Employment Tax

Exclusions from the disguised remuneration rules

Produced by Tolley in association with Karen Cooper of CooperCavendish LLP
  • 19 Oct 2021 23:17

The following Employment Tax guidance note Produced by Tolley in association with Karen Cooper of CooperCavendish LLP provides comprehensive and up to date tax information covering:

  • Exclusions from the disguised remuneration rules
  • Exclusions for share schemes
  • Tax-advantaged share schemes
  • Unapproved share schemes and employment-related securities
  • Hedging
  • Earmarking for deferred remuneration
  • Fall-back charges associated with unapproved scheme exemptions
  • Exclusions for other employment-related securities and other relieving provisions
  • Other employment-related exclusions

Exclusions from the disguised remuneration rules

When the disguised remuneration rules were published there was widespread concern that the legislation would catch many straightforward arrangements which did not involve tax avoidance, including employee share plans, HMRC registered pension schemes and benefits operated by third parties on behalf of employers. This resulted in the government introducing a detailed set of amendments to the legislation to provide exclusions and relieving provisions for certain types of arrangements. This note covers the main exclusions available.

Exclusions for share schemes

There are a number of specific exemptions in the legislation for arrangements that support common types of employees’ share schemes. It is important to ensure that each step in the process is covered by a separate exclusion, as HMRC will treat the setting aside of assets (earmarking), and the grant of options or awards as distinct steps for the purposes of the rules. The statutory exemptions overlap, and in some cases are subject to certain terms and conditions.

Tax-advantaged share schemes

These types of schemes benefit from the widest set of exclusions covering the following relevant steps:

  1. those taken under HMRC tax-advantaged share schemes, Share Incentive Plans (SIPs), SAYE and CSOP, including the grant of options / awards, and the acquisition and delivery of shares to satisfy them

  2. those taken solely for the purposes of acquiring shares to be awarded under SIP, SAYE and CSOP, provided the total number of shares held for the relevant purpose do not exceed the maximum number of shares which might ‘reasonably be expected to be required’ for those purposes over a 10-year period

  3. those involving the grant of qualifying EMI options, the acquisition, holding, and provision of shares for the purposes of an EMI scheme, provided there is no tax avoidance motive and the total number of shares held do not exceed the maximum number which might ‘reasonably be expected’ to be required over a 10-year period

As a result of the condition relating to the number of

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