Section 994 — Corporation Tax Act 2009: Deduction for providing free or matching 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.