Are there any tax deductions/liability for the company when operating a Share Plan?

Yes

National Insurance deductions

Good news – for SIP, companies can claim back National Insurance Contributions on the value of the award.

For participants there are no income tax or NIC to pay when shares are awarded under the plan. If participants are making contributions to purchase Partnership Shares, these contributions are taken from their gross pay.

There may be Income Tax and NICs to pay if a participant leaves your employment or takes the shares out of the plan within five years of joining it. This will depend on why the shares are taken out and how long they have been in the plan.

- Don’t worry we have a well-established process in place to help you.

Sharesave

Generally no NICs are payable when share options have been granted under an HM Revenue & Customs approved scheme since regulations exclude these share options from being treated as Readily Convertible Assets. The exception to this is if a cash cancellation payment is made for share options awarded from 6 April 1999.

SIP

In some circumstances shares withdrawn by an employee from the Share Incentive Plan (SIP) may also attract a NICs liability.

SIP

Corporation tax

Companies are allowed deductions against corporation tax (CT) by the Share Incentive Plan legislation for certain costs of setting up and operating the plan.

They are also allowed a deduction in calculating their taxable profits for their costs in setting up a Share Incentive Plan.

Deductions are allowed against profits for free and matching share awards equal to the market value of shares when they are acquired by the plan trust.

For more detailed information please refer to the HM Revenue & Customs web site.