Tax and NICs for Incentives

Companies have a legal obligation to provide information to HM Revenue & Customs (HMRC) regarding The operation of tax-favoured share incentive arrangements. "Reportable events" in relation to non-tax favoured "employment-related securities" and "employment-related securities options. These are reported on form 42 (for more details, see Practice note, Form 42: annual reporting obligations for employee securities (except tax-favoured arrangements).  This practice note focuses on the return forms companies must use to report events in relation to tax -favoured share plans: Form 34 for SAYE option schemes. Form 35 for CSOPs. Form 39 for SIPs. Form 40 for EMIs.  

A note on the bank payroll tax, payable by banks and certain other financial services firms on bonuses paid by them from 9 December 2009 to 5 April 2010.

A table showing where rewritten versions of various corporation tax provisions relevant to share incentives are found in the Corporation Tax Bill 2008-09, introduced into Parliament on 4 December 2008.This table is an extract from a larger table of destinations for the bill, see PLC Tax, Practice note, Corporation Tax Bill 2008-09: table of destinations.

A brief summary of the relative merits of the tax-favoured share schemes available in the UK.

Part 7A of  Income Tax (Earnings and Pensions)  Act 2003 counters tax avoidance using employee benefit trusts and other intermediaries to reward employees or their family members, but is very broadly drafted. This note considers the scope of the legislation, HMRC's guidance about it and how it applies in practice, and highlights some practical difficulties it may cause for share and bonus schemes which are not avoidance schemes.

A note on the effect of the Court of Appeal judgment in Mansworth (HMIT) v Jelley [2002] EWCA Civ 1829 and subsequent HMRC guidance on the capital gains tax acquisition cost of shares acquired by the exercise of employee share options before 10 April 2003.  Further HMRC action in 2012 has raised issues for some taxpayers who may have thought the position was settled.

A practice note on the EU Social Security Regulations (883/2004/EC), which came into force on 1 May 2010.

A selection of common questions asked about share options.

A practice note with a table of Finance Bill 2012 clauses and Schedules, including links to PLC analysis and information on the status of each provision. 

This practice note examines the general anti-abuse rule (GAAR) and HMRC's GAAR guidance.

HMRC issues various forms for use in connection with employee share schemes, some for particular tax years. To suggest further forms which you would like to access from this page, please e-mail the PLC Share Schemes & Incentives professional support team at incentivesfeedback@practicallaw.com.

HMRC and the British Venture Capital Association have agreed two memoranda of understanding intended to offer certainty about valuation and tax treatment of equity interests awarded to managers of target companies and private equity and venture capital providers if certain requirements are met. These memoranda are summarised in this practice note.

This note is a collection of charts illustrating the tax treatment of common incentive arrangements. Subscribers may like to use these charts when explaining the tax structure of share plans to clients, trainees or non-specialists. These charts provide a simple visual guide to the basic tax structure of share plans. Share schemes specialists will be aware that the detailed tax treatment of share plans can be more complicated than the very simple examples provided in this note. In particular, for the sake of simplicity, national insurance contributions liability will normally not be shown on the charts.

This note is a general summary of the principles underpinning UK income tax. It describes what income is and how it is taxed. It also provides links to notes describing other aspects of the UK income tax rules, such as calculation of income and exemptions from income tax.

An overview of the tax issues involved in making and writing off loans to employees and directors. The note includes an overview of the notional loans regime and the key legal issues to consider.

This practice note considers the requirement that participating employees and/or their associates must not have a material interest in the company whose shares are used for tax-advantaged share incentives. It includes the special rules relating to employee benefit trusts and other discretionary trusts.

Promoters and in some cases users of certain National insurance contributions (NICs) saving arrangements are obliged to disclose details of those arrangements to HMRC from 1 May 2007. This note sets out the types of arrangements that are caught by those rules, who must disclose and when disclosure must be made. 

Between 6 April 2007 and 31 March 2010, companies were able to submit information and returns relating to certain employee share schemes electronically to HM Revenue & Customs. This practice note considers the key elements of this former online service.

An overview of pay as you earn (PAYE) so far as it applies to employment income dealing, in particular, with the PAYE treatment of cash and notional payments (including the penal tax charge that can arise if an employee fails to make good a tax liability arising on notional payments) whether made during employment or on or after termination. The note also discusses the collection of under-deducted tax and NICs, interest and penalties and real time information (RTI) reporting.

Lots of jargon and acronyms are used in share schemes and incentives practice, many of which are very similar.  These unfamiliar terms can make it difficult for newcomers  to quickly pick up on the basics of share schemes law and practice.  This jargon buster is intended to help those new to share schemes to navigate their way around the jargon and acronyms used by share schemes practitioners.

Whether or not a company's shares are listed on a recognised stock exchange is significant for several aspects of the tax and NICs treatment of employee share schemes.

This practice note sets out our analysis of the remittance to the UK of securities or options income relating to non-UK duties, for resident but non ordinarily resident taxpayers claiming the remittance basis. From Royal Assent of Finance Act 2013, the concept of ordinary residence will be abolished and a statutory residence test will come into force (see Practice note, Statutory residence test for individuals).  We are currently reviewing this practice note in the light of this forthcoming development.

This practice note covers the meaning of "residence" and "ordinary residence" of individuals in the context of UK taxation. NOTE: This resource is being reviewed in light of the 2013 Budget. For more information, see 2013 Budget: key private client tax announcements.

This practice note sets out in detail the UK tax implications of residence, ordinary residence and domicile for individuals. NOTE: This resource is being reviewed in light of the 2013 Budget. For more information, see 2013 Budget: key private client tax announcements.

This practice note considers the anti-forestalling measures implemented by the previous government in the Finance Act 2009 in advance of its abortive plans to restrict tax relief on pension saving for high-income individuals. The anti-forestalling measures only applied to pensions tax relief claimed in the 2009/10 and 2010/11 tax years.

A practice note about the statutory residence test (SRT) for individuals that the government intends to introduce in the Finance Act 2013 (FA 2013). Following Royal Assent of FA 2013 (likely to be in July 2013), the SRT will determine whether an individual is UK resident for tax purposes for the tax years 2013-14 onwards. We would welcome subscribers' views on the practicalities of operating the SRT, see Your comments. NOTE: This practice note is being reviewed in light of the government amendments to Schedules 43 and 44 to the Finance Bill 2013 announced on 13 June 2013. For more information, see Private client tax legislation tracker 2012-13: Statutory residence test and Abolition of ordinary residence.

A summary of the discussions of the working groups established to consider the integration of tax and NICs.

A practice note summarising the tax consultations, consultation responses and draft legislation published before the end of 2010.

This update sets out a brief list of some of the most significant income tax, national insurance contributions (NICs), capital gains tax (CGT), corporation tax, share plan and pensions rates, bands and allowances for the tax year beginning 6 April 2011.

This note considers how the concept of legitimate expectation may apply in the taxation context.  

An overview of the way in which payments made to employees on termination of their employment are taxed.

This note describes the key features of US employee stock purchase plans (often called a section 423 plan) and suggests possible approaches to implementing a UK version of a section 423 plan.

A practice note summarising the tax consultations, consultation responses and draft Finance Bill 2013 legislation we are expecting on or before 11 December 2012.  

A table summarising how the various limits for the tax-favoured share schemes apply to employees who are employed by more than one company at the same time.