Finance Act 2013

40Corporation tax relief for employee share acquisitions etcU.K.

(1)Chapter 6 of Part 12 of CTA 2009 (relief for employee share acquisitions: relationship between relief under Part 12 and other reliefs) is amended as follows.

(2)For section 1038 substitute—

“1038Exclusion of other deductions

(1)Subsection (2) applies if relief is or, apart from condition 2 in section 1009(1), would be available under this Part.

For this purpose, it does not matter if the amount of the relief is or would be calculated as nil.

(2)Except as provided for by this Part, for the purpose of calculating any company's profits for corporation tax purposes for any accounting period, no deduction is allowed—

(a)in relation to the provision of the shares or to any matter connected with the provision of the shares, or

(b)so far as not covered by paragraph (a) in a case in which the shares are acquired pursuant to an option, in relation to the option or to any matter connected with the option.

(3)In a case in which section 1022 has applied, in subsection (2)(b) references to the option cover the new option and any relevant earlier qualifying option.

(4)For the purposes of subsection (2) it does not matter if the accounting period in question falls wholly before or after the time at which the shares are acquired.

(5)In a case in which the shares are acquired under an employee share scheme, the deductions disallowed by subsection (2) include (in particular) deductions for amounts paid or payable by the employing company in relation to the participation of the employee in the scheme.

(6)But subsection (2) does not disallow deductions for—

(a)expenses incurred in setting up the scheme,

(b)expenses incurred in meeting, or contributing to, the costs of administering the scheme,

(c)the costs of borrowing for the purposes of the scheme, or

(d)fees, commission, stamp duty, stamp duty reserve tax, and similar incidental expenses of acquiring the shares.

(7)“Employee share scheme” means a scheme or arrangement for enabling shares to be acquired because of persons' employment.

(8)In a case in which relief is or, apart from condition 2 in section 1009(1), would be available under Chapter 5 by virtue of section 1030(2), subsection (2) does not disallow deductions in relation to the provision of the convertible securities.”

(3)After section 1038 insert—

“1038AExclusion of deductions for share options: shares not acquired

(1)Subsection (2) applies if—

(a)a person obtains an option to acquire shares and the requirements of section 1015(1)(a) to (c) are met in relation to the obtaining of the option, or

(b)so far as not covered by paragraph (a), a person obtains an option to acquire shares and the obtaining of the option is connected with an option previously obtained in a case covered by paragraph (a) or this paragraph.

(2)For the purpose of calculating any company's profits for corporation tax purposes for any accounting period, no deduction is allowed in relation to—

(a)the option, or

(b)any matter connected with the option,

unless the shares are acquired pursuant to the option.

(3)For the purposes of subsection (2) it does not matter if the accounting period in question falls wholly before or after the time at which the option is obtained.

(4)In a case in which the shares would be acquired under an employee share scheme, the deductions disallowed by subsection (2) include (in particular) deductions for amounts paid or payable by the employing company in relation to the participation of the employee in the scheme.

(5)But subsection (2) does not disallow deductions for—

(a)expenses incurred in setting up the scheme,

(b)expenses incurred in meeting, or contributing to, the costs of administering the scheme,

(c)the costs of borrowing for the purposes of the scheme, or

(d)fees, commission, stamp duty, stamp duty reserve tax, and similar incidental expenses of acquiring the shares.

(6)“Employee share scheme” means a scheme or arrangement for enabling shares to be acquired because of persons' employment.

(7)Subsection (2) does not disallow deductions for—

(a)amounts on which the employee is subject to a charge under ITEPA 2003,

(b)amounts on which the employee would have been subject to a charge under ITEPA 2003 had the employee been a UK employee at all material times, or

(c)if the employee has died, amounts on which the employee would have been subject to a charge under ITEPA 2003 had the employee been alive.

(8)“UK employee” is to be read in accordance with section 1017(4).”

(4)For the purposes of the following subsections—

• “pre-20 March 2013 relevant accounting period” means an accounting period which begins before 20 March 2013 but ends on or after that date, and

• “relevant accounting period” means an accounting period which ends on or after 20 March 2013.

(5)The amendment made by subsection (2) above has effect for the purpose of disallowing deductions for relevant accounting periods.

For this purpose, it does not matter if the acquisition of shares which gives rise, or would give rise, to the relief under Part 12 of CTA 2009 occurs before a company's first relevant accounting period.

(6)But the amendment made by subsection (2) above has no effect for the purpose of disallowing a deduction for a pre-20 March 2013 relevant accounting period where the acquisition of shares which gives rise, or would give rise, to the relief under Part 12 of CTA 2009 occurs before 20 March 2013.

(7)The amendment made by subsection (3) above has effect for the purpose of disallowing deductions for relevant accounting periods.

For this purpose, it does not matter if the option is obtained before a company's first relevant accounting period.

(8)But the amendment made by subsection (3) above has no effect for the purpose of disallowing a deduction for a pre-20 March 2013 relevant accounting period where—

(a)the option is obtained before 20 March 2013, and

(b)before that date, an event (for example, the lapse or cancellation of the option) occurs in consequence of which the shares cannot be acquired pursuant to the option.