Corporation tax deductions for share schemes: Unlocking opportunities for international employees

While many UK companies are diligent in claiming relief for their UK-based workforce, we often find that the international employee population, specifically internationally mobile employees (IMEs) and those working for UK-host employers, is either overlooked or incorrectly calculated.

Corporation tax relief is generally available when employees acquire shares in their employer (or a parent company) by reason of their employment. The relief is typically equal to the market value of the shares at the time of acquisition, less any consideration paid by the employee.

For many businesses, these deductions are significant and may exceed any accounting expense or immediate cash outlay by the company. However, the rules governing relief in cross-border scenarios are complex, particularly where employees move between jurisdictions during the life of an award or where UK-resident companies host employees from overseas group entities.

The primary opportunities for additional relief often lie in three specific areas:

Where an individual is employed by a non-UK resident company but works in the UK for a UK-resident host employer. For example, on secondment, the UK host company may be entitled to claim CT relief. This is possible where the individual is subject to UK income tax on the share acquisition. In these cases, the law deems the individual to have an employment with the host employer for Part 12 purposes.

It is a common misconception that an employee must be within the charge to UK employment income tax for the company to claim CT relief. For certain share acquisitions, relief may still be available for non-UK employees if they would have been subject to UK tax had they been UK resident with UK duties. This can open up claims for international participants in global plans that are often excluded from CT calculations.

Where employees have mixed UK and non-UK duties, or change residence during the vesting period, apportionment rules may apply. While this requires granular data, it often reveals that companies are underclaiming relief by not correctly identifying the portion of the award that relates to UK-taxable earnings.

To ensure that full relief is claimed, we recommend that companies adopt a structured plan to assess their share scheme populations. This involves:

The complexities of Part 12 CTA 2009, combined with the data challenges of tracking mobile employees, means that many businesses may not be currently optimising their corporation tax position.

If you are currently only considering your UK-based employees in your CT deduction calculations, or if you have a significant number of inbound secondees, there may be an opportunity to revisit your CT relief. 

Our team has experience in reviewing international share scheme data and providing calculation methodologies to help clients claim their full statutory entitlements.

Get in contact with our tax team to discuss how we can assist you in reviewing your current processes and identifying potential opportunities for additional relief.

Approval code: NTEH7062624