Commentary on Sections Overview Chapter 1: Share incentive plans Section 988: Deductions for running expenses of an approved share incentive plan
2534.This section prevents any prohibitive rule in this Chapter denying a deduction for the costs of running a SIP. It is based on paragraph 8 of Schedule 4AA to ICTA.
2535.The trustees of a SIP will incur costs related to the day to day running of the SIP. For example, they will have to operate a PAYE scheme to deal with the employees’ income tax liabilities. They will also incur incidental costs in acquiring the shares. The employing company will have to meet these costs.
2536.The section does not itself give the company a deduction for payments made to the trustees to enable them to meet the running costs. It provides that none of the prohibitive rules in this Chapter, such as section 994(7), prevents a deduction being given for running expenses. As the SIP is run for the benefit of its employees the costs would usually be allowed as a normal deduction in calculating the company’s taxable profits. Whether or not a deduction is allowed is considered on first principles.
2537.Subsection (3) makes clear that running expenses do not include the cost of acquiring the shares except for the incidental costs listed in subsection (4). The reference to stamp duty reserve tax is new.