Commentary on Sections Overview Chapter 1: Share incentive plans Section 986: Treatment of receipts under Chapter
2526.This section explains how a withdrawal of relief is taxed. It is based on section 21A of, and paragraphs 10 to 13 of Schedule 4AA to, ICTA.
2527.If relief is withdrawn the company is treated as receiving an amount equal to the deduction. See, for example, section 990(4). This section sets out how this is taxed.
2528.Subsection (3) applies if the relief is recovered after the trade or property business has ceased. It makes clear that the recoveries are taxed as post-cessation receipts. In the source legislation the amounts are taxed as trading receipts. See Change 76 in Annex 1. This change also affects sections 990(4) and (5), 992(4) and (6), 993(2) and (4) and 998(3) and (4).
2529.If the company is not carrying on a trade or property business or has not carried on a trade or property business the amount is one to which the charge to corporation tax on income is applied, see subsection (4).
2530.This treatment is also applied to the recovery of relief given for contributions to a plan trust. In the source legislation paragraphs 10 and 12 of Schedule 4AA to ICTA charge these amounts as trade receipts. See Change 76 in Annex 1.
2531.The amount charged by subsection (4) is included on the list of former Schedule D Case VI charges (in section 834A of ICTA as inserted by Part 1 of Schedule 1 to this Act). This does not mean that loss relief is available under section 396 of ICTA against the amount charged by subsection (4). This is because the amount charged by subsection (4) does not arise from a transaction as required by that section.