Budget 2008: The hidden detail behind Enterprise Management Incentives

Commenting on today's Budget, Chris Blundell partner and head of Employee Tax Services at international accountancy and advisory firm Mazars said:

"While the Chancellor appears to have improved the tax breaks on share incentives by increasing the Enterprise Management Incentive limit to £120,000, it is not much more than index-linking it since its introduction in 2001. What went completely unannounced was that Enterprise Management Incentives will only now be available to companies with less than 250 employees.

Moreover, tucked in the Budget small print is a measure that will ensnare many short-term residents in the draconian anti-avoidance measures on share incentives, which were introduced for the rest of us in 2003.

Employees who are short-term residents - or "not ordinarily resident" - currently pay income tax and NIC only on their initial low value and not on any growth in the shares' value. Following today's announcement, they will now also have income tax and NIC to pay on the growth in the value of such shares if they are awarded on or after 6 April 2008.

Someone can be UK resident but considered a short-term resident if he spends just 183 days here in a tax year. With the changes also announced today on how the 183 days are measured, it is now even easier for employees who are short-term visitors to the UK to inadvertently become UK resident but "not ordinarily resident".

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© 2008 Mazars LLP, the UK firm of Mazars, an international advisory and accountancy group.