BIM44630 - Specific deductions: Employee benefit trusts: general purpose EBT contributions: timing of deductions: FA03/SCH24: interaction with FA03/SCH23

FA03/SCH23 (CT deductions for employee share acquisitions) applies to deductions for providing employees with shares which satisfy certain conditions, described in this guidance as ‘qualifying shares’. Guidance on FA03/SCH23 is at BIM44250 onwards.

Broadly FA03/SCH23/PARA25 disallows deductions in computing a company’s taxable profits for the costs of providing ‘qualifying shares’ until, at earliest, the period in which the employees acquire the shares (the ‘acquisition period’).

The interaction of FA03/SCH24 and FA03/SCH23 may need to be considered if:

• a deduction for a period before the acquisition period has been disallowed by FA03/SCH23//PARA25 because it relates to the expected costs of providing employees with ‘qualifying shares’; and
• although the intention was for the employees to receive ‘qualifying shares’ they end up receiving other kinds of benefits which are qualifying benefits for the purposes of FA03/SCH24 - for example non-qualifying shares or a cash alternative on which income tax and NICs liability arises; and
• the employees receive those other benefits out of a contribution by the employer to an EBT or other third party intermediary, rather than direct from the employer.

In these circumstances the amount disallowed for the earlier period should be treated as having been disallowed instead under FA03/SCH24/PARA1 (3).

The amount disallowed will then be available to be allowed as a deduction under FA03/SCH24/PARA1 (4) for the period in which the qualifying benefits are provided by the EBT or other third party out of the employer’s contribution.