Out-Law News 2 min. read
03 Aug 2012, 12:12 pm
The list forms part of the OTS's interim report (87-page / 541KB PDF, published following the initial "fact-finding" stage of its review of 'unapproved' share plans. Unapproved share plans are those that are not one of the specific types of tax-advantaged plans provided for in the tax legislation.
The OTS review extends to commonly used types of 'unapproved' plan as well as more 'ad hoc' arrangements. The fact-finding stage has been intended to help the OTS establish a "full and complete" picture of the issues faced by businesses using these 'unapproved' arrangements and the interim report asks businesses and stakeholders for further information, which it will use to devise recommendations for the Government on how to make it easier for employees to introduce and run such schemes.
"Many businesses have told us that [unapproved] arrangements are important in aligning employee reward with how the business is doing and help with staff retention," John Whiting, Tax Director with the OTS, said. "At the same time, they regularly cite technical difficulties or administrative burdens. We will now start to look for solutions to facilitate use, and will put forward common sense recommendations in due course."
The interim report would, he said, enable the OTS to have a "full and complete picture of the arrangements businesses use and the issues they encounter".
"We are publishing this interim report to ask people to confirm we have the right messages," he said. "We're also setting out some of the questions we will be addressing over the coming months and would really welcome input on those as well."
The report follows on from the OTS' work on the existing tax-advantaged 'approved' plans, published earlier this year. The Government is currently consulting on many of the OTS' recommendations intended to simplify the operation of 'approved' plans, including whether companies should be allowed to 'self-certify' certain types of plans rather than having to submit them to HM Revenue and Customs (HMRC) for pre-approval.
There are currently four recognised approved employee share schemes in operation which attract various tax advantages, although the Government is currently conducting further research on whether one particular scheme, the Company Option Share Plan (CSOP) could be phased out or replaced in light of its declining use. Approved share plans are subject to certain financial limits and qualifying conditions – although unapproved share plans do not attract specific tax advantages, companies who do not qualify to participate in the approved plan or wish to grant options greater than the strict participation and valuation limits for these plans often find unapproved arrangements more flexible.
However the lack of a strict legal framework created its own set of barriers and complexities discouraging or preventing the use of unapproved plans, the OTS said. Some of the difficulties identified by stakeholders as part of its initial fact-finding exercise included difficulties in managing arrangements for international employees, problems with valuing shares – for companies quoted on a stock exchange, as well as unquoted companies – difficulties in meeting Pay As You Earn (PAYE) taxation requirements, confusion around penalties and administration issues.
Taxation and share plans expert Lynette Jacobs of Pinsent Masons, the law firm behind Out-Law.com, welcomed the OTS' level of engagement. Jacobs and other share plans specialists from the firm provided input to the OTS during one of a series of face-to-face meetings conducted by the department as part of the initial 'fact-finding' stage of its review.
"This report is an interesting summary of the OTS' findings - although there are few surprises within the list of key areas of complexity and the areas identified remain reasonably wide in scope," she said. "In this report, the OTS continues its fact-finding and asks for further input on some particular areas of complexity. This level of engagement is to be welcomed, as the OTS seems keen to understand the real practical issues confronting companies in relation to their share plans."
