The Office of Tax Simplification (OTS) has been consulting on improvements to the taxation and reporting for both approved and non-approved share schemes.

The consultation for the former completed in 2012 and led to some welcome changes. The consultation for the latter completed last summer and the review of the comments made has just been published, together with the Government's proposals and draft legislation. In this, the Government has recognised the complexities of the current situation and has sought to address some of these.

Comments are invited on these new proposals by 4 February 2014.

We highlight three of the proposals that, subject to the further consultation, will be included in Finance Bill 2014.

  1. The introduction of a new rollover relief for certain share exchange arrangements for employment tax purposes (a relief is already available for capital gains tax) with effect for exchanges occurring on or after the date of Royal Assent of Finance Bill 2014. This is potentially a very valuable relief and should, for example, make it easier to exchange restricted shares and obtain a rollover without generating employment tax charges.
  2. An extension (with effect from the date of Royal Assent) to corporation tax relief for employee share acquisitions following the takeover of a company. Current rules do not allow such a relief where the shares are issued in a company under the control of another company that isn't listed. The proposed relief will allow a 90 day period to acquire shares following a takeover.
  3. A change (with effect for grants and awards made on or after 1 September 2014) in the basis of taxation of shares and options granted to internationally mobile employees to make it more consistent with the taxation of other forms of employment income. While this should simplify the whole area of taxing such employees, employers should be considering the tax implications of these imminent changes.

Currently there is no employment tax on charges under the restricted, or convertible securities, or options, or post acquisition benefits employment related securities legislation where the grant or award was made in a tax year when the recipient was not resident. The change will remove this exclusion and instead calculate tax on the date of the chargeable event and apportion any charges that arise on chargeable events to periods of UK and non-UK working for those to whom the remittance basis applies or who were non- resident for part of the period between award and chargeable event.

The change will have an impact on systems and procedures for accounting for employment tax in respect of awards to the affected individuals, and employers will need to consider the impact of the measures on the effectiveness of future awards.

Overall these proposals are welcome and should help simplify and improve the taxation of unapproved share schemes and therefore make them more attractive.

We have taken great care to ensure the accuracy of this newsletter. However, the newsletter is written in general terms and you are strongly recommended to seek specific advice before taking any action based on the information it contains. No responsibility can be taken for any loss arising from action taken or refrained from on the basis of this publication. © Smith & Williamson Holdings Limited 2014. code NTD167 exp: 30/6/2014