Possible reform to Employee Share Ownership coming in 2023?
November 22, 2022
On 8th November this year, a (cross party supported) Private Members’ Bill was introduced into Parliament with the aim of updating two of the current share ownership schemes (the share incentive plan, known as SIP, and the save-as-you-earn system, known as SAYE or Sharesave) —and proposes a third scheme.
As is the nature of these things, it is likely that the specifics will change as the Bill runs its course through Parliament (with the next reading of the bill in February 2023). However, for now, it is worth noting the key proposals of the Bill:
• Obtaining the most tax efficient treatment for the SIP would be possible after a three year holding period (down from the current five).
• The creation of a new plan that does not depend on regular monthly contributions and is accessible to those in less regular forms of work. It would enable employers to give a free share award to their employees, to be held for a year, after which it could be realised at a discount value, as in SAYE schemes currently (there are no details in the Bill as to how this discount would be calculated or applied).
• The other provision in the Bill is to require the Treasury to carry out a review with the aim of modernising employee share ownership to reflect the changes that have taken place since the existing schemes were introduced (which were 22 and 42 years ago respectively!).
For those of us who have been working in this field for some time, the decision to review and update the plans is definitely welcomed and it will be interesting to see what changes might be made to make the existing structures more attractive.
The recent confirmation of the Truss government’s decision to double the Company Share Ownership Plan (CSOP) limits to £60,000 perhaps indicates that there is a real desire to make these policies attractive to businesses and to encourage employee ownership.
Ultimately, for many, the opportunity to get monies with the lower capital gains tax rates applying is a big driver for many individuals entering into employee share ownership arrangements – with many individuals ending up with a “tax free” return due to CGT “Annual Exemption” amount being set at £12,300.
Hopefully, the proposed changes to this rate (down to £6,000 from April 2023 and £3,000 from April 2024) will not have a detrimental effect on the situation and undo the good work that is being proposed.
Should you want to have someone help you explore your thinking on this issue, please contact Stuart James in the first instance.