Employee share scheme changes
From 6 April 2014, employers need to register existing and new share schemes and arrangements online with HMRC. In addition, HMRC will no longer provide formal approval of these schemes, businesses must self-certify that the schemes meet the necessary requirements. The changes also affect any non-tax advantaged plans.
There are a number of government approved share schemes which offer certain tax advantages to employees. The approved schemes are: Share Incentive Plans (SIP), Save As You Earn (SAYE) schemes, Company Share Option Plans (CSOP) and Enterprise Management Incentive (EMI) schemes.
The schemes are designed to help incentivise employees by giving them the opportunity to invest in the business they work for. This in turn helps businesses retain and recruit key staff and help to offer tax efficient benefits to staff.
The use of employee share plans does not have an inherent financial risk for employees as they are under no obligation to exercise an option to purchase shares if the price is below the exercise price. However, there are some other risks such as the shares loosing value if the profitability of the business decreases or the expectation that employees should take a lower salary in exchange for being offered share options.
Some employers offer employee share schemes which are not approved by the government. The purchase of shares in unapproved share schemes is subject to the usual tax rules.