The complexities and barriers involved in 'unapproved' employee share schemes have been set out today in an interim report published by the Office of Tax Simplification (OTS).
The OTS’s project follows on from its work on tax-advantaged (or ‘approved’) share schemes published earlier this year; many OTS recommendations of which are being taken forward by the government in a current HMRC consultation. The OTS is now midway through a complementary review of so-called ‘unapproved’ employee share schemes, looking at the most commonly used such as option schemes, long-term incentive plans, deferred share schemes, as well as more ad hoc arrangements. This review, covering both technical and administrative aspects, aims to identify recommendations for simplifications, to make it easier for employers to introduce and run such arrangements.
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.
During the review, the OTS has gathered evidence from meetings, surveys and roadshows throughout the UK. These events have given employers, professional advisers, and representative bodies a chance to contribute to the review with problems currently faced. However, the OTS remains open to views from anybody, which can be submitted through the OTS’s mailbox.
Some of the barriers and complexities to the use of such schemes that have been identified by those that use - or can’t use - them include: difficulties in managing schemes for international employees; problems with the valuation of shares (not just for unquoted companies); difficulties in meeting PAYE requirements; confusion around penalties; as well as the complexity of administrative forms.
This interim report has been published on the website: http://www.hm-treasury.gov.uk/ots.htm, and final recommendations will be reported ahead of Budget 2013.
Notes to editors
- The independent Office of Tax Simplification was established on 20 July 2010 to carry out reviews in order to provide expert advice to the Chancellor on options to improve and simplify the UK’s tax system. It started work in September 2010.
- The OTS team is led by Chairman Rt Hon Michael Jack, and Tax Director John Whiting and has a staff drawn from HM Treasury, HM Revenue & Customs and secondees from the private sector. Details and biographies are available on the OTS website. More on the OTS reviews can be found here: http://www.hm-treasury.gov.uk/ots.htm
- The OTS’s report on tax-advantaged (‘approved’) share schemes, covering SAYE Share Options, Company Share Option Plans, Share Incentive Plans and Enterprise Management Incentive, was published in March 2012 and can be found at http://www.hm-treasury.gov.uk/ots_essreview.htm . The HMRC consultation, which takes forward many of the OTS’s recommendations is on the HMRC website
- Comments on the evidence gathered for the OTS’s interim unapproved share scheme review should be sent to firstname.lastname@example.org by the 28 September. Contributions to the next stage of the review, and in particular responses to the specific questions posed in Chapter 2 of the report should be sent to the same email by the 26 October.
Issued by Office of Tax Simplification Press Office
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OTS Press Officer
Phone: 020 7147 0052 / 07917 598392