approved profit sharing
Under the Income and Corporation Taxes Act 1988, this scheme requires the establishment of an employee benefit trust into which the company pays cash out of its profits. The company obtains a corporation tax deduction for any such payment. Such payments will also, generally reduce profits for accounts and tax purposes. The trustees subsequently subscribe for new shares or purchase existing shares on the market and allocate shares to employees under the terms of the trust. The scheme is essentially non-selective, requiring employees to participate on similar terms. Shares, once allocated, have to be held by trustees for five years before the participant may take a transfer of such shares into his own name and for three years before he can sell them free of income tax. The maximum value of shares allocated in each year is the higher of ₤3000 and 10% of salary with an overriding limit of ₤8000 per annum. This type of scheme is the only scheme where participants do not have to pay for their shares.

Easyform Glossary of Law Terms. — UK law terms.

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