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Corporation Tax Act 2009

Type Public General Act

Publication 2009-03-26

Last updated 2025-04-01

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(4) If different rates apply to different parts of that income, each of those rates is the applicable rate that applies to the corresponding part of the income to which the company's share of the residuary income of the estate relates.

(5) For the purposes of this section, if there is more than one person with an absolute interest in the residue of the estate, such apportionments of parts of the aggregate income of the estate bearing income tax at different rates are to be made as are just and reasonable for their different interests.

(6) Section 650(1) of ITTOIA 2005 (absolute interests) applies for the purposes of subsection (5) in the case of any person who is not a company chargeable to corporation tax.

Successive interests

Introduction

953

(1) Sections 954 to 959 relate to cases where two or more interests in the whole or part of the residue of an estate are held successively during the administration period by different persons.

(2) For the purposes of this section and those sections, two interests are held successively even where one is not held immediately before or after the other.

(3) It is assumed for the purposes of those sections—

(a) that each of the persons holding the interests in question is a company within the charge to corporation tax (but without prejudice to the references to interests ceasing otherwise than by death), and

(b) that in the case of a person who is not a company the person's accounting periods correspond with tax years.

Successive absolute interests

954

(1) This section applies if two or more absolute interests in the whole or part of the residue of an estate are held successively during the administration period by different persons.

(2) In determining whether a company with a later such interest (“the later holder”) has an assumed income entitlement in respect of that interest and, if so, its amount—

(a) the later holder's share of the residuary income of the estate in respect of that interest for any accounting period is to be treated as including the share of any person with a previous such interest (“a previous holder”), and

(b) the basic amounts relating to the later holder's interest are to be treated as including the basic amounts relating to any previous such interest.

(3) In applying subsection (2), all determinations under that subsection or section 955(2) that fall to be made in relation to a person with an earlier interest are to be made before determinations under those provisions relating to a person with a later interest.

(4) A company which is a previous holder in the final accounting period is to be taxed for that period, in relation to the interest as to which that company is a previous holder, as if that period were not the final accounting period, and the later holder's assumed income entitlement is to be calculated accordingly (or, where the previous holder is not a company, having regard to the application of section 671(4) of ITTOIA 2005 to the previous holder).

(5) The calculation under section 951(1)(a) and (b) (amount of reduction in the share of the residuary income of the company with an absolute interest at the end of the administration period) is to be made by reference to all the absolute interests taken together.

(6) If the amount resulting from that calculation is greater than the total amount of the reductions which can be made under section 951(2) and (3), the share of the residuary income of the estate of the last previous holder of the interest for the last accounting period in which that last holder had that interest is to be reduced, and so on.

(7) But if subsection (6) applies in a case where the last previous holder or any earlier previous holder is not a company, in applying that subsection regard must be had to the application of section 671(6) of ITTOIA 2005 to the previous holder.

Assumed income entitlement of holder of absolute interest following limited interest

955

(1) This section applies if—

(a) two or more interests in the whole or part of the residue of an estate are held successively during the administration period by different persons,

(b) each later interest arises or is created on the cessation of the previous interest otherwise than by death,

(d) at least one of the interests preceding that interest is a limited interest.

(2) Rules A and B apply to determine in relation to such an absolute interest—

(a) whether the company with the interest has an assumed income entitlement in respect of the interest, and

(b) if so, its amount.

(3) Rule A is that the company's share of the residuary income of the estate in respect of the absolute interest for any accounting period is treated as including any amount which would be included in it if—

(a) the interest had subsisted throughout the period when any such limited interest subsisted, and

(b) no such limited interest had ever subsisted.

(4) Rule B is that the basic amounts relating to the absolute interest are treated as including the basic amounts relating to any such limited interest.

Payments in respect of limited interests followed by absolute interests

956

(1) This section applies if—

(a) two or more interests in the whole or part of the residue of an estate are held successively during the administration period by different persons,

(b) each later interest arises or is created on the cessation of the previous interest otherwise than by death,

(d) at least one of the interests preceding that interest is a limited interest.

(2) A sum to which a company (“C”) with such an absolute interest is entitled in respect of any such limited interest which is paid while C has the absolute interest is treated as paid in respect of the absolute interest (and not the limited interest).

(3) Subsection (4) applies if—

(a) C's absolute interest ceases during the administration period, and

(b) a sum to which C is entitled in respect of any such limited interest—

(i) is paid after the absolute interest ceases but before the end of the administration period, or

(ii) remains payable at the end of it.

(4) This Chapter applies as respects any such sum as if the limited interest had continued to subsist while that absolute interest subsisted and had been held by C.

(5) Subsection (4) is subject to subsection (6).

(6) For the purposes only of section 951 (reduction in share of residuary income of estate), any such sum is treated as paid or payable in respect of the absolute interest.

Holders of limited interests

957

(1) This section applies if—

(a) two or more interests in the whole or part of the residue of an estate are held successively during the administration period by different persons,

(b) the earlier or, if there are more than two, the earliest of the interests is a limited interest, and

(2) Income is treated as arising from a limited interest in the whole or part of the residue of the estate in an accounting period in cases A, B and C.

(3) Case A is where—

(a) one of the successive interests subsists at the beginning of the accounting period of a company which has or has had one of the interests which is a limited interest (the “limited holder”),

(b) a sum is paid in respect of one of the interests in that period and before the end of the administration period, and

(4) Case B is where—

(a) the accounting period of a limited holder is the final accounting period,

(b) one of the successive interests subsists at the beginning of that period,

(d) the limited holder is entitled to receive the payment.

(5) Case C is where—

(a) the accounting period of a limited holder is a period before the final accounting period,

(b) the last of the successive interests ceases in the accounting period,

(i) paid in respect of one of the interests in a later accounting period but before the end of the administration period, or

(ii) remains payable in respect of it at the end of the administration period, and

(d) the limited holder is entitled to receive the payment.

Basic amount of estate income: successive limited interests

958

The basic amount of estate income relating to a limited interest within section 957 for an accounting period is the total of the sums within section 957(3)(b), (4)(c) and (5)(c) for that period.

Apportionments

959

(1) Such apportionments as are just and reasonable are to be made for the purposes of this Chapter if—

(a) the part of a residuary estate in which an interest within any of the provisions specified in subsection (2) subsists does not wholly correspond with the part in which another such interest held successively subsists, or

(b) one of those interests is in the whole of the residuary estate and the other is only in part of it.

(2) The provisions are—

section 954 (successive absolute interests),

section 955 (successive interests: assumed income entitlement of holder of absolute interest following limited interest),

section 956 (successive interests: payments in respect of limited interests followed by absolute interests),

section 957 (successive interests: holders of limited interest) and,

section 958 (basic amount of estate income: successive limited interests).

Relief where foreign estates have borne UK income tax

Relief in respect of tax relating to absolute interests

960

(1) This section applies if—

(a) United Kingdom corporation tax has been charged on a company for an accounting period on estate income treated as arising from an estate under section 937 (estate income: absolute interests in residue),

(b) the estate is a foreign estate in relation to the relevant tax year, and

(c) United Kingdom income tax has already been borne by part of the aggregate income of the estate for the relevant tax year.

(2) If the company makes a claim under this section, the corporation tax charged on the company on that estate income is to be reduced by an amount equal to—

$$T×AB$where—T is the corporation tax charged on the company,A is so much of the aggregate income of the estate as has already borne United Kingdom income tax for the relevant tax year, andB is the aggregate income of the estate for the relevant tax year.$

Relief in respect of tax relating to limited or discretionary interests

961

(1) This section applies if—

(a) United Kingdom corporation tax has been charged on a company for an accounting period on estate income from an estate treated as arising under—

(i) section 939 (estate income: limited interests in residue), or

(ii) section 940 (estate income: discretionary interests in residue),

(b) the estate is a foreign estate in relation to the relevant tax year, and

(c) United Kingdom income tax has already been borne by part of the aggregate income of the estate for the relevant tax year.

(2) If the company makes a claim under this section, the corporation tax charged on the company on that estate income is to be reduced by an amount equal to—

$$T×A-CB-C$where—T is the corporation tax charged on the company,A is so much of the aggregate income of the estate as has already borne United Kingdom income tax for the relevant tax year,B is the aggregate income of the estate for the relevant tax year, andC is the amount of United Kingdom income tax already borne by the aggregate income of the estate for the relevant tax year.$

General

Income from which basic amounts are treated as paid

962

(1) The part of the aggregate income of the estate from which a basic amount is treated as paid is determined by applying assumptions A and B in that order.

(2) Assumption A is that if there are different persons with interests in the residue of the estate, payments in respect of their basic amounts are paid out of the different parts of the aggregate income of the estate in such proportions as are just and reasonable for their different interests.

(3) Assumption B is that payments are made from those parts in descending order, starting with the income bearing income tax at the highest rate and ending with the income bearing income tax at the lowest rate (subject to subsection (3A)).

(3A) For the purposes of assumption B, where those parts include—

(a) income bearing income tax at 0% by virtue of section 963(1A), and

(b) other income bearing income tax at 0%,

payments are to be made from income within paragraph (a) after income within paragraph (b).

(4) If some, but not all, of the aggregate income of the estate is income within section 963, assumption C is applied before assumptions A and B.

(5) Assumption C is that the basic amount is paid from income that is not within section 963 before it is paid from income within that section.

(6) Assumptions A and B then apply—

(a) first to determine the part of the income not within that section from which the basic amount is paid, and

(b) then to determine the part of the income within that section from which the basic amount is paid.

Income treated as bearing income tax

963

(1) This section has effect for the purposes of—

section 946 (the applicable rate for grossing up basic amounts of estate income),

section 952 (applicable rate for determining assumed income entitlement (UK estates)), ...

section 962 (income from which basic amounts are treated as paid) , and

section 962A (income from which sums within section 951(1)(b) are treated as paid).

(1A) If, in the case of a UK estate, the aggregate income of the estate for a tax year is equal to or less than the de minimis estates amount (within the meaning of section 24B of ITA 2007), the aggregate income of the estate for that tax year is treated as bearing income tax at 0%.

(2) If—

(a) subsection (1A)does not apply to treat the aggregate income of the estate for a tax year as bearing income tax at 0%, and

(b) the aggregate income of the estate for that tax year includes a sum within subsection (3), (3A) or (4),

the sum is treated as bearing income tax at the rate specified for it in that subsection.

(3) The following sums are treated as bearing income tax at the dividend ordinary rate—

(a) a sum charged under Chapter 3 of Part 4 of ITTOIA 2005 (dividends etc. from UK resident companies etc.), ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3A) A sum that is part of the aggregate income of the estate because of falling within section 947(2)(c) (stock dividends) or (d) (release of loans to participator in close company: loans and advances to persons who die) is treated as bearing income tax at 0%.

(4) A sum that is part of the aggregate income of the estate because of falling within section 947(2)(e) (gains from life insurance contracts etc.) is treated as bearing income tax at the basic rate.

(5) Income tax treated as borne under section 941(3) or 942(4) (gross amount of estate income treated as bearing tax at the applicable rate) is not repayable so far as the basic amount of the estate income in question is paid from sums within this section or from aggregate income treated as bearing income tax at 0% by virtue of subsection (1A).

Transfers of assets etc treated as payments

964

(1) For the purposes of this Chapter—

(a) a transfer of assets, or

(b) the appropriation of assets by personal representatives to themselves,

is treated as the payment of an amount equal to the assets' value at the date of transfer or appropriation.

(2) The set off or release of a debt is treated for the purposes of this Chapter as the payment of an amount equal to it.

(3) If at the end of the administration period—

(a) there is an obligation to transfer assets to any person, or

(b) personal representatives are entitled to appropriate assets to themselves,

an amount equal to the assets' value at that time is treated as payable then for the purposes of this Chapter.

(4) If at the end of the administration period—

(a) there is an obligation to release or set off a debt owed by any person, or

(b) personal representatives are entitled to release or set off a debt in their own favour,

a sum equal to the debt is treated as payable then for the purposes of this Chapter.

Assessments, adjustments and claims after the administration period

965

(1) This subsection applies if after the administration period ends it is apparent that a company is liable for corporation tax on estate income for any accounting period for which it previously appeared not to be so liable or to be liable for tax on a lesser amount.

(2) If subsection (1) applies—

(a) the company may be assessed and taxed for the accounting period, and

(b) any relief or additional relief to which the company may be entitled for the accounting period is to be allowed if a claim is made.

(3) This subsection applies if after the administration period ends it is apparent that a company which previously appeared to be liable for corporation tax on estate income for any accounting period is not so liable or is liable for tax on a lesser amount.

(4) If subsection (3) applies—

(a) all necessary adjustments and repayments of corporation tax for the accounting period are to be made, and

(b) if the company has been allowed relief which exceeds the relief that could have been given by reference to the amount actually charged for the accounting period, the excess is to be treated as chargeable for that accounting period under the charge to corporation tax on income.

(5) An assessment or adjustment made for the purposes of this Chapter or a claim made as a result of this Chapter may be made after the end of the period otherwise allowed if it is made on or before the third anniversary of the 31 January following the accounting period in which the administration period ends.

Power to obtain information from personal representatives and beneficiaries

966

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statements relating to estate income

967

(1) If a company within subsection (2) requests it in writing, a personal representative of a deceased person must provide the company with a statement showing—

(a) the amount treated as estate income arising from the company's interest in the whole or part of the deceased person's estate for which the company is liable to corporation tax for an accounting period, and

(b) the amount of any tax at the applicable rate which any such amount is treated as having borne.

(2) A company is within this subsection if—

(a) it has or has had an absolute or limited interest in the whole or part of the residue of the estate, or

(b) estate income has arisen to it from a discretionary interest it has or has had in the whole or part of the residue of the estate.

(3) A statement under subsection (1) must be in writing.

(4) The duty to comply with a request under this section is enforceable by the company which made it.

...

Meaning of “personal representatives”

968

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 4 — Income from holding an office

Charge to tax on income from holding an office

969

(1) The charge to corporation tax on income applies to income from the holding of an office.

(2) The amount of any income charged to tax under this section is to be calculated in accordance with income tax principles and all questions as to any of the following matters are to be determined in accordance with income tax law and practice as if accounting periods were years of assessment—

(a) the amounts which are or are not to be taken into account as a person's income from the holding of an office,

(b) the amounts which are or are not to be taken into account in calculating a person's income from the holding of an office,

(d) the time when any such amount is to be treated as arising.

(3) Subsection (2) is subject to the provisions of the Corporation Tax Acts.

(4) Accordingly—

(a) for corporation tax purposes income from the holding of an office is to be calculated under Part 2 of ITEPA 2003 (employment income) and the provisions applicable to that Part, and

(b) any provision of the Income Tax Acts (other than ITTOIA 2005 or ITA 2007) which has the effect of conferring an exemption from income tax in relation to income from the holding of an office has the corresponding effect for corporation tax purposes, unless otherwise provided.

(5) For the purposes of this section “income tax law” means, in relation to an accounting period of a company, the law applying to the charge on individuals of income tax for the tax year in which the period ends, but does not include—

(a) such of the enactments of the Income Tax Acts as make special provision for individuals in relation to matters referred to in subsection (2), or

(b) ITA 2007.

(6) In this section “office” includes in particular any position which has an existence independent of the person who holds it and may be filled by successive holders.

Rule restricting deductions for bad debts

970

(1) This section applies only to debts to which Part 5 (loan relationships) does not apply.

(2) In calculating the income of an office held by a company, no deduction is allowed in respect of a debt owed to the company, except—

(a) by way of impairment loss, or

(b) so far as the debt is released wholly and exclusively for the purposes of the office as part of a statutory insolvency arrangement.

(3) In this section “debt” includes an obligation or liability that falls to be discharged otherwise than by the payment of money.

Chapter 5 — Distributions from unauthorised unit trusts

Overview of Chapter

971

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Charge to tax under this Chapter

972

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amount of income treated as received

973

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 6 — Sale of foreign dividend coupons

Charge to tax under this Chapter

974

(1) The charge to corporation tax on income applies to income treated under subsection (2) as arising from foreign holdings.

(2) Income is treated as arising from such holdings in the following cases.

(3) The first case is where a bank's office in the United Kingdom—

(a) pays over the proceeds of a sale or other realisation of taxable dividend coupons in respect of the holdings which has been effected by the bank, or

(b) carries such proceeds into an account.

(4) The second case is where proceeds of sale arise from a sale of taxable dividend coupons in respect of the holdings by a person who is not a bank or a dealer to a person dealing in coupons in the United Kingdom.

(4A) For the purposes of subsections (3) and (4) a dividend coupon is “taxable” if the associated dividend would not have been exempt for the purposes of Part 9A (company distributions) had it been paid to the holder of the shares.

(5) The amount of the income that is treated as arising is equal to the proceeds of the sale or realisation.

(6) In this section “bank” has the meaning given by section 1120 of CTA 2010.

Meaning of “foreign holdings” etc

975

(1) In this Chapter “foreign holdings” means shares outside the United Kingdom that are issued by or on behalf of a non-UK resident body of persons.

(2) In section 974 “dividend coupons” means coupons for dividends payable in respect of foreign holdings.

(3) In this Chapter “coupons” includes—

(a) warrants, and

(b) bills of exchange that purport to be drawn or made in payment of dividends payable in respect of foreign holdings.

Chapter 7 — Annual payments not otherwise charged

Overview of Chapter

976

(1) This Chapter—

(a) applies the charge to corporation tax on income to annual payments not otherwise charged to corporation tax (see section 977), ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The following are also relevant to the tax treatment of annual payments within this Chapter—

(a) section 687A(3) of ICTA (discretionary payments by trustees to companies),

(b) section 494 of ITA 2007 (grossing up of discretionary payment and payment of income tax),

(c) section 848 of ITA 2007 (under which a sum representing income tax deducted under Chapter 6 or 7 of Part 15 of that Act (deduction from annual payments, patent royalties and other payments connected with intellectual property) from an annual payment within this Chapter is treated as income tax paid by the recipient), and

(d) Chapter 8 of Part 15 of ITA 2007 (special provision in relation to royalties).

Charge to tax on annual payments not otherwise charged

977

(1) The charge to corporation tax on income applies to annual payments that are not otherwise within the application of that charge under the Corporation Tax Acts.

(2) Subsection (1) does not apply to annual payments in respect of which no liability to corporation tax arises because of an exemption.

(3) The frequency with which payments are made is ignored in determining whether they are annual payments for the purposes of this Chapter.

Exemption for payments by persons liable to pool betting duty

978

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 8 — Income not otherwise charged

Charge to tax on income not otherwise charged

979

(1) The charge to corporation tax on income applies to income that is not otherwise within the application of that charge under the Corporation Tax Acts.

(2) Subsection (1) does not apply to—

(a) annual payments,

(b) income in respect of which no liability to corporation tax arises because of an exemption, or

Exemption for commercial occupation of woodlands in UK

980

(1) No liability to corporation tax arises under this Chapter in respect of income arising from the commercial occupation of woodlands in the United Kingdom.

(2) For this purpose the occupation of woodlands is commercial if the woodlands are managed—

(a) on a commercial basis, and

(b) with a view to the realisation of profits.

Exemption for gains on financial futures

981

(1) No liability to corporation tax arises under this Chapter in respect of a gain arising to a company in the course of dealing in—

(a) financial futures,

(b) traded options, or

(2) The reference in subsection (1) to a gain arising in the course of dealing in financial futures includes a gain regarded as so arising under section 143(3) of TCGA 1992 (gains arising from transactions otherwise than in the course of dealing on a recognised futures exchange, involving authorised persons).

(3) In this section—

“financial futures” means financial futures which are for the time being dealt in on a recognised futures exchange,

“financial option” has the meaning given by section 144(8)(c) of TCGA 1992,

“recognised futures exchange” means the London International Financial Futures Exchange and any other futures exchange which is for the time being designated for the purposes of that Act by order made by the Commissioners for Her Majesty's Revenue and Customs under section 288(6) of that Act, and

“traded option” has the meaning given by section 144(8)(b) of that Act.

Chapter 9 — Priority rules

Provisions which must be given priority over this Part

982

(1) Any income, so far as it falls within—

(a) Chapter ... ... 6, and

(b) Chapter 2 of Part 3,

is dealt with under Part 3.

(2) Any income, so far as it falls within—

(a) Chapter ... ... 6, and

(b) Chapter 3 of Part 4 so far as the Chapter relates to a UK property business,

is dealt with under Part 4.

Introductory

Overview of Chapter

983

(1) This Chapter is about deductions relating to Schedule 2 share incentive plans.

(2) Section 984 relates to the interpretation of this Chapter.

(3) Sections 985 and 986 set out—

(a) how effect is given to deductions allowed under this Chapter, and

(b) how amounts treated as received under this Chapter are dealt with.

(4) Sections 987 and 988 deal with deductions allowed for the costs of setting up plans and their running expenses.

(5) Sections 989 to 993 deal with deductions allowed for payments used to acquire shares for plan trusts.

(6) Sections 994 to 997 deal with other deductions relating to free shares, matching shares, partnership shares and dividend shares.

(7) Section 998 deals with the withdrawal of deductions if a plan ceases to be a Schedule 2 share incentive plan.

Chapter to form part of SIP code etc

984

(1) This Chapter forms part of the SIP code (see section 488 of ITEPA 2003).

(2) Therefore expressions used in this Chapter and contained in the index at the end of Schedule 2 to ITEPA 2003 have the meaning indicated by that index.

(3) Subsection (4) applies if any of a participant's plan shares are forfeited.

(4) For the purposes of this Chapter the shares are treated as acquired by the trustees—

(a) when the forfeiture occurs, and

(b) for no consideration.

Deductions and receipts: general

References to a deduction being allowed to a company

985

(1) References in this Chapter to a deduction being allowed to a company are to be read in accordance with this section (and references to a deduction being made are to be read in that light).

(2) If a deduction is allowed to a company, the deduction is made in calculating for corporation tax purposes the profits of a trade or property business carried on by the company.

This is subject to subsections (3) and (4).

(3) If the company is a company with investment business (as defined in section 1218B), the amount of the deduction is treated as expenses of management of the company.

But this subsection does not apply if the company's business is a property business (in which case subsection (2) applies instead).

(4) If—

(a) the company is a company in relation to which the I - E rules apply, and

(b) the expenses are referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the company's basic life assurance and general annuity business,

the expenses are treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company.

(5) So far as this Chapter provides for a deduction to be allowed, it has effect despite section 53 (no deduction for items of a capital nature in calculating trading profits), including that section as applied by section 210 to the calculation of profits of a property business.

Treatment of receipts under Chapter

986

(1) This section applies if a company is treated under this Chapter as receiving an amount.

(2) If the company is carrying on a trade or property business in respect of which it is within the charge to corporation tax, the amount is treated as a receipt of that trade or business.

(3) If the company has permanently ceased to carry on a trade or property business in respect of which it was within the charge to corporation tax, the amount is treated as a post-cessation receipt of that trade or business (see Chapter 15 of Part 3).

(4) Otherwise, the amount is treated as a receipt chargeable under the charge to corporation tax on income.

Deductions relating to setting up and running costs

987

(1) This section applies if a company incurs expenses in setting up a share incentive plan that is a Schedule 2 share incentive plan.

(2) A deduction for the expenses is allowed to the company.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) If the relevant date falls more than 9 months after the end of the period of account in which the expenses are incurred, the deduction is allowed for the period of account in which the relevant date falls.

(4A) In subsection (4) “the relevant date”, in relation to a share incentive plan, has the meaning given in paragraph 81A(6) of Schedule 2 to ITEPA 2003.

(5) No other deduction is allowed in respect of expenses for which a deduction is allowed under this section.

988

(1) This section applies if a company incurs expenses in contributing to the expenses of the trustees in running a Schedule 2 share incentive plan.

(2) This Chapter does not affect the deductions that, apart from this Chapter, are allowed to the company in relation to those expenses incurred by it.

(3) For the purposes of this section expenses of the trustees in running a Schedule 2 share incentive plan do not include expenses incurred in acquiring shares for the purposes of the plan other than expenses within subsection (4).

(4) The expenses within this subsection are—

(a) interest paid on money borrowed by the trustees for the purpose of acquiring the shares, and

(b) any of the following—

(i) fees,

(ii) commission,

(iii) stamp duty,

(iv) stamp duty reserve tax, and

(v) other incidental costs similar to any mentioned in sub-paragraphs (i) to (iv).

Deductions relating to payments used to acquire shares

Deduction for contribution to plan trust

989

(1) A deduction is allowed to a company (“the paying company”) if—

(a) the paying company makes a payment to the trustees of a Schedule 2 share incentive plan to enable them to acquire shares in the paying company or a company that controls it,

(aa) the payment is not made pursuant to tax avoidance arrangements,

(b) the trustees apply the payment to acquire such shares,

(d) at the end of the interim period the condition in subsection (2) is met in relation to the company in which the trustees acquire the shares.

(2) The condition is that the trustees hold shares in the company for the plan trust that—

(a) constitute at least 10% of the ordinary share capital of the company, and

(b) carry rights to at least 10% of—

(i) any profits available for distribution to shareholders of the company, and

(ii) any assets of the company available for distribution to shareholders on a winding up.

(3) For the purposes of subsection (2) shares that have been appropriated to, and acquired on behalf of, an employee under the plan are to be treated as held by the trustees for the plan trust so long as the shares are still subject to the plan.

(4) The deduction is allowed for the period of account in which the interim period ends.

(5) The amount of the deduction is an amount equal to the payment mentioned in subsection (1)(a).

(6) If the deduction is made, no other deduction is allowed in relation to the payment (except as specified in section 991).

(6A) For the purposes of this section the payment mentioned in subsection (1)(a) is made pursuant to tax avoidance arrangements if—

(a) it is made pursuant to arrangements entered into by the paying company, and

(b) the main purpose, or one of the main purposes, of the paying company in entering into the arrangements was to obtain a deduction or an increased deduction.

(6B) In subsection (6A) “arrangements” includes any arrangements, scheme or understanding of any kind, whether or not legally enforceable, involving a single transaction or two or more transactions.

(7) In this section “the interim period” means the period of 12 months beginning with the date on which the trustees acquire the shares as mentioned in subsection (1)(b).

Withdrawal of deduction under section 989

990

(1) If—

(a) a deduction is made under section 989, and

(b) condition A or B is met,

an officer of Revenue and Customs may by notice direct that the deduction is withdrawn.

(2) Condition A is that less than 30% of the acquired shares have been awarded under the plan before the end of the period of 5 years beginning with the date on which the trustees acquire them.

(3) Condition B is that not all the acquired shares have been awarded under the plan before the end of the period of 10 years beginning with the date on which the trustees acquire them.

(4) If a direction is made, the paying company is treated as receiving an amount equal to the deduction.

(5) The amount is treated as received when the direction is made.

(6) For the purposes of this section and sections 991 to 993—

(a) “the acquired shares” means the shares acquired by the trustees as mentioned in section 989(1)(b), and

(b) if the trustees acquire shares on different days, assume that shares acquired on an earlier day are awarded under the plan before those acquired on a later day.

Another deduction to be allowed if all acquired shares are awarded

991

(1) This section applies if—

(a) a direction is made under section 990, and

(b) at any time after the making of the direction the condition in subsection (2) is met.

(2) The condition is that all the acquired shares are awarded under the plan.

(3) A deduction is allowed to the paying company for the period of account in which the condition is first met.

(4) The amount of the deduction is an amount equal to the payment mentioned in section 989(1)(a).

Award of shares to excluded employee

992

(1) This section applies if—

(a) a deduction is made under section 989 or 991, and

(b) a number of the acquired shares are awarded under the plan to an excluded employee.

(2) An employee is excluded if, at the time the shares are awarded to the employee, the earnings from the relevant employment are not (or would not be if there were any) general earnings—

(a) to which section 15 of ITEPA 2003 applies, or

(b) to which a section listed in section 20(1) of ITEPA 2003 applies.

(3) “The relevant employment” means the employment because of which the shares are awarded to the employee.

(4) The paying company is treated as receiving an amount equal to the relevant proportion of the deduction.

(5) The relevant proportion is the proportion that the number of shares awarded to the excluded employee bears to the total number of the acquired shares.

(6) The amount is treated as received when the shares are awarded to the excluded employee.

Plan termination notice

993

(1) This section applies if—

(a) a deduction has been made under section 989,

(b) the deduction has not been withdrawn under section 990,

(c) the paying company issues a plan termination notice under paragraph 89 of Schedule 2 to ITEPA 2003 in relation to the plan, and

(d) not all the acquired shares have been awarded under the plan before the issue of that notice.

(2) The paying company is treated as receiving an amount equal to the relevant proportion of the deduction.

(3) The relevant proportion is the proportion that the number of the acquired shares not awarded bears to the total number of the acquired shares.

(4) The amount is treated as received when the paying company issues the plan termination notice.

Deductions relating to provision of certain types of shares

Deduction for providing free or matching shares

994

(1) This section applies if, under a Schedule 2 share incentive plan, shares are awarded to employees as free or matching shares because of their employment with a company (“the employing company”).

(2) A deduction is allowed to the employing company for the period of account in which the shares are awarded to the employees.

(3) The amount of the deduction is an amount equal to the market value of the shares awarded to the employees.

(4) But if the shares are awarded to the employees under a group plan, the amount of the deduction is an amount equal to the relevant proportion of the total market value of the shares included in the award.

(5) The relevant proportion is the proportion that the number of shares awarded to the employees bears to the total number of shares included in the award.

(6) For the purposes of this section—

(a) the market value of shares is their market value when they are acquired by the trustees of the plan trust, and

(b) if the trustees acquire shares on different days, assume that shares acquired on an earlier day are awarded before those acquired on a later day.

(7) No deduction, other than one under this section, is allowed to the employing company or any associated company in relation to the provision of the shares awarded to the employees.

(8) But subsection (7)—

(a) does not prevent a deduction being allowed under section 987 in relation to expenses incurred by a company in setting up a share incentive plan, and

(b) is subject to section 988.

(9) If the shares are awarded to the employees because of their employment with two or more companies, only one of those companies can make a deduction under this section in relation to the award.

(10) This section is subject to section 996.

Deduction for additional expense in providing partnership shares

995

(1) This section applies if—

(a) under a Schedule 2 share incentive plan, partnership shares are awarded to employees because of their employment with a company (“the employing company”), and

(b) the market value of the shares when they were acquired by the trustees of the plan trust exceeds the partnership share money paid by the participants to acquire those shares.

(2) A deduction is allowed to the employing company for the period of account in which the shares are awarded.

(3) The amount of the deduction is an amount equal to the excess mentioned in subsection (1)(b).

(4) No deduction, other than one under this section, is allowed to the employing company or any associated company in relation to the provision of the shares.

(5) But subsection (4)—

(a) does not prevent a deduction being allowed under section 987 in relation to expenses incurred by a company in setting up a share incentive plan, and

(b) is subject to section 988.

(6) If the shares are awarded to the employees because of their employment with two or more companies, only one of those companies may make a deduction under this section in relation to the award.

(7) This section is subject to section 996.

Shares excluded from sections 994 and 995

996

(1) No deduction is allowed under section 994 or 995 in relation to shares to which any of exclusions 1 to 5 applies.

(2) Exclusion 1 applies to shares awarded to an excluded employee.

(3) For the purposes of subsection (2) an employee is excluded if, at the time the shares are awarded to the employee, the earnings from the employee's employment with the employing company are not (or would not be if there were any) chargeable earnings—

(a) to which section 15 of ITEPA 2003 applies, or

(b) to which a section listed in section 20(1) of ITEPA 2003 applies.

(4) Exclusion 2 applies to shares in a company that are liable to depreciate substantially in value for reasons that do not apply generally to shares in that company.

(5) Exclusion 3 applies to shares in relation to which a deduction has been made by the employing company or an associated company in relation to the provision of the shares for the plan trust or for another trust.

(6) For the purposes of subsection (5)—

(a) it does not matter upon what basis that deduction was made or what the nature or purpose of the other trust is, and

(b) if the trustees of the plan trust acquire shares on different days, in determining whether the same shares have been provided to more than one trust, assume that shares acquired on an earlier day are awarded under the plan trust before those acquired on a later day.

(7) Exclusion 4 applies to shares acquired by the trustees of the plan trust as a result of a payment in relation to which a deduction is made under section 989 or 991.

(8) Exclusion 5 applies to shares awarded after having been forfeited by a participant.

No deduction for expenses in providing dividend shares

997

(1) No deduction is allowed to a company for expenses in providing shares that are acquired on behalf of employees under a Schedule 2 share incentive plan as dividend shares.

(2) This is subject to section 988.

Plan ceasing to be a Schedule 2 SIP

998

(1) This section applies if—

(a) a deduction is made by a company under section 987, 989, 991, 994 or 995 in relation to a Schedule 2 share incentive plan, and

(b) by virtue of paragraph 81H or 81I of Schedule 2 to ITEPA 2003 the plan is not to be a Schedule 2 share incentive plan.

(2) An officer of Revenue and Customs may by notice direct that the deduction is withdrawn.

(3) If a direction is made, the company is treated as receiving an amount equal to the deduction.

(4) The amount is treated as received when the direction is made.

Deduction for costs of setting up SAYE option scheme or CSOP scheme

999

(1) This section applies if—

(a) a company incurs expenses in setting up a scheme within subsection (2) ... ...

(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(2) The schemes within this subsection are—

(a) Schedule 3 SAYE option schemes within the meaning of the SAYE code (see section 516(4) of ITEPA 2003), and

(b) Schedule 4 CSOP schemes within the meaning of the CSOP code (see section 521(4) of ITEPA 2003).

...

(3) A deduction for the expenses is to be made in calculating for corporation tax purposes the profits of a trade or property business carried on by the company.

This is subject to subsections (4) and (5).

(4) If the company is a company with investment business (as defined in section 1218B), the expenses are treated as expenses of management of the company.

But this subsection does not apply if the company's business is a property business (in which case subsection (3) applies instead).

(5) If—

(a) the company is a company in relation to which the I - E rules apply, and

(b) the expenses are referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the company's basic life assurance and general annuity business,

the expenses are treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company.

(6) If the relevant date falls more than 9 months after the end of the period of account in which the expenses are incurred—

(a) for the purposes of subsection (3) the deduction is to be made for the period of account in which the relevant date falls, or

(b) for the purposes of subsection (4) or (5) the expenses are treated as referable to the accounting period in which the relevant date falls.

(6A) In subsection (6) “the relevant date”—

(a) in relation to a Schedule 3 SAYE option scheme, has the meaning given in paragraph 40A(6) of Schedule 3 to ITEPA 2003, and

(b) in relation to a Schedule 4 CSOP scheme, has the meaning given in paragraph 28A(6) of Schedule 4 to ITEPA 2003.

(7) So far as this section provides for a deduction to be allowed, it has effect despite section 53 (no deduction for items of a capital nature in calculating trading profits), including that section as applied by section 210 to the calculation of profits of a property business.

1000

(1) This section applies if a company incurs expenses in setting up a qualifying employee share ownership trust (within the meaning of Schedule 5 to FA 1989).

(2) A deduction for the expenses is to be made in calculating for corporation tax purposes the profits of a trade or property business carried on by the company.

This is subject to subsection (3).

(3) If the company is a company with investment business (as defined in section 1218B), the expenses are treated as expenses of management of the company.

But this subsection does not apply if the company's business is a property business (in which case subsection (2) applies instead).

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) If the trust is established more than 9 months after the end of the period of account in which the expenses are incurred—

(a) for the purposes of subsection (2) the deduction is to be made for the period of account in which the trust is established, or

(b) for the purposes of subsection (3) or (4) the expenses are treated as referable to the accounting period in which the trust is established.

(6) For the purposes of subsection (5) a trust is established when the deed under which it is established is executed.

(7) So far as this section provides for a deduction to be allowed, it has effect despite section 53 (no deduction for items of a capital nature in calculating trading profits), including that section as applied by section 210 to the calculation of profits of a property business.

Chapter 1 — Introduction

Introductory

Overview of Part

1001

(1) This Part provides for corporation tax relief in relation to employee share acquisitions.

(2) Sections 1002 to 1005 relate to the interpretation of this Part.

(3) Chapter 2 provides for relief if shares are acquired by an employee or another person because of the employee's employment by a company.

(4) Chapter 3 provides for relief if—

(a) an employee or another person obtains an option to acquire shares because of the employee's employment by a company, and

(b) shares are acquired pursuant to the option.

(5) Chapter 4 provides for additional relief in cases involving restricted shares.

(6) Chapter 5 provides for additional relief in cases involving convertible shares or convertible securities that are not shares.

(7) Chapter 6 deals with the relationship between the reliefs under this Part and other reliefs.

Interpretation

“Employment”

1002

(1) This section explains how references in this Part to employment (and related expressions) are to be read.

(2) “Employment” includes a former or prospective employment.

(3) References to employment by a company include references to holding an office with that company.

(4) Members of a company whose affairs are managed by its members are treated as holding an office with the company.

(5) See also sections 1007A(2), 1015B(2), 1025B(2) and 1030B(2) (deemed employment for the purposes of Chapters 2, 3, 4 and 5 of certain employees of overseas companies who work for companies in the UK).

“Shares” etc

1003

(1) In this Part “shares” includes—

(a) an interest in shares, and

(b) stock or an interest in stock.

(2) For the purposes of this Part shares are acquired by a person when the person acquires a beneficial interest in them (and not, if different, when they are conveyed or transferred).

Groups, consortiums and commercial associations of companies

1004

(1) This section applies for the purposes of this Part.

(2) Two companies are members of the same group if one is a 51% subsidiary of the other or both are 51% subsidiaries of a third company.

(3) “Group transfer” means a transfer of a business, or a part of a business, from one company that is a member of a group to another company that is, or two or more companies that are, members of the group.

(4) A company is a parent company of another company if that other company is its 51% subsidiary.

(5) A company (“the consortium company”) is owned by a consortium if—

(a) five or fewer companies (“the shareholding companies”) between them beneficially own at least 75% of the consortium company's ordinary share capital, and

(b) each of the shareholding companies beneficially owns at least 10% of that capital.

(6) Each shareholding company is a member of the consortium.

(7) For the purposes of subsection (5) the shareholdings of members of a group of companies are to be treated as held by a single company.

(8) And, in such a case, a member of the group of companies is a member of the consortium if the member beneficially owns some of the consortium company's ordinary share capital.

(9) “Commercial association of companies” means a company together with such of its associated companies (as defined in section 449 of CTA 2010) as carry on businesses that are of such a nature that the businesses of the company and the associated companies, taken together, may be reasonably considered to make up a single composite undertaking.

Other definitions

1005

In this Part—

“convertible securities” has the same meaning as in Chapter 3 of Part 7 of ITEPA 2003 (see section 436 of that Act),

“convertible shares” means shares that are—convertible securities, oran interest in convertible securities,

“the employee” has the meaning given by section 1007(1)(a) or 1015(1)(a) (as the case may be) (see also sections 1025A(7) and 1030A(8)),

“the employing company” has the meaning given by section 1007(1) or 1015(1) (as the case may be),

“listed company” means a company—whose shares are listed on a recognised stock exchange, andwhich is neither a close company nor a company that would be a close company if it were UK resident,

“market value” has the same meaning as in TCGA 1992 (see sections 272 and 273 of that Act),

“option” includes any right to acquire shares,

“ordinary shares” means shares forming part of a company's ordinary share capital,

“the qualifying business” has the meaning given by section 1007(1)(b), 1015(1)(b), 1025A(1)(d)(i) or 1030A(1)(d)(ii) (as the case may be),

“the recipient” has the meaning given by section 1007(1) or 1015(1) (as the case may be),

“the relevant employment” has the meaning given by section 1007(1)(b) or 1015(1)(b) (as the case may be), and

“restricted shares” means shares that are—restricted securities, ora restricted interest in securities,for the purposes of Chapter 2 of Part 7 of ITEPA 2003 (see sections 423 and 424 of that Act).

Chapter 2 — Relief if shares acquired by employee or other person

Introductory

Overview of Chapter

1006

(1) This Chapter provides for relief if shares are acquired by an employee or another person because of the employee's employment by a company.

(2) Sections 1007 to 1009 set out the requirements that must be met for relief to be available.

(3) Sections 1010 to 1012 set out how the amount of relief is calculated.

(4) Section 1013 sets out how the relief is given.

Requirements to be met for relief to be available

Basic requirements for relief under Chapter 2

1007

(1) Relief under this Chapter is available to a company (“the employing company”) if—

(a) a person (“the employee”) has employment with the employing company,

(b) that employment (“the relevant employment”) is in relation to a business within subsection (2) (“the qualifying business”),

(d) the conditions set out in sections 1008 and 1009 are met as mentioned in those sections, and

(e) relief under Chapter 3 is not available to the employing company in relation to the acquisition of the shares.

The person who acquires the shares is, in that capacity, called “the recipient”.

(2) A business is within this subsection so far as—

(a) the business is carried on by the employing company, and

(b) the employing company is within the charge to corporation tax in relation to the profits of the business or would be but for section 18A.

Conditions relating to shares acquired

1008

(1) Each of the following conditions must be met in relation to the shares acquired.

Condition 1

The shares are ordinary shares that are fully paid-up and not redeemable.

Condition 2

The shares are—

(a) shares of a class listed on a recognised stock exchange,

(b) shares in a company that is not under the control of another company, or

Condition 3

The shares are shares in—

(a) the employing company,

(b) a company that, when the shares are acquired, is a parent company of the employing company,

(d) a company that, when the shares are acquired, is a member of a consortium that owns a parent company of the employing company, or

(e) a company within subsection (2).

(2) A company (“company A”) is within this subsection if when the shares are acquired—

(a) the employing company or a parent company of the employing company is a member of a consortium that owns another company (“company B”), and

(b) company A is—

(i) a member of that consortium or a parent company of a member of that consortium, and

(ii) a member of the same commercial association of companies as company B.

Conditions relating to employee’s income tax position

1009

(1) If the shares acquired are not restricted shares, the following conditions must be met in relation to the income tax position of the employee.

Condition 1

The employee is subject to a charge under ITEPA 2003 in relation to the acquisition of the shares.

Condition 2

Section 446UA of ITEPA 2003 does not apply in relation to the shares.

(2) If the shares acquired are restricted shares, the following condition must be met in relation to the income tax position of the employee.

The Condition

The employee—

(a) has, as a result of the acquisition of the shares, relevant earnings from the relevant employment that are subject to the charge under Part 2 of that Act, or

(b) is not within paragraph (a) but will be subject to a charge under ITEPA 2003 as a result of section 426 of that Act if an event occurs in relation to the shares that is a chargeable event for the purposes of that section.

(2A) Relevant earnings” means—

(a) earnings within Chapter 1 of Part 3 of ITEPA 2003, and

(b) any amount that is treated as earnings by virtue of section 226A of that Act (employee shareholder shares).

(3) Subsection (4) applies if—

(a) the conditions are, or the condition is, not met, but

(b) the conditions or the condition would be met if at all material times the employee had been a UK employee.

(4) This Chapter applies as if the employee had been a UK employee as mentioned in subsection (3)(b).

(5) The employee is a UK employee if—

(a) the employee is UK resident ..., and

(b) the duties of the relevant employment are performed in the United Kingdom.

(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Calculation of amount of relief

Calculation of relief if shares are neither restricted nor convertible

1010

(1) If the shares acquired are neither restricted shares nor convertible shares, the amount of relief to be given is an amount equal to—

(a) the market value of the shares when they are acquired, less

(b) the total amount or value of any consideration given by any person in relation to the acquisition of the shares.

This is subject to section 1012 ... .

(2) The consideration mentioned in subsection (1)(b) does not include the performance of any duties of, or in connection with, the relevant employment.

(3) A just and reasonable apportionment is to be made of any consideration given partly in relation to the acquisition of the shares and partly in relation to other matters.

Calculation of relief if shares are restricted or convertible

1011

(1) If the shares acquired are restricted shares or convertible shares (or both), the amount of relief to be given is calculated as follows.

This is subject to section 1012.

(2) If the shares are restricted shares, the amount of relief is equal to the amount that, as a result of the acquisition of the shares, is relevant earnings of the employee from the relevant employment.

(3) If the shares are convertible shares, the amount of relief is equal to the amount that, as a result of the acquisition of the shares, is relevant earnings of the employee from the relevant employment.

In calculating the employee's earnings for this purpose the market value of the shares is to be determined as if they were not convertible shares.

(4) For the purposes of subsections (2) and (3) “relevant earnings” means—

(a) earnings within Chapter 1 of Part 3 of ITEPA 2003, and

(b) any amount that is treated as earnings by virtue of section 226A of that Act (employee shareholder shares) ... ,

except that it does not include any amount of exempt income (within the meaning of section 8 of ITEPA 2003).

(5) If the shares are both restricted and convertible, the total amount of relief is whichever is the greater of the amounts of relief given by subsections (2) and (3) (or, if the amount is the same in each case, that amount).

Reduction in amount of relief

1012

(1) This section applies if the relevant employment is in relation to both the qualifying business and a business (or part of a business) that is not within section 1007(2).

(2) The amount of relief is to be reduced by a just and reasonable amount.

Giving of relief

How the relief is given

1013

(1) The relief is given for the accounting period in which the shares are acquired.

(2) The amount of relief is allowed as a deduction in calculating the profits of the qualifying business for corporation tax purposes (subject to subsections (3) and (4)).

(3) If the employing company is a company with investment business (as defined in section 1218B, the amount of relief is treated as expenses of management of the company.

But this subsection does not apply if the qualifying business is a property business (in which case subsection (2) applies instead).

(4) If—

(a) the employing company is a company in relation to which the I - E rules apply, and

(b) the relief is referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the employing company's basic life assurance and general annuity business,

the amount of relief is treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company referable to the accounting period.

(5) If the relevant employment is in relation to more than one business (or part of a business) within section 1007(2), the relief is to be apportioned on a just and reasonable basis.

Chapter 3 — Relief if employee or other person obtains option to acquire shares

Introductory

Overview of Chapter

1014

(1) This Chapter provides for relief if—

(a) an employee or another person obtains an option to acquire shares because of the employee's employment by a company, and

(b) shares are acquired pursuant to the option.

(2) Sections 1015 to 1017 set out the requirements that must be met for relief to be available.

(3) Sections 1018 to 1020 set out how the amount of relief is calculated.

(4) Section 1021 sets out how the relief is given.

(5) Sections 1022 and 1023 deal with cases in which a person obtains an option to acquire shares in a company and that company is subsequently taken over.

(6) Section 1024 provides for relief to be given to a successor company if the qualifying business is transferred by group transfers.

Requirements to be met for relief to be available

Basic requirements for relief under Chapter 3

1015

(1) Relief under this Chapter is available to a company (“the employing company”) if—

(a) a person (“the employee”) has employment with the employing company,

(b) that employment (“the relevant employment”) is in relation to a business within subsection (2) (“the qualifying business”),

(d) the person who obtains the option acquires shares pursuant to the option, and

(e) the conditions set out in sections 1016 and 1017 are met as mentioned in those sections.

The person who obtains the option is, in that capacity, called “the recipient”.

(2) A business is within this subsection so far as—

(a) the business is carried on by the employing company, and

(b) the employing company is within the charge to corporation tax in relation to the profits of the business “ or would be but for section 18A.

(3) If—

(a) the recipient dies, and

(b) subsequently another person acquires shares pursuant to the option,

this Chapter applies as if the recipient were alive and the shares were acquired by the recipient.

Conditions relating to shares acquired

1016

(1) Each of the following conditions must be met in relation to the shares acquired.

Condition 1

The shares are ordinary shares that are fully paid-up and not redeemable.

Condition 2

The shares are—

(a) shares of a class listed on a recognised stock exchange,

(b) shares in a company that is not under the control of another company, ...

(d) shares within subsection (1A).

Condition 3

The shares are shares in—

(a) the employing company,

(b) a company that, when the option is obtained, is a parent company of the employing company,

(d) a company that, when the option is obtained, is a member of a consortium that owns a parent company of the employing company,

(e) a company within subsection (2), or

(f) a qualifying successor company (see section 1022).

(1A) Shares are within this subsection if—

(a) after the option is obtained, the company in which the shares are to be acquired (“the relevant company”) comes to be controlled by another company (“the takeover”),

(b) immediately before the takeover, the shares were within any of paragraphs (a) to (c) of Condition 2,

(d) the shares are acquired pursuant to the option within the period of 90 days beginning with the day of the takeover, and

(e) the avoidance of tax is not the main purpose (or one of the main purposes) of the takeover.

(2) A company (“company A”) is within this subsection if when the option is obtained—

(a) the employing company or a parent company of the employing company is a member of a consortium that owns another company (“company B”), and

(b) company A is—

(i) a member of that consortium or a parent company of a member of that consortium, and

(ii) a member of the same commercial association of companies as company B.

Condition relating to employee’s income tax position

1017

(1) The following condition must be met in relation to the income tax position of the employee.

The Condition

The acquisition of the shares is a chargeable event in relation to the employee for the purposes of section 476 of ITEPA 2003 (whether or not an amount counts as employment income of the employee because of that event).

(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) If the employee is dead when the shares are acquired, the condition is to be treated as met if it would have been met had the employee been alive.

Calculation of amount of relief

Calculation of relief if shares are neither restricted nor convertible

1018

(1) If the shares acquired are neither restricted shares nor convertible shares, the amount of relief to be given is an amount equal to—

(a) the market value of the shares when they are acquired, less

(b) the total amount or value of any consideration given by any person in relation to the obtaining of the option or to the acquisition of the shares.

This is subject to section 1020 ... .

(2) The consideration mentioned in subsection (1)(b) does not include—

(a) the performance of any duties of, or in connection with, the relevant employment, and

(b) an amount paid or payable by the employee because of—

(i) an agreement within paragraph 3A(2) of Schedule 1 to the Social Security Contributions and Benefits Act 1992 (c. 4) or of Schedule 1 to the Social Security Contributions and Benefits (Northern Ireland) Act 1992 (c. 7), or

(ii) an election under paragraph 3B of either of those Schedules.

(3) A just and reasonable apportionment is to be made of any consideration given partly in relation to the obtaining of the option or the acquisition of the shares and partly in relation to other matters.

Calculation of relief if shares are restricted or convertible

1019

(1) If the shares acquired are restricted shares or convertible shares (or both), the amount of relief to be given is calculated as follows.

This is subject to section 1020 ... .

(2) If the shares are restricted shares, the amount of relief is equal to—

(a) the amount that counts as employment income of the employee under section 476 of ITEPA 2003 in relation to the acquisition of the shares, or

(b) if the option is a qualifying option (within the meaning of the EMI code), the amount that would have so counted apart from the EMI code.

(3) If the shares are convertible shares, the amount of relief is equal to—

(a) the amount that counts as employment income of the employee under section 476 of ITEPA 2003 in relation to the acquisition of the shares, or

(b) if the option is a qualifying option (within the meaning of the EMI code), the amount that would have so counted apart from the EMI code;

and in calculating the employee's employment income for this purpose the market value of the shares is to be determined as if they were not convertible shares.

(4) For the purposes of subsections (2) and (3)—

(a) no account is to be taken of any relief under section 481 or 482 of ITEPA 2003, and

(b) “the EMI code” has the meaning given by section 527(3) of that Act.

(5) If the shares are both restricted and convertible, the total amount of relief is whichever is the greater of the amounts of relief given by subsections (2) and (3) (or, if the amount is the same in each case, that amount).

(6) If the employee is dead when the shares are acquired, the amount of relief is to be calculated as if the employee were alive.

Reduction in amount of relief

1020

(1) This section applies if the relevant employment is in relation to both the qualifying business and a business (or part of a business) that is not within section 1015(2).

(2) The amount of relief is to be reduced by a just and reasonable amount.

Giving of relief

How the relief is given

1021

(1) The relief is given for the accounting period in which the shares are acquired.

(2) The amount of relief is allowed as a deduction in calculating the profits of the qualifying business for corporation tax purposes (subject to subsections (3) and (4)).

(3) If the employing company is a company with investment business (as defined in section 1218B), the amount of relief is treated as expenses of management of the company.

But this subsection does not apply if the qualifying business is a property business (in which case subsection (2) applies instead).

(4) If—

(a) the employing company is a company in relation to which the I - E rules apply, and

(b) the relief is referable, in accordance with Chapter 4 of Part 2 of FA 2012, to the employing company's basic life assurance and general annuity business,

the amount of relief is treated for the purposes of section 76 of that Act as ordinary BLAGAB management expenses of the company referable to the accounting period.

(5) If the relevant employment is in relation to more than one business (or part of a business) within section 1015(2), the relief is to be apportioned on a just and reasonable basis.

Takeovers and transfers of businesses

Takeover of company whose shares are subject to option

1022

(1) This section applies if—

(a) a person (“P”) obtains a qualifying option to acquire shares in a company,

(b) subsequently there is a takeover of that company,

(c) P, by agreement with the acquiring company, releases P's rights under the qualifying option in consideration of P's obtaining another option (“the new option”), and

(d) the new option is an option to acquire shares in a qualifying company.

Section 1023 explains what is meant by “qualifying option”, “takeover”, “the acquiring company” and “qualifying company”.

(2) This Chapter applies as if shares acquired pursuant to the new option are acquired pursuant to the qualifying option.

(3) The company whose shares are subject to the new option is a qualifying successor company for the purposes of paragraph (f) of condition 3 in section 1016 (condition relating to shares acquired).

(4) In calculating the amount of any relief resulting from this section—

(a) any consideration given in relation to the obtaining of the new option is treated as consideration given in relation to the obtaining of the qualifying option, and

(b) any consideration given in relation to the acquisition of shares pursuant to the new option is treated as consideration given in relation to the acquisition of shares pursuant to the qualifying option.

The consideration covered by paragraph (a) does not include the consideration mentioned in subsection (1)(c).

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary provision for purposes of section 1022

1023

(1) This section applies for the purposes of section 1022.

(2) An option is a qualifying option if condition 3 in section 1016 would be met in relation to shares acquired pursuant to the option.

(3) There is a takeover of a company when another company (“the acquiring company”) acquires control of it.

(4) The following companies are qualifying companies—

(a) the acquiring company,

(b) a company that, when the takeover occurs, is a parent company of the acquiring company,

(d) a company that, when the takeover occurs, is a member of a consortium that owns a parent company of the acquiring company, and

(e) a company within subsection (5).

(5) A company (“company A”) is within this subsection if when the takeover occurs—

(a) the acquiring company or a parent company of the acquiring company is a member of a consortium that owns another company (“company B”), and

(b) company A is—

(i) a member of that consortium or a parent company of a member of that consortium, and

(ii) a member of the same commercial association of companies as company B.

Transfer of qualifying business by group transfers

1024

(1) This section applies in relation to relief to be given under this Chapter if—

(a) during the option period, the whole, or substantially the whole, of the qualifying business is transferred, and

(b) conditions A and B are met.

(2) Condition A is that—

(a) the transfer is a group transfer, or

(b) if there is more than one transfer, all the transfers are group transfers.

(3) Condition B is that, as a result of the transfer or transfers, at the end of the option period—

(a) the whole, or substantially the whole, of the qualifying business is carried on by one company (“the successor company”) only and that company is not the employing company, or

(b) the whole, or substantially the whole, of the qualifying business is carried on by companies (“the successor companies”) none of which is the employing company.

(4) The relief is to be given to—

(a) the successor company, or

(b) whichever one of the successor companies is nominated by them,

instead of the employing company (and references to the employing company in section 1021(3) and (4) are to be read as references to the company to which the relief is to be given).

(5) In this section “the option period” means the period—

(a) beginning when the option is obtained, and

(b) ending when the shares are acquired.

Chapter 4 — Additional relief in cases involving restricted shares

Additional relief available if shares acquired are restricted shares

1025

(1) This Chapter applies if—

(a) relief (“the original relief”) is available under Chapter 2 or 3 in relation to an acquisition of restricted shares, and

(b) after the acquisition—

(i) an event that is a chargeable event in relation to the restricted shares for the purposes of section 426 of ITEPA 2003 occurs, or

(ii) Chapter 2 of Part 7 of ITEPA 2003 ceases to apply to the restricted shares because the employee dies (see section 421B(4) and (6) of that Act).

For the purposes of paragraph (a) it does not matter if the amount of relief is calculated as nil.

(2) Relief under this Chapter is available to the employing company.

(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(6) If—

(a) the original relief is available as a result of section 1015(3) (death of recipient), and

(b) the recipient is not the employee,

this Chapter applies as if the recipient were alive and the restricted shares were acquired by the recipient.

(7) If the original relief is available as a result of section 1022 (takeover of company whose shares are subject to an option), this Chapter applies as if the restricted shares were acquired pursuant to the qualifying option mentioned in that section.

(8) To find out what accounting period the relief is given for and how to calculate the amount of relief, see—

(a) section 1026 for relief available as a result of the occurrence of a chargeable event, and

(b) section 1027 for relief available as a result of the employee's death.

Those sections are supplemented by section 1028.

(9) Section 1029 provides for the relief to be given to a successor company if the qualifying business is transferred by group transfers.

Relief available on occurrence of chargeable event

1026

(1) This section applies in relation to relief available as a result of the occurrence of a chargeable event.

(2) The relief is given for the accounting period in which the chargeable event occurs.

(3) The amount of relief is equal to the amount that counts as employment income of the employee under section 426 of ITEPA 2003 in relation to the chargeable event.

(4) For the purposes of subsection (3) the following are to be ignored—

(a) any relief under section 428A of ITEPA 2003,

(b) section 446E(6) of ITEPA 2003, and

(c) the amount of any non-commercial increase (as defined in section 446K(4) of ITEPA 2003) in the market value of the restricted shares after their acquisition.

(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Relief available on death of employee

1027

(1) This section applies in relation to relief available as a result of the employee's death.

(2) The relief is given for the accounting period in which the employee dies.

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Corporation Tax Act 2009

Successive interests

Introduction

953

Successive absolute interests

954

Assumed income entitlement of holder of absolute interest following limited interest

955

Payments in respect of limited interests followed by absolute interests

956

Holders of limited interests

957

Basic amount of estate income: successive limited interests

958

Apportionments

959

Relief where foreign estates have borne UK income tax

Relief in respect of tax relating to absolute interests

960

Relief in respect of tax relating to limited or discretionary interests

961

General

Income from which basic amounts are treated as paid

962

Income treated as bearing income tax

963

Transfers of assets etc treated as payments

964

Assessments, adjustments and claims after the administration period

965

Power to obtain information from personal representatives and beneficiaries

966

Statements relating to estate income

967

...

Meaning of “personal representatives”

968

Chapter 4 — Income from holding an office

Charge to tax on income from holding an office

969

Rule restricting deductions for bad debts

970

Chapter 5 — Distributions from unauthorised unit trusts

Overview of Chapter

971

Charge to tax under this Chapter

972

Amount of income treated as received

973

Chapter 6 — Sale of foreign dividend coupons

Charge to tax under this Chapter

974

Meaning of “foreign holdings” etc

975

Chapter 7 — Annual payments not otherwise charged

Overview of Chapter

976

Charge to tax on annual payments not otherwise charged

977

Exemption for payments by persons liable to pool betting duty

978

Chapter 8 — Income not otherwise charged

Charge to tax on income not otherwise charged

979

Exemption for commercial occupation of woodlands in UK

980

Exemption for gains on financial futures

981

Chapter 9 — Priority rules

Provisions which must be given priority over this Part

982

Part 11 — Relief for particular employee share acquisition schemes

Chapter 1 — Share incentive plans

Introductory

Overview of Chapter

983

Chapter to form part of SIP code etc

984

Deductions and receipts: general

References to a deduction being allowed to a company