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1. This clause authorises the phasing out of corporation tax relief for payments made by companies to the trustees of approved profit sharing scheme trusts to acquire shares for appropriation and to meet running expenses. Where the sums are used by the trustees to acquire shares and appropriate them to employees, relief will continue for payments made between 21 March 2000 (Budget day) and 5 April 2002. Relief for administrative expenses will also continue where the payment is made within 3 years of the last appropriation of shares under the scheme and before 5 April 2002.(*Rev3)

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DETAILS OF THE CLAUSE

2. Subsection (1) authorises the phasing out of the relief.

3. Subsection (2) removes the relief for payments made to the trustees between 21 March 2000 (Budget Day) and 5 April 2002 unless they are used to acquire shares and those shares are appropriated to employees within 9 months of the end of the accounting period in which the payment was made to the trustees, and in any case before 6 April 2002.

4. Subsection (3) removes relief for payments made to trustees after 6 April 2002 in order to acquire shares to be appropriated to employees.

5. Subsection (4) removes relief for payments made to trustees to meet trustees’ expenses where the payment is made more than 3 years after the last approved appropriation of shares under the scheme.

6. Subsection (5) explains that the phasing out refers to reliefs for sums used to acquire shares for appropriation under the approved profit sharing scheme, and to sums used to cover the trustees’ expenses.

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BACKGROUND NOTE

 

7. The existing profit sharing scheme, which is to be phased out under clause 49 of this Bill, provides corporation tax relief for companies making payments to their profit sharing scheme trusts. Under section 85 of the Taxes Act, companies can claim a deduction from their taxable profits for payments that they make to the trusts provided they meet one of the following conditions. The sum has to be used by the trustees to acquire shares and appropriate them to employees under the approved profit sharing scheme within 9 months of the end of the accounting period during which the payment was made to the trustees, or to meet the reasonable expenses of the trustees in administering the scheme.

8. Therefore, in phasing out the approved profit sharing scheme, this clause is necessary to make provision for a phasing out of this corporation tax relief.

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