Tax and NICs for Incentives

This practice note sets out our analysis of the details of the statutory apportionment mechanism of securities and option income for resident but not ordinarily resident employees with some non-UK duties.

The abolition of taper relief from April 2008 may result in advisers talking to their clients about exercising employee share options and selling the resulting shares before then. This note sets out some of the factors advisers may want to consider before advising on this issue. Since the abolition of taper relief was announced in the 2007 Pre-Budget Report (PBR) and this note was first published, the Chancellor has announced the introduction of a new relief from CGT, to be known as entrepreneurs' relief. As a result of this new relief, significant employee shareholders may find that they have not been disadvantaged by the abolition of taper relief to the extent they originally anticipated.

Companies can generally obtain relief from corporation tax when employees acquire shares under employee share plans. However, this relief may be lost on a takeover, and this is a particular issue where a company is taken over by an unlisted company, or a company which is listed on an exchange which is not a recognised stock exchange.

A practice note tracking the progress of Part 7A (employment income provided through third parties) of the Income Tax (Earnings and Pensions) Act 2003 and associated legislation and guidance, and bringing together all the PLC Share Schemes & Incentives resources on Part 7A. The legislation was introduced by Finance Act 2011 and applies in full from 6 April 2011. It is widely referred to as the disguised remuneration legislation, as this was the term used in the original consultation draft (though it is not in the legislation as enacted).

EMI options may be granted to one employee over shares worth more than the EMI individual limit over a three year period in certain circumstances.

The definition of employment-related securities is essential for several provisions under which income tax (and potentially also NICs) can arise where securities are acquired or held by or for employees or directors. Some of these tax charges arise frequently and are important in many situations. This practice note examines the meaning of securities and employment-related for the purposes of these tax charges.

A brief description of a phantom share option.

A practice note with a table of Finance Bill 2011 clauses and Schedules, including links to PLC analysis and information on the status of each provision. 

Companies have an obligation to provide information to HM Revenue & Customs (HMRC) regarding "reportable events" in relation to all kinds of "employment-related securities" and "employment-related securities options".  HMRC provide separate annual return forms for each type of tax favoured arrangement and one return form for all non-tax favoured arrangements.  This practice note focuses on form 42, which is the return form employers must use to make returns about non-tax favoured employment-related securities and employment-related securities options.

A practice note on the implications for business tax of the policy statements and pledges made by the three main political parties in the lead-up to the 2010 general election. Please note that this resource is no longer maintained.

A practice note commenting on HMRC's guidance on share incentives for internationally mobile employees. This HMRC guidance was rewritten in September 2008 to reflect Finance Act 2008.

This note takes a look at the process through which announcements made in the UK's annual budget become law.

This is a summary of some major cases relevant to share schemes in which the decision was published before February 2007 (roughly when PLC Share Schemes & Incentives began producing its own legal updates about cases).  Cases published from February 2007 are covered in separate legal updates which can be accessed from each share schemes topic page by clicking on the "Legal updates" tab.

A summary of the situations in which income tax and National Insurance contributions (NICs) may arise for a leaver under a share scheme. This note considers the income tax and NICs position for leavers by reason of: Injury. Disability. Redundancy. Retirement. Transfer of the employee's employing business (a TUPE transfer) or company. It also looks at the income tax and NICs position when a participant dies in service.

Taper relief was abolished on 6 April 2008. This note explains how, before this date, EMI taper relief would be lost if shares acquired on exercise of an EMI option were rolled over into purchaser loan notes. It also considers alternative approaches that could be taken to preserve the EMI taper relief treatment in these circumstances.

A practice note listing the statutory provisions of special relevance to National Insurance contributions (NICs) liabilities in respect of employee securities and options.

This practice note deals with aspects of the UK tax treatment of employment-related securities and securities options acquired after 5 April 2008 by employees and directors who are UK resident, but not ordinarily resident (R/NOR). It also deals briefly with those who are UK resident and ordinarily resident (R/OR), but not domiciled in the UK.  

Part-time employees should generally be able to participate in share plans on the same basis as their full-time colleagues.

This tracker follows the progress of the bank payroll tax from the 2009 Pre-Budget Report to the 2010 Budget and Finance Bill 2010 to enactment.

This note examines the coalition government's measures to restrict the availability of tax relief on pension saving by reducing the annual and lifetime allowances. As well as looking at the circumstances in which an annual allowance charge is triggered, the note highlights some key practical issues for trustees and employers, including the obligation to provide pension savings statements to members. The note also refers to the announcement of further reductions to the annual and lifetime allowances made at the 2012 Autumn Statement to take effect from the 2014/15 tax year.

This practice note sets out our analysis of the NICs treatment of securities or options income relating to non-UK duties, for R/NOR taxpayers claiming the remittance basis. Readers should carefully consider whether they agree with our views. We would welcome any feedback on this note.

This note contains links to practice notes covering: the meaning of "residence" and "ordinary residence" in the context of UK taxation; the meaning of "domicile" and the UK tax implications for individuals of these concepts.

Where securities (or interests in them) are acquired or held by or for employees or directors, they are often subject to restrictions which may reduce their value. These restrictions can be important to the design of employee incentives and remuneration. Restrictions of this type are also important because they bring many employees within complex income tax provisions for the taxation of restricted securities. These income tax provisions are explained in this practice note.

This practice note is a guide to the use of salary and bonus sacrifice arrangements.

To satisfy share awards under employee share schemes of various types, companies may fund an EBT to enable it to purchase shares. EBTs are widely used by quoted companies to purchase shares in the market which will be used to satisfy long-term incentive plan awards or share options. Private companies may also use them to support the operation of their employee share schemes. This practice note is a brief explanation of the tax and accounting implications of funding an EBT.

A summary of the tax changes for high earners introduced since 6 April 2009 and those which the coalition government proposes will take effect from 6 April 2011, together with examples to illustrate what the changes will mean in practice.

This note is a general summary of the UK rules applying to the taxation of chargeable gains. It describes what chargeable gains are, what assets are affected, when disposals arise, the way in which gains are calculated and the manner in which they are taxed, exceptions from taxation, anti-avoidance rules and how allowable losses may be used. This note is intended as a general overview, so you should be aware that the tax treatment in a particular case may differ from the general position described in this note.

This update sets out a brief list of some of the most significant income tax, national insurance contributions (NICs), capital gains tax (CGT), corporation tax, share plan and pensions rates, bands and allowances for the tax year beginning 6 April 2011.

This note considers the effect of income tax and national insurance contributions on income earned by employees in the UK.

This US anti-avoidance measure was introduced by the American Jobs Creation Act 2004. It can affect US taxpayers who participate in UK share plans. UK companies may need US tax advice to ensure their share plans do not cause problems for any employees who are US taxpayers.

There are a number of different reasons why the shares of an unquoted company will need to be valued and in certain circumstances that value will also need to be agreed with HM Revenue & Customs Shares and Assets Valuation. This practice note deals specifically with the valuation of shares for the purposes of employee share schemes.

Companies need to know which employees must and may be permitted to participate in share schemes. Who can participate in a share scheme depends on the type of scheme in question. This practice note outlines the eligibility requirements for certain common types of share schemes.