BIM44040 - Measuring the profits (specific rules & practices) - receipts & deductions: specific deductions - employee share schemes: providing shares - accounting periods starting before 1 January 2003: contributions to employee share ownership (ESOP) trusts

Different rules apply to determine deductions for contributions to employee share ownership trusts in computing employers’ taxable profits depending on whether the accounting period starts before or after 1 January 2003.

Accounting periods starting before 1 January 2003

For accounting periods starting before 1 January 2003 deductions for contributions to employee share ownership trusts fall into the following categories:

• SIP trusts (set up under Share Incentive Plans approved by HMRC under ITEPA03/SCH2, previously FA00/SCH8), see BIM44045;
• APS trusts (set up under Profit Sharing Schemes approved by HMRC under ICTA88/SCH9), see BIM44060;
• qualifying employee share ownership trusts (QUESTs), see BIM44065;
• Other trusts (generally known as ‘Case Law’ trusts), see BIM44145.

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Accounting periods starting on or after 1 January 2003

For accounting periods starting on or after 1 January 2003 deductions fall into the following categories:

• Contributions to SIP trusts (trusts set up under Share Incentive Plans approved under ITEPA03/SCH2, previously FA00/SCH8);
• Other arrangements (including contributions to non-SIP trusts) to provide employees with shares which are ‘qualifying shares’ under FA03/SCH23;
• Contributions to trusts to provide employees with ‘non-qualifying shares’ (to which the EBT legislation in FA03/SCH24 applies).

Guidance on deductions for accounting periods starting on or after 1 January 2003 is at BIM44250 onwards.