As an employer, there are numerous ways that you can remunerate or reward your employees and encourage their ongoing commitment to the business or company. Such rewards can be monetary, the provision of some form of benefit, or the gift or transfer of an asset. However, care should be taken when considering such "rewards" or "gifts" as in many cases they are likely to be deemed to be earnings and therefore subject to tax and/or National Insurance Contributions (NICs). Recent Case In the recent case of Mullens v HMRC (TC08112),  Mr Mullens (the taxpayer) sought to persuade the First-tier Tribunal (FTT) that huge payments he received from Bernie Ecclestone’s businesses, as well as from Ecclestone’s ex-wife and trusts, were gifts...

If you are an employer and you operate either an Enterprise Management Incentives (EMI) scheme or an Employment Related Securities (ERS) scheme, you will need to file an EMI or ERS return by 6 July after the tax year end. For the tax year ended 5 April 2021, the deadline is 6 July 2021. Furthermore, there may be cases where an ERS return is required but no official scheme is in place, such as where an employee or director has acquired shares in a company by reason of their employment (subject to certain exceptions), or the company has been restructured and employees/directors have received new shares. Enterprise Management Incentives (EMIs) EMI is a form of employee share option scheme that allows selected employees to be rewarded ...

In this two part series, we’ll be looking at the tax advantages of company share schemes for directors looking to reward, retain, and incentivise their staff. In Part 1 we looked at Company Share Option Plans (“CSOPs”) and Enterprise Management Incentive schemes (“EMIs”) which are more common with SMEs. In this part, we’ll be looking at Share Incentive Plans (“SIPs”) and Save As You Earn schemes (“SAYEs”) which can often be more appropriate for larger companies. As we discussed in Part 1, providing employees with shares directly can come with significant tax and National Insurance Contribution ("NIC") costs as well as cash flow problems for the employees receiving shares. Tax Advantaged Share Schemes for Empl...

In welcome news for those setting up EMI schemes, HMRC has announced that the window for agreeing EMI share valuations has been extended from 60 to 90 days. The Announcement HMRC made the announcement through the Employment Related Securities Bulletin 32 (June 2019). You can find the full bulletin here. What are EMIs? As covered in our previous blog, EMIs are a type of tax advantaged share scheme that allows companies to reward, retain, and incentivise select staff. EMI schemes operate by allowing companies to give select staff the opportunity to buy shares in the company at a price set when the share option is agreed. The Importance of Correct Valuations If EMI share options are priced at the market price when the o...

In our two part series, we'll be looking at the tax advantages of company share option schemes for directors looking to reward, retain, and incentivise their staff. In brief, a share option gives a recipient the right (but not the obligation) to acquire shares in a company in the future. This can give employees the chance to share in the growth of the company, providing strong incentives, whilst being very cost-efficient from the company’s perspective as well. In this part, we'll focus on two of the more common schemes used by SMEs: Company Share Option Plans (“CSOPs”) and Enterprise Management Incentive schemes (“EMIs”). The second part will examine Share Incentive Plans ("SIPs") and Save As You Earn schemes ("SAYEs"). ...

Click here to download our Winter 2015 Intelligent Tax Newsletter. This issue focuses on employee shareholder schemes, including: Employee Ownership Trusts EMI Schemes: A Summary Employee Shareholder Status

The concept of Employee Shareholder (ES) Shares was introduced in September 2013. In exchange for an employee signing away some of their employment rights, they receive shares in their employing company (or its parent) worth at least £2,000.  They are deemed to pay £2,000 for the shares and any value in the shares above £2,000 is taxable on them as a benefit in the year of receiving the shares. Given the relatively small income tax exemption of £2,000, ES is easy to overlook, but what advantages can ES shares actually bring?:- -  HMRC are willing to agree a value for the shares prior to them being issued to an employee. No pre-transaction valuation agreement process is available under normal circumstances for shares acquired ...

Under rules introduced in 2014, the owners of a trading company and their employees could benefit from the introduction of a qualifying "Employee Ownership Trust" (EOT).   The concept is that control of the company is sold to a Trust, whose beneficiaries are all employees of the company. Vendor Shareholders The existing owners' benefit is that they could pay no capital gains tax on the sale of shares to the trust, as opposed to the 10% rate of tax that they would ordinarily expect to pay if they qualify for Entrepreneurs' Relief on a sale to a third party. So this does represent a tax saving to them if they believe that their best exit route is a Management Buy Out, or a wider employee share ownership arrangement. To benefit from...

A roundup of the latest news from the world of tax for individuals, businesses and professional advisers. Click on the links below to view the full articles. Do Nil Rate Legacies include the Transferable Nil Rate Band? Loring v Woodland Trust highlights the care that must be taken when interpreting (and drafting) nil rate band legacies in wills. Employee Share Ownership Update A summary of some recent changes to the rules for; employee shareholders, EMI share option schemes and share incentive plans Business Property Relief Update New technical guidance is available regarding the impact on BPR of (a) surplus cash, and (b) partnership structures. Is a Dividend Waiver a Settlement? HMRC continue to pay close attention to income spli...

See our Spring 2014 Tax Update for more recent cases. The current government are encouraging towards direct ownership by employees of shares in their employing company:- The Introduction of Employee Shareholder Shares From 1 September 2013, an employer can provide shares with a value of at least £2,000 to each of its employees. In exchange for these shares the employee will become an "Employee Shareholder"; such an employee will have redcued employment rights, including a lack of redundancy rights and restricted unfair dismissal rights. The tax implications of providing Employee Shares are as follows:- - The first £2,000 of value in shares are received tax and national insurance free by the employee - Gains on a future sale of these...