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HMRC Consultation on employee shares

The consultation follows on from The Office of Tax Simplification’s report indicating that a charge to income tax should only arise on the acquisition of employment related securities (ERS) if they are “marketable, i.e. if they can be sold at (virtually) full value.  Where employees acquire shares that are not marketable no tax should be charged on acquisition.  It should, though, be possible to elect to pay the tax charge at the date of acquisition.

The outcome would be that for most private companies, as compared with the current position, a deferral of the tax charge on acquisition would be permitted.

However, to stop possible tax avoidance, where income tax has not been paid on shares, all dividends, etc. arising from the ERS would be taxed as employment income.

HMRC has a list of questions including:

What are the merits of the ‘marketable security’ proposal for businesses and individuals and are there any potential downsides?

How far do you agree that the prospect of a tax charge on the award of ERS provides a disincentive to ERS-based remuneration?  Would implementation of this recommendation have any impact on the number or type of ERS awards offered or taken up?

Would there be any undesirable or unintended consequences, including costs to employers of taxing income, obtained from ERS as employment income?

If the Government were to apply a backstop date at which the ERS would be deemed to be ‘marketable securities’, at what point should this apply?

The full consultation can be found on the website.



Date: 11th August, 2014
Author: Cathy Corns


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