BIM44450 - Specific deductions - employee share schemes: Providing “non-qualifying” shares, a/c periods from 1 Jan 2003 - introduction

Relief is not given under FA03/SCH23 for providing employees with shares which are not “qualifying shares”.

Deductions for the costs to employers of providing non-qualifying shares are determined by the same general tax principles applicable for accounting periods starting before 1 January 2003, see BIM44040 onwards.

The costs of providing “non-qualifying shares” to employees fall into the following categories:

• shares provided through “case law” employee benefit trusts to which the employer makes contributions, see BIM44455,
• shares provided to employees under global share schemes for which the employer pays an intra-group recharge, see BIM44460,
• new “non-qualifying shares” issued direct to employees, see BIM44465.

Non-qualifying shares

The following shares are not qualifying shares for the purposes of FA03/SCH23:

• partly-paid shares, or
• redeemable shares, or
• preference shares, or
• unlisted shares in a subsidiary company (unless its parent company is listed on a recognised stock exchange and is not a close company), or
• shares in a company which is not sufficiently linked to the employing company (see BIM44295) at the date on which the employee acquires:

• • the shares, or
  • any earlier right (share option) to acquire the shares.