• A company is treated as "associated" with another if both are under the control of the same person or persons, and a partnership is treated as a single person for these purposes.
• Whether a person controls a company is determined under sections 450 and 451 of the Corporation Tax Act 2010.