The new Government tax review – what is being reviewed and, more importantly, what is not?

March 27, 2021

As part of its long-term strategy around taxation, the administration of tax and wider tax policies, HM Treasury have split out the aspects of the recent Budget that related specifically to these areas.  As a result, Tuesday 23rd March saw the publication of a raft of tax policies and consultations.

The impact of this work will unfold over the coming months. However, there are some interesting headline matters that are worthy of comment.

In terms of what is included, the most interesting from a remuneration perspective is the consultation on Enterprise Management Incentives (“EMI” for short) – which, strictly speaking, was unveiled at the beginning of the month.

For those unfamiliar, EMI has been the “tax advantaged” share plan of choice for growing and entrepreneurial businesses (usually privately held but can apply to some listed companies) for many years.  The ability to offer awards on a targeted basis, plus the accompanying favourable tax treatment has made it a firm favourite.

As with any government consultation, there is always the risk that the outcome will be that the tax policy in question will be amended or removed.  Whilst this is a possibility, taking away this popular share plan for employees would seem to go against the direction of travel in respect of employee ownership and encouraging enterprise.

What is more hopeful is that the EMI rules may be adjusted such that larger organisations could take advantage of this type of share plan.  MM&K will certainly be adding its voice for this expansion to occur.

In terms of what has not been included, the news that will be most appreciated is that there is no plan in 2021 to review the structure of Capital Gains Tax.  Given the worry in the market caused by the Office of Tax Simplification suggestions late in 2020, the fact that CGT is not an area for review should give comfort to business owners and employee shareholders, who may have been worried that their hard work in the face of Covid and Brexit might have turned out to be less rewarding.

It should be noted that the lack of inclusion of CGT in this latest tax review does not prevent the Government taking other steps – such as simply changing the rates of CGT.  However, our view is that this would not happen until the next Budget at the earliest and, most likely, quite some time after that.

Details of the other areas subject to review can be found on the Government website.

If you would like further information about the points raised in this article or any related share or tax matter, please do contact Stuart James.

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