The Office of Tax Simplification (OTS) has published a report on employee share schemes, recommending the removal of the approval process for sharesave schemes, share incentive plans (Sips) and company share option plans (Csops).
The Review of tax-advantaged employee share schemes also recommends merging the current enterprise management incentive (EMI) and the Csop into one scheme, while maintaining separate limits for different-sized companies.
Additional recommendations within the report:
- Employers could be allowed to self-certify across all share schemes, making it simpler and quicker, and more likely that organisations will offer these to employees.
- The proposed streamline of the administration of share plans through a single return form and online filing for share plans.
- The proposed reduction of the tax-free holding period for a Sip to a standard three years.
- The proposed removal of the seven-year sharesave scheme.
Philip Fisher, employment tax and rewards partner at PKF and a member of the OTS consultative committee, said: “EMI schemes are attractive and simple for smaller employers to use and are widely recognised as having a positive motivational effect.
“A Csop is less appealing, in part because of the extra complexity and the need for employees to wait three years to exercise their options. Combining the rules will give Csops a new lease of life.
“As a member of the consultative committee, it has been a pleasure to assist in developing common-sense ways to improve and popularise approved share schemes. These changes should make a real difference. We are now looking forward to simplifying the processes and regulations for unapproved share schemes in the next stage of the project.”
John Collison, head of employee share ownership at IFS Proshare, added: “As the voice of the employee share ownership industry in the UK, IFS Proshare welcomes the sensible, well-measured and considered recommendations that the OTS makes and believes these will go some way to reducing unnecessary bureaucracy.
“There is more to be done but these recommendations are a very strong start to reinvigorating what continues to be a very successful means of encouraging saving, investing and improving company performance.”
The government will respond to the OTS recommendations in the Budget report on 21 March.
Read more articles on employee share schemes
Tax-relieved share schemes have been around for many years and have proved popular with employers and employees alike. However, too much dust has been allowed to settle on these schemes and successive governments have failed to keep them up to date and relevant to the modern workforce.
The OTS report is the first stage in a much-needed reform, although all eyes will be on the chancellor on Budget day to see how he responds.
At a time when the government is looking for the business sector to drive economic growth, the ability of companies to provide tax-efficient incentives to their employees through share ownership is key.
Cutting red tape makes good sense. We believe that tax-advantaged discretionary share options should continue to be available to employees of companies of all sizes.
Merging enterprise management incentives (EMI) and company share option plans (Csop) is a step in the right direction. We would encourage the chancellor to grasp the opportunity presented to him by the OTS report and provide a much-needed and long-overdue boost to tax-relieved share plans in the UK.
The Csop has suffered through a low profile in recent years. Yet it is the window of hope into employee ownership for the lowest-paid and part-time workers. Its preservation and development is essential in a fair society.
Its benefits as an all-employee scheme should be promoted more vigorously. We welcome any recommendations which would increase its use, but must ensure that its benefits are not lost in any merger.
Other recommendations will make it easier for companies to compare the relative advantages of the schemes by bringing the rules of the four schemes into line where they differ.
The overall package of recommendations is very sensible. If they are adopted they will allow more employees to share in the success of their companies.
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