The Office of Tax Simplification (OTS) has produced its interim report on unapproved share plans. Click here to read the report. (It has already made recommendations on approved share plans, on which the Government is currently consulting further).
The interim report seeks further evidence in various areas. We list below the key ones. Companies are invited to contact the OTS with their own experiences/difficulties and suggestions for improvement. While this list gives an indication of the direction of travel of the review, there is no guarantee that any changes will come about as it is up to the Government and HMRC whether to implement any proposals which the OTS may have.
Form 42 – the process HMRC has set up for companies to notify it of awards of options or shares to employees
What are your main issues with Form 42? A number of companies complain that it remains (some 10 years after its introduction) too complicated to fill in and too much unnecessary information is required.
Internationally mobile employees
What are the main difficulties you face when managing internationally mobile employees in the context of unapproved share plans?
Can you provide any particular examples of how the new disguised remuneration rules have adversely impacted upon the design, implementation or administration of your unapproved share plans?
Timing of income tax charge - quoted companies
This point mostly arises for quoted companies. An income tax (and often NIC) charge often arises when shares are acquired. Although most companies take a practical view on this, working out the exact point at which shares are received can be difficult - is it the date of the exercise notice (despatch or receipt), the date the shares are issued or transferred, the date of a board or trustee minute or the date when shares are sold? However, even if you work out the relevant time, the tax rules for working out a share value at that point are not as flexible as some would like. The OTS welcomes views on this, including whether it would be a simplification if in certain circumstances the income tax charge (or PAYE obligation) arose on the receipt of money on the sale from the shares.
Private companies only
What experience do you have of difficulties valuing private company shares and how does this impact on the design and implementation of your share plans? How could agreeing a valuation be made simpler/cheaper?
Do you think there should be separate rules for small/private companies to account for the particular issues they face? How would this look?
Employee Benefit Trusts (EBTs)
Can you give examples of when the taxation of EBTs (e.g. inheritance tax rules, loans to participators) has provided a barrier to the establishment of an unapproved share plan or caused you to restructure, or alter the design of, your share plan in a manner which has adversely affected the attainment of your commercial intentions?
Responses to any of the questions above should be sent to firstname.lastname@example.org by Friday, 26 October 2012. Any further areas not included above which companies would like the OTS to consider should be notified to it by Friday, 28 September 2012.