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HMRC's internal guidance concerning the deductibility of share scheme costs is contained in BIM44000 onwards. The key issue to determine is whether any of the particular costs are capital in nature and therefore disallowable for the purposes of calculating trade profits.

The special provisions for certain tax-favoured employee share schemes are discussed below.

In P-E Consulting Group Ltd¹, payments by a company to a trust set up to acquire shares in the company for the benefit of the employees and to prevent outside interference were held to be deductible on the basis that:

1. Ìý

   •ÌýÌýÌýÌý the payments to the trust were revenue and not capital expenditure because:

2. 1. Ìý

      –ÌýÌýÌýÌý the object of the scheme was to enable the taxpayer company's business to be carried on more efficiently, since the conduct of its business depended on the high qualifications and expertise of its staff and their efforts in promoting the taxpayer company's business free from outside interference, and

   2. Ìý

      –ÌýÌýÌýÌý the expenditure consisted, not of a single payment on which the scheme depended, but of a series