6th December 2012
In his Autumn Statement on 5 December 2012, the Chancellor of the Exchequer announced an update on various matters affecting employee share ownership and companies operating share incentives.
The Finance Bill 2013 will be published on 11 December 2012. It is expected that this will include draft clauses (together with guidance) on the UK’s first ever General Anti-Abuse Rule (GAAR) which is intended to provide a significant new deterrent to what the Government views as abusive tax avoidance schemes. We shall include in a future newsletter our comments on issues arising from the proposed GAAR or any other element of the draft legislation which might affect employee share schemes and the companies which operate them.
Certain other matters will be dealt with in the 2013 Budget. These will include an update on the review by HMRC of offshore employment intermediaries whose purpose is considered to be to avoid tax and NIC. The Government also proposes at that time to report on further incentives to support employee ownership as a business model following its recent response to the Nuttall Report on employee ownership.
Ahead of the Autumn Statement, the Department for Business Innovation and Skills (BIS) responded to the consultation following the Chancellor’s announcement of a proposed new “employee owner” (now renamed “employee shareholder”) status, which would involve employees giving up some employment rights in exchange for shares in their employer. This will be introduced in the Growth and Infrastructure Bill which is currently being considered in the committee stage.
Only a “very small number” of respondents to the consultation welcomed it and suggested they would be interested in taking it up, but BIS has confirmed that the legislation will proceed. The Government plans to issue new guidance on employee, worker and employee shareholder status, to assist businesses to use these appropriately. It will also issue guidance for individuals about the personal consequences of employee shareholder status, and guidance for businesses about implementation, including on valuation and forfeiture of shares. It will also consider “options to reduce” income tax and NIC liabilities that arise when employee shareholders receive their shares.
In addition, we are informed that:
- Employee shareholder shares must be fully paid up, and must be offered free of charge.
- Companies registered outside the UK will be able to offer employee shareholder status. It will also be possible to issue parent company shares, rather than employer shares, where the employer is a subsidiary.
- The upper limit (£50,000) on the value of employee shareholder shares will be removed, but this level will be retained as an upper limit on the value of shares (at acquisition) qualifying for CGT relief.
As a final point, a reminder that the additional rate of tax which applies to income over £150,000 will fall from 50% to 45% with effect from 6 April 2013. Where the additional rate is relevant and there is appropriate flexibility, consideration might be given to, for example, the deferral of the payment of dividends or discretionary bonuses, or the exercise of share options until after 6 April 2013.