Press release

Share schemes simplification recommendations put forward

Recommendations to simplify tax advantaged share schemes have been put to the Chancellor of the Exchequer and published today.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Recommendations to simplify tax advantaged share schemes have been put to the Chancellor of the Exchequer and published today by the Office of Tax Simplification (OTS).

The independent OTS has now completed its simplification review of the four Government approved employee share schemes that attract special tax reliefs.

Today’s recommendations include both technical and administrative simplifications and have been put forward to encourage take up of the schemes, and reduce the burdens on those that offer them. The key recommendations are:

  • Introduce a self-certification system - the OTS found unanimous agreement that the approval process with HM Revenue & Customs (HMRC) caused employers problems, which ranged from the volume of paperwork required, to delays in acceptance and lengthy negotiations over whether a share scheme was eligible. The OTS believes it is time to move to a self-certification process in line with self-assessment principles.
  • Review the CSOP scheme - during the review, the OTS considered if the Company Share Option Plan (CSOP) was still relevant today. Whilst evidence points to usage reducing, it is unclear as to why. The OTS therefore recommends that further work is done in this area to establish if CSOP is still relevant, or could be phased out or replaced.
  • Merge EMI and CSOP share schemes - the OTS established that there is clear scope for changes to simplify the schemes on offer that will make a genuine difference to employers. The OTS therefore, recommends that if CSOP is found to be still of use, then the EMI and CSOP schemes should be merged. This would take some of the confusion out of the system, and as these two schemes are broadly similar, a merger would be relatively simple. This merger would significantly reduce the amount of share scheme legislation.
  • Technical simplifications - the OTS has also put forward many detailed recommendations to individual schemes regarding the harmonisation of definitions, adjusting time limits for today’s employment climate, and modifying certain conditions.

John Whiting, Tax Director for the Office of Tax Simplification said:

We have looked hard to see whether the approved share schemes are still valid, given their decline in usage. Accordingly, we spent a lot of time gathering the views of the people that use them, and found that employers saw real benefits, citing greater commitment from employees, and better engagement across all employees.

We think the way forward is to improve the current schemes and this has led us to recommend a number of technical and practical changes. Overall, we think the recommendations put forward today offer a common sense approach to simplify the various schemes for the thousands of employers offering them throughout the UK and will encourage wider use.

The OTS has gathered evidence through surveys, meetings and roadshows throughout the UK. This review has had input from employers and their employees, tax and HR advisers, and representative bodies, allowing anybody with an interest to contribute by airing their views on the problems currently faced and how they might be solved.

The full report on the OTS recommendations on share schemes is published on the website at: http://www.hm-treasury.gov.uk/ots.htm. The second stage of the review will start after the Budget and look into unapproved share arrangements - ones that do not attract special tax reliefs.

The OTS has also published an interim report on pensioner taxation today and a final report (in three parts) on small business tax last week. The Chancellor is expected to respond to all three OTS reports in his Budget on 21 March.

Notes to Editors

  1. 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.

  2. 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.

  3. OTS started its work in September 2010 and initially took forward two reviews: tax reliefs and the first stage of small business taxation (which focused on the IR35 review). Since then, the OTS has issued a further report on the review of small business, which made recommendations for a simpler tax system for the very smallest businesses, a disincorporation relief and many administrative improvements; it is currently carrying out a review of pensioner taxation.

  4. There are four recognised tax advantaged share schemes in operation in the UK - Enterprise Management Incentives (EMI), Company Share Option Plans (CSOP), Share Incentive Plans (SIP) and Save as you Earn (SAYE). More detail on these can be found in Chapter 1 and Annexes G-J of the report.

  5. Thoughts and comments on the OTS share scheme review can be sent to: ots-ess@ots.gsi.gov.uk

Issued by Office of Tax Simplification Press Office Press enquiries only please contact: Andrew Bennett OTS Press Officer Phone: 020 7147 0051 / 07917 598392

Published 6 March 2012