BIM44145 - Measuring the profits (specific rules & practices) - receipts & deductions: specific deductions - employee share schemes: providing shares - accounting periods starting before 1 January 2003: ‘Case law’ employee share ownership (ESOP) trusts - introduction

For accounting periods beginning before 1 January 2003 deductions for employers’ 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) (trusts which meet the qualifying conditions in FA89/SCH5), see BIM44065.
• Other (often known as ‘case law’) trusts.

Other (‘case law’) trusts

Whether, and if so when, a deduction is allowable for an employer’s contribution to ‘case law’ employee share ownership trusts depends on general tax principles, in particular for employers carrying on a trade or profession whether the contribution is:

• revenue (not capital) expenditure, and
• laid out wholly and exclusively for the purposes of the employer’s trade or profession (ICTA88/S74 (1)(a)),
• correctly deducted for the period concerned in accordance with generally accepted accounting practice (GAAP).

Guidance on whether contributions to ‘case law’ employee share ownership trusts are allowable deductions is at BIM44150 onwards.

Guidance on GAAP and the timing of deductions for contributions to ‘case law’ employee share ownership trusts is at BIM44160 onwards.