Office of Tax Simplification publishes recommendations for employee share schemes

The Office of Tax Simplification (OTS) has published a report on employee share schemes, recommending the removal of the approval process for sharesave schemes, share incentive plans (Sips) and company share option plans (Csops).

The Review of tax-advantaged employee share schemes also recommends merging the current enterprise management incentive (EMI) and the Csop into one scheme, while maintaining separate limits for different-sized companies.

Additional recommendations within the report:

  • Employers could be allowed to self-certify across all share schemes, making it simpler and quicker, and more likely that organisations will offer these to employees.
  • The proposed streamline of the administration of share plans through a single return form and online filing for share plans.
  • The proposed reduction of the tax-free holding period for a Sip to a standard three years.
  • The proposed removal of the seven-year sharesave scheme.

Philip Fisher, employment tax and rewards partner at PKF and a member of the OTS consultative committee, said: “EMI schemes are attractive and simple for smaller employers to use and are widely recognised as having a positive motivational effect.

“A Csop is less appealing, in part because of the extra complexity and the need for employees to wait three years to exercise their options. Combining the rules will give Csops a new lease of life.

“As a member of the consultative committee, it has been a pleasure to assist in developing common-sense ways to improve and popularise approved share schemes. These changes should make a real difference. We are now looking forward to simplifying the processes and regulations for unapproved share schemes in the next stage of the project.”

John Collison, head of employee share ownership at IFS Proshare, added: “As the voice of the employee share ownership industry in the UK, IFS Proshare welcomes the sensible, well-measured and considered recommendations that the OTS makes and believes these will go some way to reducing unnecessary bureaucracy.

“There is more to be done but these recommendations are a very strong start to reinvigorating what continues to be a very successful means of encouraging saving, investing and improving company performance.”

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The government will respond to the OTS recommendations in the Budget report on 21 March.

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