IFS Proshare has been working with HR Revenue and Customs (HMRC) in respect to the introduction of the pay as you earn (PAYE) OT code and its impact on share-based payments.
The code, which comes into effect today, 6 April, enables income tax to be deducted in respect to payments made to leavers who have received their P45 at the basic, higher and additional rates of tax.
IFS Proshare said the code raises specific issues in respect to share-based payments, as it would impose a disproportionately high administrative burden and cost on employers as well as imposing unfair levels of taxation on employees.
HMRC has advised that the code OT will not apply to share-based payments for leavers. The code BR should continue to be applied.
The result will be that share-related payments will only be liable to a deduction of tax at basic rate, effective for payments from 6 April.
Alexy Armitage, head of employee share ownership at IFS Proshare, worked closely with HMRC to achieve this outcome.
Armitage received support from large UK employers like BT, National Grid, Kingfisher, Smith and Nephew, and BAE Systems, as well as employee share plan administrators like Computershare Plan Managers, Equiniti and Killik Employee Services.
Armitage said: “I am delighted with the outcome of the discussions with HMRC. This clearly shows that they have listened constructively and taken into consideration the important concerns raised by companies and administrators of employee share plans.
“Our members are very positive about the outcome and we look forward to continuing to work closely with HMRC in the future to ensure an ongoing open and constructive dialogue on issues affecting employee share ownership.”
Read more articles on employee share plans