The draft Finance Bill for 2014 was published yesterday. Of the 673 pages of draft legislation and explanatory notes, more than 120 pages dealt with employee shares schemes, employee ownership and related issues. To prove that tax doesn’t have to be taxing, we have done the hard work for you and distilled down your “need-to-knows”.
Employee share schemes
The main items of news here are:
- Prior HMRC approval of company share option plans, savings-related share option (SAYE) schemes and share incentive plans will be done away with. Companies will have to self-certify any of these plans put in place after 6 April 2014, in the same way as for EMI plans currently.
- All schemes – both Revenue-approved and unapproved – will have to be registered with HMRC from 6 April 2014.
- Annual returns, for both tax-advantaged schemes and unapproved arrangements, will have to be filed electronically for the 2014-2015 tax year onwards.
- Notifications of the grant of EMI options (Revenue form EMI1) after 6 April 2014 will have to be filed electronically and the holders of the options must give written declarations to the company that they satisfy the “working time requirement” (25 hours per week or 75% of their working time).
Capital gains tax relief can be claimed by a shareholder who sells shares in a company to an “employee ownership trust” provided the following requirements are satisfied:
- Relief can only be claimed for shares sold in one tax year.
- The company must be a trading company at the time of the sale and up to the end of the tax year.
- The shares sold to the trust must give it control of the company – more than 50% of each of the issued shares, voting rights, income paid on shares and capital on a winding up.
- The trust must operate on an “all-employee” basis. Awards from the trust must be made to all eligible employees on the same terms (which can include by reference to salary, length of service or hours worked), cannot be operated so that only or mainly directors or higher-paid employees benefit and cannot be in the form of loans.
In addition, employees of a company controlled by an employee ownership trust can receive tax-free cash bonus (but not salary) payments from their employer of up to £3,600 per year, provided the payments are made under a scheme under which all eligible employees participate on the same terms.
Corporation tax deduction on a takeover
A corporation tax deduction will now be able to be claimed on option gains made by employees on a change of control of a company even if the acquiring company is not quoted, provided the employees acquire the shares within 90 days of the takeover.