Acknowledgements

Contents

List of abbreviations

1          Cash Bonus Plans, “Golden Hellos” and Phantom Shares

1.1  Cash Bonus Plans

1.2  Golden Hellos

1.3  Phantom Share Plans

2          Non-Cash Benefits

2.1  Taxation of Benefits: General Rules

2.2  Flexible Benefits

2.3  Exempt Employee Shareholder Shares

2.4  Incentive Award Schemes

2.5  Cars

2.6  Healthcare and Medical Benefits

2.7  Life Assurance

2.8  Childcare Vouchers

2.9  Workplace Nurseries

2.10       Nurseries outside the Workplace

2.11       Workplace Meals

2.12       Mobile Telephones

2.13       Vouchers

2.14       Pensions

2.15       Job-related Accommodation

2.16       Accommodation that is Not Job-Related

2.17       Recreational Facilities

3          Registered Pension Schemes

3.1  Introduction

3.2  Description

3.3  Disclosure

3.4  Regulatory Treatment

3.5  Tax Treatment of Member

3.6  Summary of Benefits Payable from Registered Money Purchase Pension Schemes

3.7  Tax Treatment of Trustee/Scheme Administrator

3.8  Tax Treatment of Employer

4          Employer-Financed Retirement Benefits Schemes

4.1  Description

4.2  Regulatory Treatment:

4.3  Tax Treatment of Member:

4.4  Tax Treatment of Trustee/Scheme Administrator

4.5  Tax Treatment of Employer:

5          Employee Benefit Trusts and Disguised Remuneration

5.1  Uses of Employee Benefit Trusts

5.2  Taxation of a Beneficiary

5.3  Taxation of Company

5.4  Capital Gains Tax

5.5  Collection of NIC

5.6  Taxation of Individual Settlor

5.7  Taxation of the EBT Trustee

5.8  Company Law

6          Unapproved Option Plans

6.1  Description

6.2  Key Features of Share Options

6.3  Company Law Issues

6.4  Designing a Share Option Plan and Drafting the Rules

6.5  Sources of Shares

6.6  Accounting Treatment

6.7  Summary of Advantages and Disadvantages of Share Options

6.8  Taxation of Options

6.9  Assignment or Release of Securities option

6.10       Frequently Asked Questions on Unapproved Share Options

7          Tax-Favoured Share Plans: General

7.1  Overview

7.2  Requirements common to SIP, SAYE and CSOP

7.3  Requirement common to SIP and SAYE: No Discouraging Features

7.4  Requirements common to SAYE and CSOP

7.5  Requirement common to EMI, SAYE and CSOP

7.6  Requirements common to EMI and CSOP

7.7  Requirements common to EMI, SAYE, CSOP and SIP

8          EMI

8.1  Description

8.2  Checklist for Granting an EMI Option

8.3  Qualification Requirements for the Relevant Company and its Shares

8.4  Tests applying to the Shares

8.5  Qualification Requirements for the Optionholder

8.6  Qualification Requirements for the Option

8.7  The Terms of the Option

8.8  Documentation and Registration

8.9  Taxation of the Employee

8.10       Summary of Advantages and Disadvantages of EMI Options

8.11       Frequently Asked Questions on EMI Plans

9          CSOP

9.1  Description

9.2  Checklist for Implementation of a CSOP

9.3  Approval Requirements for the Shares

9.4  Approval Requirements for Participating Companies

9.5  Approval Requirements for the Optionholder

9.6  Approval Requirements for the Plan

9.7  Approval Process

9.8  Valuation Issues

9.9  Tax Treatment of Employee

9.10       Tax Treatment of Employer

9.11       Accounting Treatment

9.12       Frequently Asked Questions

10       SAYE

10.1       Description

10.2       Checklist for Implementation of an SAYE

10.3       Approval requirements for the Shares

10.4       Approval Requirements for Participating Companies

10.5       Approval Requirements relating to Optionholders

10.6       Approval Requirements for the Plan

10.7       Approval Process

10.8       Selecting a Savings Carrier

10.9       Valuation Issues

10.10        Tax Treatment of Employee

10.11        Tax Treatment of Employer

10.12        Accounting Treatment

10.13        Summary of Advantages and Disadvantages of SAYE Options

10.14        Frequently Asked Questions for SAYE

11       SIP

11.1       Overview

11.2       Free Shares

11.3       Partnership Shares

11.4       Matching Shares

11.5       Dividend Shares

11.6       Checklist for Implementation of a SIP

11.7       Approval Requirements for the Shares

11.8       Approval Requirements for Participating Companies

11.9       Approval Requirements relating to Participants

11.10        Approval Requirements for the Plan

11.11        Other Features of the SIP

11.12        Approval Process

11.13        Selecting a Trustee/Administrator

11.14        Tax Treatment

11.15        Summary of Advantages and Disadvantages of SIP

11.16        Frequently Asked Questions on SIPs

12       Exempt Employee Shareholder Shares

12.1       Introduction

12.2       Legal Requirements

12.3       Exemption from Income Tax on Acquisition

12.4       Exemption from Distribution Treatment on Disposal

12.5       Exemption from Capital Gains Tax on Disposal

12.6       National Insurance

12.7       Employee with Material Interest

12.8       Corporation Tax Issues

12.9       Accounting and Company Law

13       Share Purchase and Award Plans: Overview

13.1       Structure of this Section

13.2       Company Law Issues

13.3       Common Ways of Providing Shares

13.4       Unrestricted Shares

13.5       Restricted Shares

13.6       Convertible securities

13.7       Nil-paid and Partly-paid Shares

13.8       Ratchet Arrangements

13.9       Value Freezing/Growth Shares/Hurdle Share

13.10        Flowering Shares

13.11        Joint Ownership Plans

13.12        Share Appreciation Rights

13.13        Discounted Share Offers

14       Tax Treatment of Employee on Acquisition of the Securities

14.1       Unrestricted Shares

14.2       Restricted Securities

14.3       Convertible securities

14.4       Nil-Paid and Partly-Paid Shares

14.5       Ratchet Arrangements

14.6       Value Freezing/Growth Shares/Hurdle Shares

14.7       Flowering Shares

14.8       Joint Ownership Plan

14.9       Share Appreciation Rights

15       Tax Treatment of Employee after Acquisition of the Securities

15.1       Unrestricted Securities

15.2       Restricted Securities

15.3       Convertible securities

15.4       Securities Acquired for less than Market Value

15.5       Ratchet Arrangements

15.6       Value Freezing/Growth Shares/Hurdle Shares

15.7       Flowering Shares

15.8       Joint Ownership Plan

15.9       Entrepreneurs’ Relief

15.10        Income Tax Relief for Capital Losses

16       Restricted Securities Elections

16.1       The Elections

16.2       Deciding to Make an Election

16.3       Reporting

17       Legacy Rules

17.1       Forfeitable Shares Acquired before 17 March 1998

17.2       Conditional Securities Acquired before 16 April 2003

17.3       Removal or Variation of a Restriction on Securities Acquired Before 1 September 2003

18       Anti-Avoidance and Special Situations

18.1       Pre-acquisition Avoidance Cases

18.2       Securities that have been Artificially Depressed in Value

18.3       Artificially Enhanced Securities

18.4       Securities Disposed of for More than Market Value

18.5       Post-Acquisition Benefits

19       Corporation Tax Relief

19.1       General Principles

19.2       CTA 2009, Part 12

19.3       Relationship between Part 12 and other deductions

19.4       CTA 2009, s1288

19.5       CTA 2009, sections 1290 to 1297

19.6       Establishment and Operation of Approved Schemes

19.7       Pension Contributions

19.8       Cash Cancellation Payments

19.9       Transfer Pricing and Anti-Arbitrage Issues

19.10        Termination Payments

20       NIC Recovery and Transfers

20.1       Primary NIC

20.2       Secondary NIC Transfers

21       Employment-Related Loans

21.1       Prohibition on Loans to Directors

21.2       Loans to Director acting as Trustee

21.3       Tax on Cheap Loans to Directors and Employees

21.4       Consumer Credit Act 1974

21.5       Loans to Acquire Shares in Close Companies

21.6       Loans to Acquire Shares in an Employee-Controlled Company

21.7       Loans to Participators in Close Companies

22       Termination Payments

22.1       Overview

22.2       Summary

22.3       Employment Rights

22.4       PILONs

22.5       Payments for Post-termination Restrictions

22.6       £30,000 Exemption

22.7       Statutory Redundancy Payments

22.8       Enhanced Redundancy Payments

22.9       Payments from Registered Pension Schemes

22.10        Approved Lump Sum Payments

22.11        Overseas Pension Schemes

22.12        Payments into Registered Pension Schemes

22.13        Payments on Death, Injury or Disability

22.14        Foreign Service Relief

22.15        Long Service Awards

22.16        Outplacement Counselling

22.17        Legal Expenses

22.18        Benefits in Kind

22.19        Special Rules for Directors

22.20        Compensation for Loss of Option Rights

22.21        Corporation Tax Issues

23       Corporate Transactions: Effect on Share Plans

23.1       Change of Control

23.2       Sale of Business or Subsidiary

23.3       Bonus issue and rights issue

23.4       Demergers and Spinoffs

23.5       Earnouts

24       Overview of Share Valuation

24.1       Money’s Worth Valuation

24.2       Capital Gains Tax Valuation

24.3       Impact of Personal Restrictions

25       Company Law Issues

25.1       Model Documentation

25.2       Public Offers of Securities

25.3       Corporate Authority

25.4       Issuing Shares for less than par

25.5       Restrictions on Allotment of Shares

25.6       Pre-emption rights

25.7       Financial Assistance

25.8       Definition of “Employees’ Share Scheme”

25.9       Disclosure Requirements

25.10        FSMA 2000

25.11        Loans to Directors

25.12        Interests in Contracts

25.13        Membership of Holding Company

25.14        Share Buybacks

26       Accounting Treatment

26.1       Accounting for Employment Costs – General

26.2       Accounting for Cash Bonuses

26.3       Accounting for Employment-related Securities and Options

26.4       Accounting for Secondary NIC

26.5       Accounting for Corporation Tax

26.6       Accounting for Employee Benefit Trusts

27       Anti-Avoidance

27.1       Background

27.2       PAYE Implications

28       Meaning of “by reason of employment”

29       Flowcharts and Checklists

29.1       Readily convertible asset

29.2       Corporation tax deductible share

29.3       Attribution of EBT shares to beneficiaries

29.4       Rollover of Approved options

29.5       Rollover of EMI Options

30       Form 42 Reporting

31       Future Developments

31.1       Department for Business, Information and Skills

31.2       Office for Tax Simplification (OTS)

31.3       HM Treasury

32       Glossary

Table of Authorities

Index