Finance Act 2014 and New Government Consultations

28th July 2014

Following the passing of Finance Act 2014, the Government has now launched two consultations on subjects which could have a far-reaching impact on employee share schemes and employee ownership.

  1. Finance Act 2014 received Royal Assent on 17 July 2014. As we have reported previously, it includes full CGT relief for a qualifying disposal of shares to an employee ownership trust and income tax relief for bonuses paid to employees of employee-controlled businesses.

It also makes a number of significant changes to the operation of tax-advantaged and non-tax-advantaged employee share schemes. These include:

  • A self-certification system has now replaced the requirement for prior HMRC approval for tax-advantaged company share option plans, SAYE option schemes and Share Incentive Plans.
  • All annual returns for share schemes and forms for notifying the grant of Enterprise Management Incentives (EMI) options must be filed online
  • Changes to non-tax-advantaged schemes recommended by the Office of Tax Simplification (OTS)

Many of these changes came into force on 6 April 2014, some on 17 July 2014 and others will take effect on dates later in 2014 or 2015.

  1. The OTS recommended that the Government should consider whether to introduce a new employee shareholding vehicle to make it easier for companies wishing to manage their employee share arrangements and create a market for shares held by employees. The Government has published a discussion paper which explores the case for change made by the OTS and the potential issues that the introduction of an employee shareholding vehicle raises. The discussion paper can be found by clicking here
  1. The OTS also proposed a significant change to the taxation of employment related securities (ERS). Broadly, individuals would be able to choose whether the tax charge on ERS (that is, the exercise of an option or purchase of a share) should arise at the time they are acquired or, if different, at the time at which they can be sold for cash (when they become “marketable”). The consultation document can be found by clicking here 

The Government is inviting comments on both consultations from interested parties before the closing date of 10 October 2014.