Subject to meeting various conditions which are discussed below, companies can claim a statutory deduction from profits for share awards to directors / employees or to another person acquiring shares by reason of an employment. The underlying policy of the provision is to recognise the increasing use of shares as part of an employee's remuneration package. Remuneration expenses are generally deductible for corporation tax purposes, however, expenses relating to shares are usually classed as capital and are therefore not deductible. Therefore, specific legislation is required to allow a deduction for employee share acquisitions in certain circumstances, as described below.
Generally the amount of relief available mirrors the amount chargeable to income tax on the recipient, eg there is no income tax charge under an EMI scheme (dealt with further below). The shares can be given as part of an approved share scheme with beneficial income tax treatment, an unapproved share option scheme or gifts of shares. See BIM44015 for a table which summarises the income tax and NIC treatment of various approved and unapproved share schemes.