Employment Tax

UK participants in offshore share plans

Produced by Tolley in association with Caroline Harwood of Burges Salmon LLP
  • 01 Nov 2021 12:42

The following Employment Tax guidance note Produced by Tolley in association with Caroline Harwood of Burges Salmon LLP provides comprehensive and up to date tax information covering:

  • UK participants in offshore share plans
  • General principles
  • General regulatory requirements
  • European Economic Area (EEA) prospectus requirements
  • Financial Services and Markets Act 2000 restrictions
  • Registration and annual reporting requirements
  • Taxation
  • Direct acquisitions of ERS
  • Share options
  • Restricted stock units (RSUs)
  • More...

UK participants in offshore share plans

Share plans are increasingly popular as employee incentive arrangements and multinational businesses often offer participation to employees in several jurisdictions. This can lead to administrative and tax headaches, so the purpose of this note is to set out the key issues which an overseas employer needs to consider when extending their share plan to UK employees or executives.

Some companies offer global plans on the same terms to all employees wherever resident. These organisations need to ensure that they understand the regulatory requirements in the jurisdictions in which they operate and that they deal with these and, in particular, tax withholding requirements. This is to ensure that neither the employees nor the employer have a nasty (and potentially costly) surprise waiting for them in the form of interest and / or penalties which could negate the incentivising effect of the award.

Other organisations seek to make use of local tax advantaged arrangements which typically take the form of sub-plans which operate under an ‘umbrella’ plan which includes the overriding provisions applicable in all jurisdictions.

This guidance note looks at both the key UK provisions which should be considered when awards are made to UK employees (for the purposes of this note ‘employees’ includes office-holders); and sets out some details of the main UK tax advantaged plan commonly used as a tax efficient sub-plan. It is not intended to be comprehensive and due to the complex nature of the legislation surrounding this area it is recommended that each arrangement is considered on a case by case basis.

All comments are based on the assumption that the employee is resident in the UK for tax purposes at all times.

General principles

From a UK perspective, UK employees can acquire shares or other securities in overseas companies and can be granted options or other rights over those shares or securities. The commercial benefits of operating a share-based incentive arrangement are considered in the Why use a share scheme?

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