Changes to tax advantaged share schemes?
On 6 March the Office of Tax Simplification (“OTS”) published its report on approved employee share schemes. The report includes a number of recommendations.
A link to the OTS’s report is set out in the ‘Resources’ section below.
This is the first part of a two part review into share schemes which is being conducted by the OTS. The second part of the review will consider unapproved share schemes.
Summary of recommendations
We set out a brief summary of the most important recommendations below:
- Remove the current approvals process for Company Share Option Plans (“CSOPs”), Share Incentive Plans (“SIPs”) and Save as you earn (“SAYE”) schemes and replace it with a simpler self-certification process (similar to the position for Enterprise Management Incentives (“EMI”) schemes).
- Carry out further research on whether CSOPs should be retained or abolished.
- Merge CSOP and EMI rules, while retaining the current EMI limits for smaller high-risk companies (assuming that CSOPs are to be retained).
- Adopt a single annual return for all share schemes and reintroduce online filing, possibly moving to real time filing of share scheme grants, exercises and lapses.
- Harmonise the ‘good leaver’ rules for CSOPs, SIPs and SAYE schemes by presuming that leavers are good leavers unless they fall into certain categories e.g. they are dismissed for cause or they resign voluntarily.
- Explore ways of reducing the costs of the approved savings carriers for SAYE schemes.
There are a number of other recommendations, of a more technical nature, which are designed to relax some of the conditions required to implement and operate approved share schemes. We will provide further details once the government has confirmed how it proposes to implement the OTS’s recommendations.
The government is to consider the recommendations made by the OTS and will consult on the best way of taking these recommendations forward. It is likely that any amending legislation will be included in next year's Finance Bill. There is however, no guarantee that any of the OTS's recommendations will ever become law.
The way in which the government implements the OTS’s recommendations may have a strong impact on how companies approach approved share schemes.
The OTS’s recommendations are sensible and, if implemented, should reduce the administration and costs incurred in implementing and administering approved share plans.