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Tax Simplification Body Reviews UK Share Schemes


The Office of Tax Simplification (OTS) has put forward its recommendations on UK tax advantaged share schemes, designed to encourage take up, and reduce the burdens on those offering the schemes.

The recommendations follow an OTS simplification review of the four government approved employee share schemes attracting special tax reliefs. They are Enterprise Management Incentives (EMI), Company Share Option Plans (CSOP), Share Incentive Plans (SIP) and Save as you Earn (SAYE). Evidence was gathered through surveys, meetings and roadshows throughout the UK, with the OTS receiving input from employers and employees, tax and HR advisers, and representative bodies.

The recommendations include both technical and administrative simplifications. The key recommendations are as follows:

  • The government should introduce a self-certification system. The OTS found unanimous agreement that the approval process with HM Revenue & Customs (HMRC) caused employers problems. These ranged from the volume of paperwork required, to delays in acceptance and lengthy negotiations over whether a share scheme was eligible. The OTS believes it is time to move to a self-certification process in line with self-assessment principles.

  • The CSOP scheme must be reviewed. The OTS considered whether the CSOP was still relevant today, and whilst evidence points to usage reducing, it is unclear as to why. The OTS therefore recommends that further work is done in this area to establish if CSOP is still relevant, could be phased out or replaced.

  • EMI and CSOP share schemes could be merged. The OTS established that there is clear scope for changes to simplify the schemes on offer that will make a genuine difference to employers. It recommends that if CSOP is found to be still of use, the EMI and CSOP schemes should be merged. It says this would take some of the confusion out of the system, and as these two schemes are broadly similar, a merger would be relatively simple. The OTS argues that merger would also significantly reduce the amount of share scheme legislation.

  • Technical simplifications could also be made. The OTS has suggested changes to individual schemes regarding the harmonization of definitions, adjusting time limits for today’s employment climate, and modifying certain conditions.

John Whiting, Tax Director for the OTS said: “We have looked hard to see whether the approved share schemes are still valid, given their decline in usage. Accordingly, we spent a lot of time gathering the views of the people that use them, and found that employers saw real benefits, citing greater commitment from employees, and better engagement across all employees. We think the way forward is to improve the current schemes and this has led us to recommend a number of technical and practical changes. Overall, we think the recommendations put forward today offer a common sense approach to simplify the various schemes for the thousands of employers offering them throughout the UK and will encourage wider use.”

Source: http://www.lowtax.net