On 6 March 2012, the Office of Tax Simplification (OTS) issued its final report on tax advantaged employee share schemes, making a number of recommendations.
The key recommendations are:
- To dispense with the requirement to seek approval to adopt SAYE, CSOP and SIP schemes, and to move to a self-certification similar to the one used for EMI;
- To look at whether to abolish CSOPs, although this will involve a review of the circumstances in which this type of scheme is used;
- To look at whether to merge CSOP and EMI, particularly as there is evidence that these schemes are often used in tandem;
- To look at harmonising the definitions across the schemes, modify the conditions attaching to the schemes, and make time limits more workable.
Currently, the rules for each type of scheme are complex, and have been more difficult to work with because there is little uniformity. A common cause of failure, particularly in the context of EMI schemes, is the short time frame in which to issue options under the scheme and to make relevant returns once those options have been exercised. An extension to these time limits would be particularly welcome.
If these changes are adopted in Finance Bill 2012, more practitioners may be encouraged to recommend share schemes to their clients.
The OTS has also made recommendations in connection with tax issues relevant to pensioners. In particular they have proposed that the following should be reviewed:
- Age related allowances
- The Married Couples allowance
- The 10% rate for savings
- PAYE forms and administrative processes that are particularly burdensome for pensioners.
There may be less political will to simplify these areas as some pensioners are likely to be adversely affected, for example if age related allowances are removed. Any reduction to these reliefs may need to be addressed in conjunction with a general increase in the personal allowance.
One of the other proposals made by the OTS, which has attracted a lot of attention, is that the state pension should be removed from the scope of income tax. This may be considered reasonable recompense for the loss of other allowances