First of all, one must give credit to the government for increasing limits on sharesave schemes for the first time in about two decades and for share incentive plans (Sips) for the first time since their inception.
While most governments in Europe have been cutting back on tax-advantaged schemes, the UK’s increase in tax-free limits is a pleasant contrast.
Given that all three major political parties favour wider share ownership, the tax relief is unlikely to be reversed in the foreseeable future. This should give organisations confidence to plan future share schemes.
But there are a number of reasons why we may not see an immediate large increase in share plans.
First of all, these share schemes do have a cost and organisations will need to budget for this before agreeing new plans.
Secondly, those organisations that already scale back sharesave when applications exceed their allocation are unlikely to take advantage of the new limits.
Thirdly, some organisations with a large proportion of lower-paid staff in, say, the manufacturing or hospitality sectors, may be wary of launching or changing a scheme in which it is likely that only executives can take advantage of the increased limits.
A Sip, which involves share ownership rather than options, gives tax and national insurance (NI) relief on contributions. It is more costly to administer than sharesave and its complexity has deterred many organisations. However, the increased amount that can be put into such a plan will give organisations a larger NI saving, which should make Sips more attractive.
Of course, there will be organisations, particularly in the financial services sector, that have a larger proportion of higher-than-average earners that may be interested in using the additional relief available. I would expect earlier activity in this area than in other, less well-paid, sectors.
Over the longer term, I believe a steady stream of employers will again revisit share schemes.
The tax relief available is now too big for large and medium-sized enterprises to ignore in the medium term, and I predict that a tipping point will arise where it will be standard for an organisation to have at least one all-employee HM Revenue and Customs-approved share scheme and those that do not will render themselves less competitive in the labour market.
Jeremy Mindell is director of tax and share scheme advisory firm Primondell