HM Revenue & Customs (HMRC) last week produced a revised version of its Frequently Asked Questions (FAQs) on the vexed subject of disguised remuneration. Please click here to read them.
Background
Disguised remuneration is the widely used but still unofficial term for a set of provisions which can impose up-front income tax and NIC charges when third parties (such as trustees of employee trusts) agree to provide shares or other remuneration. This can be ahead of the date when the actual remuneration is received from those third parties which has historically been the taxing point. These provisions are included in the Finance Bill, which is currently going through its final stages in Parliament, meaning that few further changes can now be made.
As set out in our previous Law-Nows on this subject (see Disguised Remuneration - Employee Trusts and Disguised Remuneration – An update for employee share plans), the particular challenge for quoted company share plans is where companies use employee trusts to satisfy awards. This includes situations where employee trusts already hold or acquire shares which may be used to satisfy awards.
HMRC comfort
Because of this, it is comforting that HMRC have now again
acknowledged in the reissued FAQs (after a month or so of further
uncertainty) that normal quoted company hedging which occurs using
trusts should not in principle give rise to tax issues. This
is provided that the trust does not make the award and does not
know the number of shares allocated to particular
employees.
Even where there is a link between the trust's shares and the
employee award that should not be fatal for most mainstream
arrangements.
This is because the FAQs also give reassuring guidance on what
terms can be contained in awards which trustees may make
and/or agree to satisfy and still fall within the
exemptions from the tax charge. However, as has been the
general story of this legislation, comfort emerges from HMRC drip
by drip and there are still other issues still to be
resolved.
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 11/07/2011.