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Share awards to internationally mobile employees (IMEs)

The Government is consulting on the potential impacts of a proposal to change national insurance contributions (NICs) for such employees.

Generally, the taxation of shares and share options awarded to IMEs depends on the residence of the employee when the shares are awarded or options granted.  This can lead to some anomalies.

For NICs, the normal approach is to apply the charge based on the activity in each country, whereas income tax is charged on shares/options on a time basis, with the part which relates to UK duties being subject to tax, and the part which relates to overseas duties being excluded from the UK tax charge.  Complete alignment between tax and NICs creates the risk of double-charging of NICs.

The proposal is that any taxable income from share awards which is attributable to days when the individual was not in the UK social security systems will be disregarded.

The Government is asking for comment on:

  1. What would be the impact of the proposed change for businesses and individuals in terms of one-off or on-going NICs or administrative costs/savings?
  2. Businesses would need to track IMEs movement during the period between grant and vesting of shares, in different social security schemes, in order to assess liability to UK NICs from such income.What would be the impacts of this requirement on business?
  3. Is the lead-in period before any new rules take effect, sufficient to allow businesses to understand the implement the changes?

The draft regulations can be found here.  Do you feel they achieve the aim?  If not, why not?

 

 

Date: 18th August, 2014
Author: Cathy Corns

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