The Office of Tax Simplification has asked people with an interest in ‘unapproved’ employee share schemes to review the ‘key areas of complexity’ that it has identified in a report published this week.
The findings set out in the interim report supported the perception that employee share schemes were ‘a highly complex area’ of the tax code, the OTS said. Problems cited by taxpayers and advisers included difficulties with valuation of private company shares, the employment-related securities rules (ITEPA 2003 Part 7) and the ‘disguised remuneration’ rules (ITEPA 2003 Part 7A).
The OTS has taken a wide view of the meaning of ‘share scheme’. It noted that while many share-based awards involve formal rules governing multiple awards to employees, there is ‘a myriad’ of less formal methods of providing equity-based rewards.
‘In private companies in particular, shares may be transferred to key individuals with a minimum of formality; nonetheless, such transfers will be subject to the large body of legislation, case law and guidance which govern employee share schemes. So, for example, a family owned business which promises shares to one key individual depending on his or her continued employment in the business will have to follow the same tax rules as an international business providing a global performance based share plan to thousands of employees.’
John Whiting, Tax Director of the Office of Tax Simplification said: ‘Many businesses have told us that these arrangements are important in aligning employee reward with how the business is doing and help with staff retention. At the same time, they regularly cite technical difficulties or administrative burdens. We will now start to look for solutions to facilitate use, and will put forward common sense recommendations in due course.
‘However, before we develop recommendations, it’s really important that we make sure we have a full and complete picture of the arrangements businesses use and the issues they encounter. So, we are publishing this interim report to ask people to confirm we have the right messages. We’re also setting out some of the questions we will be addressing over the coming months and would really welcome input on those as well.’
Comments are invited by 28 September on the OTS’s initial findings, and by 26 October on the ‘areas for further input’ set out in chapter 2 of the report. The OTS plans to set out its final recommendations by Budget 2013.
An HMRC consultation on the implementation of many of the OTS’s recommendations on approved (tax-advantaged) share schemes closes on 18 September.
The Office of Tax Simplification has asked people with an interest in ‘unapproved’ employee share schemes to review the ‘key areas of complexity’ that it has identified in a report published this week.
The findings set out in the interim report supported the perception that employee share schemes were ‘a highly complex area’ of the tax code, the OTS said. Problems cited by taxpayers and advisers included difficulties with valuation of private company shares, the employment-related securities rules (ITEPA 2003 Part 7) and the ‘disguised remuneration’ rules (ITEPA 2003 Part 7A).
The OTS has taken a wide view of the meaning of ‘share scheme’. It noted that while many share-based awards involve formal rules governing multiple awards to employees, there is ‘a myriad’ of less formal methods of providing equity-based rewards.
‘In private companies in particular, shares may be transferred to key individuals with a minimum of formality; nonetheless, such transfers will be subject to the large body of legislation, case law and guidance which govern employee share schemes. So, for example, a family owned business which promises shares to one key individual depending on his or her continued employment in the business will have to follow the same tax rules as an international business providing a global performance based share plan to thousands of employees.’
John Whiting, Tax Director of the Office of Tax Simplification said: ‘Many businesses have told us that these arrangements are important in aligning employee reward with how the business is doing and help with staff retention. At the same time, they regularly cite technical difficulties or administrative burdens. We will now start to look for solutions to facilitate use, and will put forward common sense recommendations in due course.
‘However, before we develop recommendations, it’s really important that we make sure we have a full and complete picture of the arrangements businesses use and the issues they encounter. So, we are publishing this interim report to ask people to confirm we have the right messages. We’re also setting out some of the questions we will be addressing over the coming months and would really welcome input on those as well.’
Comments are invited by 28 September on the OTS’s initial findings, and by 26 October on the ‘areas for further input’ set out in chapter 2 of the report. The OTS plans to set out its final recommendations by Budget 2013.
An HMRC consultation on the implementation of many of the OTS’s recommendations on approved (tax-advantaged) share schemes closes on 18 September.
