As part of the UK Government’s drive to make 2010-20 the “decade of employee share ownership”, there have recently been a number of significant changes to HMRC approved share plans and Enterprise Management Incentive Schemes (EMI).
Provisions which became law under the Finance Act 2013, along with draft legislation published for the Finance Act 2014, together represent the most significant set of developments in the last 10 years for companies operating employee share schemes and employees participating in them.
Some of the already enacted and proposed tax and qualification amendments include:
- increases to Share Incentive Plan (SIP) and Save-As-You-Earn Scheme (SAYE) limits;
- further tax breaks for specific forms of corporate transactions under SIPs, SAYEs and Company Share Option Plans (CSOP);
- widening of the categories of employees who can participate under SIPs, SAYEs and CSOPs;
- significant enhancements to EMI tax breaks and further grace periods following EMI “disqualifying events”;
- easier access to statutory corporation tax relief on corporate transactions and
- changes to retirement provisions with a number of employment law implications arising from that.
Additionally there are some significant compliance and administrative developments to be aware of including:
- self-certification and registration of plans with HMRC rather than formal HMRC approval;
- a new process for notifying HMRC of EMI option grants with the removal of the existing paper EMI1s;
- new HMRC powers of enquiry and a new non-compliance penalty regime; and
- a move towards online filing of all HMRC tax year-end reporting forms.
Some of the above changes are deemed to have effect for existing schemes but companies should still consider:
- amending their scheme rules in order to be able to take advantage of the beneficial changes;
- varying their schemes in order to ensure consistency with the new legislation;
- amending employee communication materials to ensure accuracy and to match the revised legislation; and
how they will satisfy their obligations under the new online processes.