The Office of Tax Simplification was established in July 2010 as an independent body whose aim is to study aspects of the tax system and develop recommendations for simplification. Our small team includes some representatives from HM Revenue & Customs (HMRC) and HM Treasury, but it built around private sector part-time secondees. The Chancellor, to whom our reports are addressed, makes the ultimate decision about whether our recommendations are taken forward – so it is important that we make a good evidence-backed case to support changes to legislation or practice.
Tax advantaged share schemes
In March, we produced a report making recommendations to simplify tax law relating to tax-advantaged employee share plans – EMI, CSOP, SAYE and SIP. This drew on a lot of input from a variety of sources, including companies, administrators and advisers. The report suggested removing the requirement for companies to seek prior approval from HMRC to three of the plans, replacing it with a self-certification approach similar to that used for EMI arrangements. We also recommended a number of technical simplifications, including harmonising definitions and reducing certain holding periods.
One of our key recommendations in that report demonstrates the importance of obtaining strong supporting evidence before we suggest changes. The feedback we obtained in relation to CSOP was inconclusive: the decline in the use of CSOP suggests it could be abolished; however, there were some strong representations for its retention. With such conflicting evidence, our recommendation was to carry out further investigation into the continued use of CSOP, to help identify the best way forward – which might be to fold it into an expanded EMI. Please do input to the forthcoming HMRC consultation on tax-advantaged schemes.
Non tax advantaged schemes
We are now reviewing non-tax advantaged employee share plans. This is not as clearly defined as the project on tax-advantaged schemes, because companies use a huge variety of equity-based schemes, and few usage statistics exist. Furthermore, the types of plans in place are not as neatly labelled as the government approved schemes – one company’s LTIP may be another company’s ESOP!
This project will therefore be divided into two stages. Stage one will be to identify the types of plans that companies are using, and the tax barriers they face in designing and implementing those plans. Only when this evidence has been gathered can we move onto stage two, which will be to develop our recommendations for simplification in the form of a report to the Chancellor.
How you can help us
We aim to complete stage one by the end of June. Before then, we would like input from as many of the Quoted Companies Alliance's members as possible with their views on unapproved share plans. We are preparing an online questionnaire for companies to complete, which will be available via the OTS website.
If you’d like to help with this project we would be happy to hear from you. You can contact us on 020 7270 6190 or by email.
This article was written by the Office of Tax Simplification.