Christmas Crackers: key moments of 2011
Here is a round-up of some of the key share scheme news of 2011!
This special 10% rate of tax is now available on lifetime gains of up to £10m. It is available to officers of the Company so long as their shareholding is at least 5% of the voting share capital of the company and they have held the shares for at least 12 months prior to disposal.
EBT clamp down
The new legislation in the Finance Act 2011 states where trustees allocate shares in an EBT, this will be classified as earmarking; it is irrelevant whether the employee is aware or not. If an EBT brings in shares to meet future requirements of a share scheme no charge will be applied, however, this is only if the shares are not earmarked. Following the Finance Act, we have updated our EBT fact sheet. Download it here for more information.
SAYE interest slashed
This year proved to be unfavourable for the SAYE scheme as interest rates were cut and cut again! For three year savings contracts under a SAYE there is now no interest at all. The best and closest alternative to the SAYE is the SIP.
Big new boost for share schemes from Europe
This year the European Economic and Social Committee published details of an initiative to encourage employee share ownership across Europe. The committee focused on small private companies and emphasis was placed on employee buyouts as a vehicle for succession. It was also highlighted that employee financial participation (EFP) and share schemes had considerable impact on motivation and production of employees. Awareness is to be raised of EFP across member states to identify obstacles to cross border schemes and to devise solutions.
Some of the other articles we published in 2011 generated a lot of interest. Here are a few of them:
Growing interest in LLPs
Recent difficulties in the economic climate have all contributed in the rising interest in LLPs. The numerous benefits include taxation of profits at lower corporate tax rates, limitation of liability with partners as well as more tax efficient succession management for the introduction and retirement of partners.
2011 Chamber of Horrors
Some of the most horrific errors made when implementing share schemes (even with the help of professional advisers) are unearthed in our chamber of horrors. From failing to amend or add appropriate transfer provisions to articles of association, through to administrative issues, all have resulted in disaster. For all the gory details read our blog here. If you think you may have already made an error worthy of the Chamber then please call us for help!
New pension caps driving increased interest in share schemes
With limits of pension contributions and individual pension funds driving senior employees to accumulate wealth and save tax, more and more are turning to employee share schemes for favourable tax savings. Many share schemes put individuals into a capital gains tax regime rather than income tax which substantially reduced the tax rate. Another tax possibility under share purchase schemes, and if participants are awarded shares over 5% of a company, is the potential to be eligible for Entrepreneurs Relief.
Learn from VCs
Or at least, their mistakes when it comes to share schemes! Beware of the following: shutting off opportunities for tax savings; failing to consider alternatives to options; imposing unnecessary performance conditions and imposing non-dilute clauses.
Continue to read our blogs into the New Year for more key share scheme updates and insights from our network of professional advisers.
If you have an article that you think would be a great addition to our professional focus column please get in contact with the RM2 team. If you are seeking further advice on anything else share plan related, call us on 020 8949 5522.