Unapproved employee share schemes simplified

Taxes on employment-related securities (ERS) under unapproved schemes will be simplified in stages in 2014/15.

From 6 April 2014: employees get longer to make good tax paid by their employer

At present an employee who receives ERS needs to make good any tax and NICs paid by the employer within 90 days of the ‘relevant event’ (receipt of the shares or a share-related benefit) or else they will have to pay additional tax because the employer’s tax payment will be treated as a benefit in kind.

For relevant events occurring on or after 6 April 2014 the time limit for reimbursement will be 90 days from the end of the tax year in which the chargeable event occurs, ie 4 July 2015 for any relevant event falling within 2013/14. This includes events arising on securities and options already awarded before 6 April 2014.

From Royal Assent: new rollover relief

Restricted, part-paid and nil-paid shares do not currently benefit from any kind of roll-over if they are exchanged for new shares on a takeover. This can lead to PAYE and NIC charges on takeovers or reorganisations. The new rollover relief will cover ‘like for like’ exchanges of restricted securities. 

The sale of nil or part paid shares can lead to a tax charge on the basis that a notional loan is being written off. To avoid this tax charge, the shares have to be paid up before sale. The proposal is that on certain disposals, this tax charge will not normally apply where the purchaser assumes the liability to pay the outstanding purchase price of the shares.

Corporation tax (CT) relief for share acquisitions will be extended to shares acquired:

  • by the exercise of share options within 90 days after takeover by an unlisted company (T&Cs apply); or
  • by an overseas individual seconded to work for a UK company but actually employed by an overseas company.

In the latter situation, the UK company will be treated as if it were the individual’s employer and CT relief given for the amount of gain subject to UK income tax.

From 1 September 2014: internationally mobile employees

Internationally mobile employees (IMEs) will be treated in a broadly similar way to UK-resident employees from 1 September 2014. There will still be some differences in the rules to take account of ‘relevant periods’ for employment-related securities awarded to IMEs. The new rules set out what income is taxable under the arising or the remittance basis (for non-doms).

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