HMRC withdraws post transaction valuation checks
HMRC’s Shares & Assets Valuation (SAV) will be withdrawing its informal valuation check service for PAYE Heath Checks and ITEPA Post Transaction Valuation Checks. SAV says that the process absorbs a lot of resources and that almost 90% of such checks are accepted as submitted anyway.
When will this happen?
Any requests received after 31 March 2016 will not be processed.
Where will the greatest impact be?
The greatest impact will be for companies operating non-tax-advantaged employee share incentive arrangements including share purchase plans, growth share plans and joint share ownership plans. Under these schemes, HMRC has been happy to provide confirmation of the market value of the shares after the awards were made rather than in advance of the award as is the case for tax-advantaged schemes such as EMI or SIP. This was on the basis that it is reasonable for employers to have a clear idea about any potential PAYE issues that might arise out of the award of shares to employees, even if the awards were not made under the formal government recognised share plan arrangements.
As SAV will no longer confirm this, there is a risk of negative tax consequences arising if, upon a chargeable event such as the sale of shares, it is deemed that the shares were originally acquired at a discount.
What will SAV offer instead?
Given the ongoing reduction in HMRC staffing, it is unlikely that this service will be restored any time soon. SAV have noted that the valuation services for the tax advantaged schemes (EMI, CSOP, SAYE and SIP) will continue for the time being. SAV will help by:
- Regularly updating guidance in its Manual.
- Considering the possibility of running a small number of Valuation Workshops for agents in 2016/17.
- Working internally to identify the minority of cases from submitted returns where valuation tax risk exists and where a review of the valuation is appropriate.
Would you like further advice on this?
Waiting to see if HMRC opens an enquiry on your share purchase plan is unlikely to be an attractive option for many companies – or, indeed, the participants. It is likely that, where such schemes are operating, some additional comfort may be sought in respect of valuing the company’s shares at the time of award.
For more information, please contact RM2.