2016: the year in share schemes

Posted by admin at 15:52 on 13 Feb 2017

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Clock showing the hands changing from 2016 to 2017

There have been bigger issues in the world this year than share schemes. Nonetheless, it’s been an exciting year for us at RM2. Here’s a look at the best (and worst) bits:

January 2016:  Back to work for our admin team.  We file around 60 trust returns for our clients that operate Employee Benefit Trusts and Share Incentive Plans

February 2016:  HMRC Shares & Assets Valuation announces the withdrawal of its post-transaction valuation services from 16 March. This is disappointing as it reduces certainty for companies rewarding employees with equity incentive arrangements outside government sponsored schemes such as the Enterprise Management Incentive (EMI).  More worryingly, will HMRC consider withdrawing pre-transaction clearance for those schemes in the future?

March 2016:  After a period of truce (owing to difficulties with HMRC’s online Employment Related Securities (ERS) system), HMRC reinstates filing penalties for late share plan returns. 

RM2 sets up RM2 Corporate Finance Limited, to focus on capital raising and structuring for Employee Ownership Trust (EOT) transactions. Garry Karch joins us, bringing 25 years of experience in the US market. 

In the Budget, the Chancellor reduces the capital gains tax exemption for Employee Shareholder Status (ESS) (the beginning of the end …). He also slashes Capital Gains Tax (CGT) rates generally from 18% to 10%, and from 28% to 20% for higher rate tax payers. 

April 2016:  ERS online filing continues less than smoothly. HMRC announces staged filing periods for different schemes. 

May 2016:  RM2 and the Employee Ownership Association publish the first major survey of companies that have established Employee Ownership Trusts (EOTs).  The survey suggests broad interest in the new EOT – companies range from those with a turnover of £150,000 up to £140 million. 

June 2016: A fortunate amendment to the Finance Bill means that, if EMI options have been granted in a company that is then acquired by an Employee Ownership Trust, this is not a disqualifying event for the purposes of the EMI options. The amendment applies retrospectively to October 2014.    

July 2016:  RM2 publishes “An Introduction to Employee Ownership Trusts” by Garry Karch, and we are delighted to have Malcolm Hurlston OBE, Founder & Chairman of the ESOP Centre, introducing the book launch.

RM2 publishes the annual Top 5 list of the largest employee-owned companies on behalf of the Employee Ownership Association. This shows another year of growth within the employee ownership sector, with combined sales of £22.6 billion and (6.3% growth year on year), a rise of 1.5% in productivity year on year and employee numbers growing by a further 5.3% year on year.

Share schemes returns month. RM2 completes over 150 share plan returns for our clients. 

The UK ushers in a new prime minister. Mrs May expresses an interest in reigning in excessive executive pay and giving employees a place on the board. However, by November she seems to be rowing back on some of her ideas …

August 2016: HMRC issues late filing penalties to those companies who didn’t file their share plans returns on time. If returns are not sent by 6 October, an automatic filing penalty of £300 applies.

The High Pay Centre reports that the average pay for a FTSE 100 CEO in 2015 was around £5.5 million – representing a 10% pay increase from the previous year. 

September 2016: We’d normally expect HMRC share schemes statistics to be published round about now.  However, the online filing system means the data isn’t available – we’ll have to wait till next June for 2015/16 statistics ...

October 2016:  The employment tribunal finds that Uber drivers are not self-employed but should benefit from rights applicable to the status of employment. The case will be watched with huge interest as it develops and is likely to have a massive impact on the treatment of workers operating in the so-called “gig economy”.

November 2016: The Chancellor kills Employee Shareholder Status stone dead in his autumn statement. This smells like a political sideswipe (the ESS was definitely George Osborne’s baby) but it would be surprising if its passing was mourned in the world of share plans.

The annual Employee Ownership Association conference is brilliantly attended; the place to go if you want to hear stories of real employee ownership from all the horses’ mouths! Our client Konditor & Cook wins the annual Employee Ownership Investment Award.

December 2016:  Draft legislation for salary sacrifice arrangements is published. We are disappointed to see that, while there are certain exemptions (for example, bicycles and childcare vouchers), there doesn’t seem to be a specific exemption for Share Incentive Plans (SIPs). Watch this space.

And, last but certainly not least, ProShare held their annual awards dinner. Congratulations to Graeme Nuttall for his Services to Employee Ownership award!

Thanks to all our clients and associates for all their support throughout the year. We’re looking forward to all the challenges and opportunities that 2017 will bring!