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Remuneration expenses are generally deductible for corporation tax purposes as they are considered to be incurred wholly and exclusively for the purposes of the trade. However, expenses relating to shares are usually classed as capital and are therefore not deductible. For this reason, specific legislation is required which allows a deduction for employee share acquisitions, which are often used as a means of incentivising key employees. Subject to meeting the various conditions 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 employment.

Generally, the amount of relief available mirrors the amount chargeable to income tax on the recipient. This is the case even where there is in fact no income tax charge, eg under an Enterprise Management Incentive (EMI) scheme. The shares can be given as part of a tax advantaged share scheme with beneficial income tax treatment, a non-tax advantaged share option scheme or gifts of shares. See BIM44015