The Budget itself had only one surprise for share schemes, which is that proposed share schemes tax and NIC changes for expatriate employees (both inbound and outbound) will now take effect from April 2015 rather than September 2014 as previously proposed.
However, the absence of fresh material in the Budget is just a sign of how much is now mounting up outside the Budget announcement. The Budget statement confirmed that all other draft legislative proposals produced in December will be implemented (although some changes in the detail are being made). These proposals include:
- Increases from 6 April 2014 in SIP annual limits from £1,500 to £1,800 for partnership shares and £3,000 to £3,600 for free shares, and an increase in the maximum amount which may be saved monthly under new SAYE savings contracts from £250 per month to £500 per month.
- From 6 April 2014, a move away from the current “approval” regime, where HMRC must read and approve all key scheme paperwork in advance of tax-approved awards being made (other than for EMI options), to a regime where companies self-certify their tax-advantaged plans. This is on the whole a liberating change as companies will no longer be reliant on HMRC timescales and forced to agree every single point with HMRC. However, it is accompanied by a need to register plans, make a declaration that they are compliant with the relevant legislation and a risk that HMRC may challenge plans later.
- From Summer this year, some minor changes to non-tax approved arrangements for employee shares, and also a new arrangement whereby individuals can sell a controlling interest in a company to a trust without any capital gains tax charge.
One thing that advisers and companies will need to keep a close eye on is which changes to tax-advantaged share plans take effect automatically without any need to change rules (and whether they take effect for options and awards already granted or only for new grants) or other plan documentation and which changes are voluntary for companies to adopt or need plan rule or documentation changes to be made by companies. The legislation itself is not likely to be final word as HMRC are also significantly changing their guidance manuals as part of the change to self-certification and there is still no sign of its views on a large number of issues.
HMRC has also announced that it will consult further on more radical proposals (originally proposed by the Office of Tax Simplification) which include delaying an income tax charge which would otherwise arise on private company shares until those shares become marketable and a new form of employee trust which would have tax advantages.
Click here to access HMRC’s webpage with relevant announcements.