The Office of Tax Simplification has recommended merging approved shares schemes to simplify what is on offer to employees and reduce restrictions on UK businesses.
The final report, Review of Tax Advantaged Employee Share Schemes, calls for bringing the current Enterprise Management Incentive and Company Share Option Plan into one scheme while maintaining separate limits for different sized companies.
The move is expected to take some of the confusion out of the system, and as these two schemes are broadly similar, a merger would be relatively simple and reduce the amount of share scheme legislation.
Philip Fisher, Employment Tax and Rewards partner at PKF and member of the Consultative Committee, told our sister website, www.AccountingWeb,co.uk, that the merging of the two will potentially “open up collective share options for many more employees” and “loses swathes of legislation as well, which is brilliant."
“EMI schemes are attractive and simple for smaller employers to use and are widely recognised as having a positive motivational effect. 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.” Fisher added.
John Whiting, tax director for the OTS said: “We think the way forward is to improve the current schemes and this has led us to recommend a number of technical and practical changes. Overall, we think the recommendations offer a common sense approach to simplify the various schemes for the thousands of employers offering them throughout the UK and will encourage wider use.”
The OTS’s other key recommendation is to remove the approval process for the Save As You Earn, Share Incentive Plan and CSOP schemes, and the introduction of a self-certification system.
“This follows the principle of Self Assessment and builds on the success of EMI, which does not require prior HMRC approval," Fisher continued: "Removing this cumbersome process will make schemes more popular and free HMRC staff to do more remunerative work.”
The second stage of the review will start after the Budget and look into unapproved share arrangements – ones that do not attract special tax reliefs. The committee will look to simplifying the processes and regulations in the next stage of the project.
The Chancellor is expected to respond to the OTS’s reports in the upcoming Budget on 21 March.
