The Autumn Statement contains an announcement that employee shareholder status is going to be withdrawn at "the next legislative opportunity". Tax favourable treatment of shares is being withdrawn from 1 December 2016, which in practice means that only those who have already received advice on the terms and effect of the agreement (as required under the conditions for employee shareholder status) will be able to enter into an employee shareholder agreement and receive favourable tax treatment for the shares.
The reason behind the decision is that it has become clear that the employee shareholder status – introduced three years ago to enable employees to receive up to £2,000 worth of shares in their employer in return for giving up some employment rights – has been used predominantly to enable employees who were already going to get shares to take advantage of the tax breaks provided by the scheme.
The second announcement of interest follows on from HMRC's response to consultation on simplifying the tax treatment of termination payments. In August HMRC announced that the exemption from income tax and NICs for termination payments up to the current threshold of £30,000 would be retained but that the distinction between contractual and non-contractual payments in lieu of notice would be removed. Any payment that reflects what an employee would have received if they had worked their notice period would be taxed and subject to NICs, regardless of whether the employer has a contractual entitlement to make a payment in lieu.
The announcement now says that payments in lieu of notice will be taxed only insofar as they represent basic pay. This appears to mean that the government has reconsidered the proposals that would have potentially brought a wider range of payments (such as compensation for loss of use of a company car during the notice period and possibly even some bonus payments) into the tax charge, although the statement does say that the government will "address any manipulation of this rule".
The changes remain scheduled to come in from April 2018.
Finally, the government has confirmed its Budget announcement that it will limit the benefits that attract relief from tax and employer NICs when provided as part of a salary sacrifice arrangement, from April 2017. Salary sacrifice arrangements that can continue to attract the tax advantages will be limited to:
• childcare benefits;
• employer pension contributions and advice;
• cycle to work schemes;
• ultra low emission cars.
Salary sacrifice arrangements in place before April 2017 will be protected until April 2018 or (for cars, accommodation and school fees) until April 2021.