Budget 2010: Changes to employee share schemes

From 24 March 2010, employers will no longer be able to operate company share option plans (Csops) if they are a subsidiary of a listed company.

Measures contained in this year’s Budget report will also introduce legislation to counter arrangements set up by employers in recent years to circumvent the £30,000 limit of value which can be granted under an option to each employee.

Tim Stovold, a partner at accountancy firm Kingston Smith, said: “This is disappointing to see as a number of US-listed parent companies with UK subsidiaries used the Csop to motivate and remunerate their UK staff and the changes announced in the Budget have put a stop to this.”

Nicholas Stretch, a partner at law firm CMS Cameron McKenna, added: “The revenue have said it has seen too much abuse, so they have clamped down on this.”

Share incentive plans

The Budget also included measures to stop corporate tax avoidance around share incentive plans (Sips).†

Changes will be introduced in the Finance Bill 2010 to combat abuse of the corporation tax (CT) deduction provision for Sips, where companies pay money to Sip trustees to buy shares from existing shareholders for use in the Sip, but no shares with any real value are transferred to employees under the scheme.†

The changes will also strengthen the provisions which allow HM Revenue and Customs to withdraw approval of a Sip in cases where alterations to share capital or changes in rights attaching to the shares materially affect the value of shares held by the plan trustees.

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