Autumn Statement

Impact on Employee Share Schemes

The Chancellor presented his last Autumn Statement before next year’s General Election on 3rd December. This contained an appraisal of wider economic issues and performance as well as a limited number of specific tax measures, some of which are relevant for employee share schemes and employment tax. The full statement can be read through this link (Autumn Statement).

Anti-avoidance: Special Purpose Employee Share Scheme

There was a renewed commitment to countering tax avoidance and evasion, supported by a number of measures.

One of these concerned a form of “special purpose” employee share scheme referred to a “B Share Schemes”. It is not clear what is intended to be covered by the definition of a B Share Scheme although this appears to be limited to specific arrangements giving the holder the choice on the form of their return.

The new anti-avoidance measure will be intended to result in the return on such schemes being taxed as dividend income.

Close Companies: Loans to Participators

Where close companies make loans to participators (broadly, shareholders), there is a tax charge imposed on the company which is recoverable on repayment of the loan.

Following the completion of a review of these tax rules, the Government has decided to make no changes to the structure and operation of the tax charge.

Tax Simplification

There have been discussion papers relating to two possible changes. One related to the possible introduction of a “safe harbour” employee trust which would have facilitated the use of employee benefits trusts to support employee share schemes. The second related to potential rules to provide additional flexibility for the taxation of “marketable securities”.

It was announced that neither of these measures will be introduced. We understand that this is due in part to the volume of responses to both discussion papers failing to indicate that there is sufficient demand for either of the proposed changes.