Taxation (International and Other Provisions) Act 2010 section 425

Employee share acquisitions

Section 425 adjusts how a worldwide group's profit before tax is calculated for corporate interest restriction purposes when an alternative calculation election is in effect, by replacing the accounting treatment of employee share schemes with the actual corporation tax treatment of those schemes.

• When an alternative calculation election is in effect, the normal accounting figures for employee share scheme costs recognised in the group's financial statements are stripped out of the group's profit before tax.
• Instead, the profit before tax is reduced by an amount that, on a just and reasonable basis, reflects the corporation tax deductions and receipts arising under Parts 11 and 12 of the Corporation Tax Act 2009 in respect of employee share acquisitions.
• Employee share acquisition arrangements are defined as arrangements whose corporation tax treatment is governed by Part 11 of CTA 2009 (relief for particular employee share acquisition schemes) or Part 12 of CTA 2009 (other relief for employee share acquisitions).
• For the purposes of this adjustment, all members of the worldwide group are treated as if they are within the charge to UK corporation tax, ensuring the calculation applies consistently across the entire group.