The Autumn Statement 2015
Leaving aside the obvious political implications, in our view the most interesting parts of the Chancellor’s autumn statement are those that focus on the government’s continuing clamp down on tax evasion and avoidance schemes. From a share schemes perspective, this reinforces the advantages of government recognised arrangements such as Enterprise Management Incentives and other tried and tested approaches to share schemes.
In particular, we note the government intends to take action against those who have used or continue to use disguised remuneration schemes and so have not yet paid their fair share of tax. The government will also consider legislating in a future Finance Bill to close down any further new schemes intended to avoid tax on earned income, where necessary from 25 November 2015. Given the recent successful HMRC appeal in the Rangers case (see a recent blog here), companies need to think very carefully when they implement schemes to reward and retain employees, particularly where employee benefit trusts are involved, to make sure they do not fall foul of such anti-avoidance legislation.
The Chancellor has repeated his concern about the growth of salary sacrifice arrangements and the government is gathering evidence to inform its approach to these. We await the outcome of any consultation to see if changes could potentially effect Share Incentive Plans, under which employees can purchase shares in their companies out of pre-tax salary.
With regard to tax evasion generally, new criminal and civil penalties will be introduced by Finance Bill 2016, with particular reference to offshore tax evasion. The General Anti-Abuse Rule (GAAR) will be tweaked to enable it better to tackle marketed avoidance schemes and, where cases are successfully tackled by the GAAR, a new penalty of 60% of the tax due will be levied. Expect changes to the Transactions in Securities rules and further targeted anti-avoidance rules in respect of company distributions.
Aside from tax avoidance and evasion issues:
Finance Bill 2016 will introduce a number of technical changes to streamline and simplify aspects of the tax rules for tax advantaged and non tax advantaged employee share schemes. These changes will provide more consistency including putting beyond doubt the tax treatment for internationally mobile employees of certain employment related securities and options.
The government announced a new digital revolution for HMRC, promising an investment of £1.3bn to turn HMRC into “one of the most digitally advanced tax administrations in the world. Our experience at RM2 of the digital revolution in respect of the Employment Related Securities online portal has left us slightly sceptical in this area but it’s possible that the share schemes team didn’t have that amount of money to play with. The government has promised to consult on the details.
An overview of draft legislation will be published on Wednesday 9 December.