HMRC v NCL Investments Ltd and another

In HMRC v NCL Investments Ltd and another [2022] UKSC 9 (23 March 2022) the Supreme Court (SC) dismissed HMRC’s appeal holding that a deduction was allowable in computing the trading profits of the companies for accounting debits arising from the grant of share options to employees. 

The taxpayer companies were wholly-owned subsidiaries of Smith & Williamson Holdings Ltd (SW) and employed staff who they made available to other group companies in return for a fee. SW established an employee benefit trust (EBT) which granted options to staff employed by the taxpayer companies to acquire shares in SW. The accounting treatment of the grants were governed by IFRS2. When options were granted to the employees the companies were obliged to recognise an expense (the ‘debit’) in their income statements equal to the fair value of the options with the corresponding...