Government responds to OTS recommendations on approved share plans
29 June 2012
The Government has published its consultation on the recommendations made by the Office of Tax Simplification on the operation of HMRC approved share plans. Whilst the consultation provides some welcome news for companies, such as confirmation of the abolition the approvals process, it also disappoints with the Government rejecting the recommendation to reduce the holding period under share incentive plans. There are still a number of recommendations on which the Government is seeking views and evidence before deciding how to proceed. Our attached briefing provides further detail on the consultation.
The good news is that the Government has, in principle, accepted two of the key OTS recommendations and is now seeking the views of stakeholders so that it can develop detailed proposals to implement both recommendations by 2014. These are:
- Moving to self-certification: the Government has accepted the recommendation to abolish the current cumbersome and time consuming approvals process and move towards a regime of self-certification. The aim of the consultation is to ensure that the self-certification arrangements are properly designed so that companies understand their obligations under the scheme and can self- certify on an informed basis, as well as giving HMRC sufficient powers to make enquiries on the operation of a scheme and to recover tax and penalties if necessary.
- Reviewing Company Share Option Plans (CSOP): The second accepted recommendation is to carry out further work to identify whether the CSOP is still relevant for UK businesses. This recommendation was fuelled by the apparent decline in the use of CSOPs over the last ten years.
However, the Government is yet to be persuaded on a number of the recommendations put forward by the OTS. Some have been rejected outright, largely due to the impact they would have on the Exchequer's purse strings – the most notable of these is the proposed reduction in the tax-free holding period for Share Incentive Plan (SIP) shares from five years to three years.
Other recommendations, such as the introduction of a single definition of "retirement" and the removal of the £1,500 cap on dividend shares, are being considered in light of their potential impact, cost and benefits, and the Government is seeking views and evidence on these aspects. If the Government decides to take those recommendations forward, it will publish further details in autumn 2012, with a view to including draft legislation in the Finance Bill 2013.
The Government also confirmed that a handful of recommendations will be set aside for the moment and will form part of future reviews. These include the move to streamline annual returns and introduce online filing, and simplifying the "good leaver" rules under the approved plans.
Whilst companies will welcome the Government's consultation on the majority of the OTS recommendations - particularly the 'deregulation' of the approvals process – it is disappointing (although perhaps unsurprising) that some of the recommendations, such as reducing the SIP holding period, will not be taken any further.
The Government asks several detailed questions in the consultation paper which, in many cases, companies using approved plans are best placed to answer. As part of our response to the consultation, we will be holding a roundtable discussion for companies addressing many of these questions and, before then, sending you a longer briefing paper on the consultation.
If you wish to take part in the consultation directly, please click on the link to the consultation paper above. The consultation closes on 18 September 2012.
Please contact your usual New Bridge Street adviser if you would like to discuss the points raised in this briefing.
This update is intended to highlight issues and not to be comprehensive, nor provide specific advice. Aon Hewitt Limited does not accept nor assume any responsibility for any consequences arising for any person as a result of them using or relying on the information contained in this briefing.
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