Yesterday the Chancellor of the Exchequer / Finance Minister announced the UK government’s Autumn Statement setting out key economic policies that will be implemented over the next few years.
While there was not a lot directly related to share plans, the following points are interesting:
- The government will introduce a number of technical changes to streamline and simplify the tax rules for tax-advantaged and non-tax advantaged employee share plans, including clarifying the tax treatment for internationally mobile employees. These changes will be included in the Finance Bill 2016 which we will see in Spring 2016.
- The government renewed their commitment to combatting tax avoidance and evasion and have both updated the General Anti-Abuse Rules to include a 60% penalty in cases which fall under the Rules and stated that they will consider legislating on the use of disguised remuneration schemes in a future Finance Bill.
- The taxation of asset manager’s performance based rewards may be subject to change. The government has said that they will introduce legislation in the Finance Bill 2016 to determine when performance awards received by asset managers will be taxed as income or capital gains. The statement says that an award will be subject to income tax unless the underlying fund undertakes ‘long term investment activity’.
None of these announcements were particularly ground breaking and should not significantly affect your UK plans, but it will be interesting to see how the technical changes will ‘streamline’ and ‘simplify’ employee share plans, and the clarification regarding the taxation of internationally mobile employees is definitely welcome.
We do not expect that employee share plans will be caught by the General Anti-Abuse Rules and as long as you are careful not to ‘earmark’ awards with regard to your offshore trusts, disguised remuneration rules should not be an issue. That said, we will keep you informed of any future legislative developments in this area.
With regard to the taxation of asset manager’s performance based rewards, it is understood that during the consultation process in July, it was suggested that employment-related securities will not be caught by these changes but this is currently unclear. However, for asset manager businesses they will need to keep an eye on this as it may necessitate a review of your plans. We will keep you up-to-date.
It was interesting to see that the Government decided to gift Royal Mail shares to employees of the recently privatised company instead of simply selling them. This shows the government’s commitment to employee share ownership.