Introduction Details of the Section
2.Subsection (2) introduces a new section 1038 Corporation Tax Act 2009 (CTA 2009) in place of the current section 1038. The existing legislation excludes other CT deductions where relief for employee share acquisitions is available under Part 12 CTA 2009, and this remains the purpose of the revised section 1038.
3.New subsections 1038(1) and 1038(2) set out the rule that where relief is, or would be, available under Part 12, no other CT deduction is allowed in relation to the provision of shares or share options; or for any connected matter. By virtue of subsection 1038(4) these provisions apply for any accounting period, whether before or after the employee acquires the shares in question.
4.New subsection 1038(3) provides that in cases where section 1022 CTA 2009 (concerning the takeover of a company whose shares are subject to a share option) applies, the exclusion at subsection 1038(2) in relation to share options has effect for any new options granted on the takeover of the company as well as any relevant earlier qualifying option.
5.New subsections 1038(5), 1038(6) and 1038(7) broadly reproduce provisions in the current section 1038, setting out the expenses for which CT deduction is excluded under subsection 1038(2) and providing exceptions to this exclusion in specified circumstances.
6.New subsection 1038(8) disregards deductions relating to the provision of convertible securities that are not shares from the exclusion at subsection 1038(2) in certain cases.
7.Subsection (3) introduces new section 1038A CTA 2009, which clarifies the exclusion of CT deductions in respect of share options pursuant to which shares are not acquired by employees.
8.New subsection 1038A(1) sets out rules applying in the case of share options obtained by employees because of their employment. Subsection 1038A(1)(b) also applies this new section to other share options connected with an option covered by subsection 1038A(1)(a), for example new options issued on a takeover of a company. By virtue of new subsection 1038A(3) these provisions apply for any accounting period, whether before or after the employee obtains the option in question.
9.New subsection 1038A(2) provides that no CT deduction is allowable for any accounting period in relation to a share option or matters connected with it, unless shares are acquired pursuant to the option.
10.New subsection 1038A(4), 1038A(5) and 1038A(6) broadly reproduce provisions in the current section 1038, setting out the expenses for which CT deduction is excluded under new subsection 1038A(2) and providing exceptions to this exclusion in specified circumstances.
11.New subsections 1038A(7) and 1038A(8) provide that subsection 1038A(2) does not disallow a deduction for amounts on which an employee is subject to an income tax charge, or would have been subject to certain circumstances.
12.Subsections (5) and (6) provide that the new section 1038 applies for company accounting periods ending on or after 20 March 2013, regardless of when the acquisition of shares took place. However, the provision will not operate to deny a CT deduction in a company accounting period spanning 20 March 2013 where the shares were acquired before that date.
13.Subsections (7) and (8) provide that the new section 1038A applies for company accounting periods ending on or after 20 March 2013, regardless of when the share option was obtained. However, the provision will not operate to deny a CT deduction in an accounting period spanning 20 March 2013 where an option to acquire shares lapsed or otherwise ceased to be exercisable before that date.