Employee Share Schemes: after the budget

Posted by RM2 at 15:51 on 1 Feb 2014


The Budget was big on pensions, but quiet on share schemes. Nonetheless, this is going to be another exceptionally busy and exciting year in the share plans world. Here’s what we’re looking forward to most:

Employee Ownership Trust

This has the potential to bring about fantastic advantages for employee owned companies – including a Capital Gains Tax (CGT) exemption if shares are sold to an employee ownership trust, and Income Tax exemption on bonuses for employees in employee owned companies.

There will be devil in the detail, so we await the latest draft legislation (due 27th March).

The online share scheme revolution

From April, HMRC will no longer give formal approval for SIP, CSOP and SAYE. All those schemes will become self-certified, in the same way as EMI, and all share plans will need to be registered online.

From 6th July 2015 you must have registered all your share schemes with HMRC, and you must also have self-certified any existing plans by that date.

This is a huge change to the administration of share schemes. Doubtless there will be teething problems, but in the long run, self-certification should make it much easier and quicker for companies to put share plans in place, and the move to online registration and returns is a really positive step away from paper returns.

Increased limits for SAYE and SIP

We welcome the long overdue increase in limits for these tax advantaged all-employee share plans. From 6th April, the monthly SAYE saving limit will double from £250 to £500. Annual SIP limits will increase both for Partnership (bought) Shares (from £1,500 to £1,800) and for Free Shares (from £3,000 to £1,800).

The increases go some way to recognising the importance of all employee share schemes as well as discretionary schemes (EMI limits have been given regular and generous increase in limits over the years) – but it’s sad to see that CSOP remains the poor relation, with no move to increase the £30,000 limit.

Brave New World?

We’re really excited about two proposed consultations to be held this year, both as a result of the Office of Tax Simplification’s review of non-tax advantaged share plans:

The “marketable security” – the plan is to simplify, and make fairer, the current position when a tax charge can arise on employee shares even if there’s no real chance of selling the shares to cover the tax (the “dry” tax charge).

The big question: How will this affect companies with EBTs, and smaller listed companies, particularly in the context of NICs?

A user friendly employee shareholding vehicle (likely to be in the form of an employee benefit trust). The plan again is to make it simpler, particularly for private companies, to easily (and cheaply) set up a trust holding shares for employees without having to worry about the many current technical and tax difficulties.

The big question: Will this create a tax avoidance vehicle for the unscrupulous?

Look out for the consultations and make sure your views are heard. These two proposals could have a very significant impact on companies with employee share schemes, especially those operating EBTs.

For more information on any of the content covered in this article, please contact a member of the RM2 team on 020 8949 5522.