The parts of the UK Finance Bill relating to share plans came into force yesterday, finally implementing many of the recommendations of the Office of Tax Simplification in this area. The main thrust of the new regime is online registration and self-certification of plans and filing of annual returns, of which more details are given in our alert. This should make administration easier and quicker, albeit there will be some input required up front.
Another major benefit is that now any shares can be used for tax-advantaged share plans, whereas in the past many companies were precluded from setting up tax-advantaged plans because of the particular restrictions on their shares.
In addition, CSOPs can now potentially be put in place as easily and quickly as EMI options. The speed of establishment of SIPs and SAYE schemes has also gone up a notch, although these will always require some time because of the need to appoint a trustee or administrator and for the invitation/application process.
These advances will be of particular benefit for non-UK parent companies wishing to extend various awards under their share plans to UK employees in a tax-efficient way. In particular, a US employee stock purchase (s423) plan can now be replicated readily using partnership shares under a SIP.
The Cinderella of the piece is employee ownership of a company through a controlling trust, for which generous CGT and income tax exemptions are available. Although significant changes to the draft legislation relating to employee ownership trusts have been made after consultation, major obstacles that we previously outlined still remain. It may be that this approach is most frequently used for employee-owned companies spun out of public service providers, as espoused by the Government.
- HMRC is expected to issue guidance on various issues to do with the new regime, such as the position of companies who have had plans approved by the Revenue in the past including provisions that would not satisfy the new requirements and the position on death of a participant (see our previous blog post)
- Companies should review their existing HMRC-approved plans in the light of the new requirements, particularly company share option plans (CSOPs), in good time before the next grant is made
- All plans, whether HMRC-approved or unapproved, can now be registered online with HMRC (and self-certified, if tax-advantaged) and this must be done by the deadline of 6 July 2015