BIM44460 - Specific deductions - employee share schemes: Providing “non-qualifying” shares, a/c periods from 1 Jan 2003 - through global share schemes

Deductions for intra-group recharges payable by UK subsidiary companies for “non-qualifying shares” provided to their employees under a global employee share scheme follow broadly the same principles as apply for accounting periods starting before 1 January 2003, see BIM44225 onwards.

The key difference is that for intra-group recharges paid on or after 27 November 2002 the anti-avoidance legislation in FA03/SCH24 will apply.

FA03/SCH24 mainly targets contributions to employee benefit trusts but also applies to benefits provided by other third parties. Its “matching” effect will defer the timing of any tax deduction for the intra-group recharge until, and restrict it to the extent that, the employee receives benefits in the form of money or assets (including the “non-qualifying shares”) on which both income tax and NICs liability arises.

Following amendments to ITEPA03/S700 made by FA03/SCH22 all “non-qualifying shares” are deemed to be readily convertible assets. Liability to income tax (collected under PAYE) and NICs arise, so they are “qualifying benefits” for the purposes of FA03/SCH24.