New clause 1 - Deductions: supplementary

Employee Share Schemes Bill – in a Public Bill Committee at 10:30 am on 27th February 2002.

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'(1) Schedule 8 to the Finance Act 2000 is also amended as specified in this section.

(2) In paragraph 108 (cases in which no deduction allowed), at the end there is inserted—

''(6) No deduction is allowed in respect of the award of shares acquired by the trustees by virtue of a payment in respect of which a deduction has been made under paragraph 112A or 112B(3).''

(3) In paragraph 113 (withdrawal of deductions on withdrawal of approval), for the words from ''any'' to ''partnership shares)'' there is substituted—

''(a) any deductions under paragraph 106,

(b) any deductions under paragraph 107,

(c) any deductions under paragraph 112A (in so far as not already withdrawn under paragraph 112B), or

(d) any deductions under paragraph 112B(3),''.

(4) In paragraph 121 (termination of plan), at the end there is inserted—

''(10) In a case where—

(a) by virtue of a payment made to the trustees by the company, the trustees acquire shares in the company, or a company which controls it,

(b) a deduction has been made in respect of that payment under paragraph 112A (and has not been withdrawn under paragraph 112B), and

(c) not all the shares acquired by virtue of the payment have been awarded under the plan before issue of the plan termination notice,

an amount equal to the appropriate proportion of the deduction is treated as a trading receipt of the company for the period of account in which the plan termination notice is given.

(11) For the purposes of sub-paragraph (10), the appropriate proportion of the deduction is the proportion which the number of shares acquired by virtue of the payment and not awarded as specified in sub-paragraph (10)(c) bears to the total number of shares so acquired.''.'.—Mr. Lazarowicz.]

Brought up, and read the First time.

Photo of Mark Lazarowicz Mark Lazarowicz Labour/Co-operative, Edinburgh North and Leith

I beg to move, That the clause be read a Second time.

This new clause proposes changes to the underlying legislation, the Finance Act 2000, which are consequential on the other changes that will result from the Bill, as amended. The changes are not substantive, but would ensure that corporation tax relief would be given only once in respect of the payment to trustees and would not, for example, be granted again when shares were distributed to employees under the share incentive plan.

In addition, the new clause would allow for up-front corporation tax relief to be withdrawn in the event that Inland Revenue approval of a company's SIP were withdrawn. Also, if the SIP were terminated, it would allow a part of the relief to be withdrawn, proportionate to the as yet undistributed number of the shares acquired by the trustees under the provisions of this clause.

Question put and agreed to.

Clause read a Second time, and added to the Bill.