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2013 Autumn Statement: share schemes and incentives implications
Practical Law UK Legal Update 6-551-1267 (Approx. 5 pages)
2013 Autumn Statement: share schemes and incentives implications
| Published on 05 Dec 2013 • United Kingdom |
On 5 December 2013, the Chancellor, George Osborne, delivered his Autumn Statement. This legal update summarises the key share schemes and incentives announcements. (Free access.)
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On 5 December 2013, the Chancellor delivered his Autumn Statement. The key announcements for share schemes and incentives are:
- An increase in certain SAYE and SIP limits.
- New tax reliefs, including a tax exemption for bonuses, for businesses that are indirectly employee-owned.
These measures are intended to take effect during 2014, and legislation will be included in Finance Bill 2014. Draft legislation will be published on 10 December 2013. The draft legislation is also expected to include clauses addressing other proposed changes to share schemes and incentives, including self-certification of tax-advantaged share schemes.
SAYE and SIP limits increased
From April 2014, certain participation limits for SAYE option schemes and share incentive plans (SIPs) will increase. The changes are:
- The savings limit for SAYE option schemes will be increased from £250 per month to £500 per month.
- The limit on free shares that can be awarded to a participant under a SIP will increase from £3,000 per tax year to £3,600 per tax year.
- The amount an employee can invest in partnership shares under a SIP will increase from £1,500 per tax year to £1,800 per tax year.
For information about the current limits for SAYE and SIP, see Practice notes, SAYE option schemes (sharesave): overview and Share incentive plans: an overview.
(See HM Treasury: Autumn Statement 2013, paragraphs 1.191 and 2.61.)
Measures to encourage employee ownership
The Chancellor announced a number of tax measures aimed at encouraging employee ownership, following Graeme Nuttall's review of employee ownership. The measures are:
- A capital gains tax (CGT) relief when shares are disposed of to an employee benefit trust (EBT) that is used as an indirect employee ownership structure, if that disposal results in the EBT owning a controlling interest in the company. This relief will apply from April 2014.
- From October 2014, bonuses (or "equivalent payments") of up to £3,600 paid to employees of companies that are indirectly employee-owned will be exempt from income tax. (The Autumn Statement does not specify if this is a total limit or a per employee limit, but it seems likely that the limit will be per employee, as £3,600 is the same as the proposed revised limit for free shares awarded under a SIP.)
- An inheritance tax exemption will apply to shares and other assets transferred to EBTs, provided certain conditions are met. Draft legislation will be included in Finance Bill 2014, but no commencement date has been announced for this measure as yet.
HM Treasury consulted on the CGT and income tax reliefs in July 2013 (see Legal update, HM Treasury consults on tax reliefs to promote indirect employee ownership).
For more information about other measures implemented following the Nuttall review, see Legal update, Share Schemes & Incentives: summary of current and upcoming developments: Nuttall review of employee ownership.
(See HM Treasury: Autumn Statement 2013, paragraphs 1.191 and 2.60.)
Unapproved share schemes simplification
A "package of simplifications" relating to non-tax advantaged share schemes will be introduced during 2014.
In May 2013, HMRC published a consultation on five of the recommendations made by the Office of Tax Simplification (OTS) in its report on non-tax advantaged share schemes (see Practice note, Share Schemes & Incentives: summary of current and upcoming developments: OTS review of unapproved share schemes). A letter from the Exchequer Secretary to the OTS states that action will be taken in respect of all five of the areas consulted on.
Two of the measures that will be implemented are:
- Amendments to the tax treatment of employment-related securities and securities options awarded to internationally mobile employees.
- A simplified method of valuing listed company shares for tax purposes, by reference to the closing price.
(See HM Treasury: Autumn Statement 2013, paragraph 2.112, HM Treasury: Autumn Statement 2013: policy costings, page 44. and Letter from Exchequer Secretary to OTS.)
Other developments relevant to share schemes
A number of other announcements in the Autumn Statement may be of interest to share schemes practitioners, including:
- New measures in relation to tax avoidance schemes, requiring users of schemes that have been found by the courts to be unsuccessful to settle their cases, and requiring users of certain tax avoidance schemes to pay the tax the scheme is designed to avoid up front.
- Changes to interest relief for qualifying loans to buy shares in close companies. Proposals to amend the rules on loans to participators in close companies announced in the 2013 Budget will not proceed, following a consultation.
- A clampdown on the use of intermediaries to facilitate self-employed status.
For details of these and all other business and private client tax announcements in the Autumn Statement, see Legal updates, 2013 Autumn Statement: business tax implications and 2013 Autumn Statement: private client implications.