Examining common disguised remuneration scenarios in share schemes
Examining common disguised remuneration scenarios in share schemes

The following Share Incentives guidance note provides comprehensive and up to date legal information covering:

  • Examining common disguised remuneration scenarios in share schemes
  • Disguised remuneration and share schemes
  • Scenarios involving EMI options
  • Scenarios involving CSOP/SAYE/SIP options
  • Scenarios involving unapproved share options
  • Scenarios involving the acquisition of shares by the Trustee
  • Scenarios involving the disposal of shares by the Trustee
  • Scenarios involving joint ownership plans (JSOPs)

Disguised remuneration and share schemes

HMRC has, for many years, sought to ensure that the rewards gained from employment are properly subject to income tax and National Insurance contributions (NICs) deducted by employers through the pay as you earn (PAYE) system. By contrast, employers have sought to use increasingly innovative ways to structure remuneration by using employee benefit trusts (EBTs) and other vehicles to avoid, defer or reduce income tax liabilities. In 2011, anti-avoidance legislation known as the disguised remuneration rules was enacted in Part 7A of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003). The legislation has since been updated most recently by the Finance Act 2017 with further changes proposed to be made pursuant to the Finance Act 2018.

Guidance is contained in the Employment Income Manual starting at EIM45000.

The legislation applies where:

  1. there is an arrangement which relates to an existing, former or prospective employee or a relevant person linked to the employee. Employee for these purposes covers non-executive directors and office holders. The definition of relevant linked person is broad and covers any person who is, or has been connected with the employee (including spouses or co-habitees) as well as family members and any company controlled by the employee

  2. the arrangement is, ‘in essence’, wholly or partly a means of providing rewards, recognition or