In the Autumn Statement 2015, the Chancellor of the Exchequer announced several measures which relate to employee ownership and share schemes, and the relevant draft clauses to be included in Finance Bill 2016 were published earlier this month.
The key points are as follows.
- Broadly, the normal rule under the enterprise management incentive (EMI) regime is that a company which is controlled another company is not permitted to grant EMI options. However, since 1 October 2014, a company controlled by the corporate trustee of a qualifying employee-ownership trust (EOT), has been able to grant EMI options (provided all the other relevant conditions are met). Nevertheless, where a company which has granted EMI options is acquired by an EOT with a corporate trustee, a disqualifying event is deemed to occur for EMI purposes under the current legislation. A clause has been included in Finance Bill 2016 to provide that such an acquisition will no longer constitute a disqualifying event. This amendment will be deemed to have effect from 1 October 2014.
- Holders of EMI options are able to exchange them for options over shares in an acquiring company following particular corporate events. Perhaps surprisingly, however, these provisions apply where, under the Companies Act, the acquiring company is entitled to acquire the shares of minority shareholders but not where those shareholders have the right to be bought out by the acquiring company. Provisions have been included in Finance Bill 2016 to correct this apparent anomaly, which now brings the treatment for EMI options into line with that for company share option plan (CSOP) and savings-related (SAYE) options.
- The tax treatment of restricted stock units (RSUs) awarded to internationally mobile employees is being clarified. Essentially, any RSU which is regarded as a “genuine” right to acquire shares will be taxed as a securities option, as opposed to under the general earnings provisions. However, an award may still be taxed under the general earnings provisions where the employer has discretion over the award to such a degree that the employee does not have a clear right to the shares.
- In addition, the Government announced that it remains concerned about the growth of salary sacrifice arrangements and is considering what action, if any, is necessary. It also intends to take action against those who it regards as having used “disguised remuneration” schemes and who have not yet paid their fair share of tax.
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