Global updates - Page 3 - Tapestry - Global Legal Compliance Partners

Tapestry's Certificate in Employee Share Plans 2023 - registration now open!

6 October 2022

We are delighted to announce that registration is now open for Tapestry’s Certificate in Employee Share Plans 2023.

Following the positive feedback we received on both our 2021 and 2022 virtual courses, we are very pleased to confirm that the Certificate will be delivered virtually for 2023! The course will run with virtual interactive teaching sessions, so you can take the course wherever you are.

Similar to the 2022 course, we will continue to combine virtual learning with in-person networking events - so the class of 2023 will get the best of both worlds.

Whether you want to learn about plan design, or how to develop and operate share plans effectively and compliantly, our industry leading experts will give you the knowledge to find the solutions you need. The course will be delivered in a flexible way, whilst maintaining all the great aspects we know our attendees value.

Completing the course continues to result in an accreditation by the Chartered Governance Institute UK & Ireland.

What does the course cover?
Tapestry’s Certificate in Employee Share Plans is a must have for anyone who works with executive or employee share plans. This course will help you gain specialist knowledge in:

plan design
accounting principles
legal requirements
disclosure & reporting
tax
compliance

The course is suitable for anyone working with employee share plans, including HR, in-house legal, reward or other compensation professionals, those working in company secretariat, and external administrators, reward (or other non-legal share plan) professionals and benefits consultants.

How will the course be structured?
The course is split into 2 parts and each part will be taught over 5 short days on Zoom, finishing around lunchtime each day. These session timings make it easier and more practical for on-screen learning and to fit around other commitments.

The course will combine larger group teaching with participatory learning through smaller breakout sessions, each hosted by a Tapestry lawyer. These sessions ensure an interactive experience and the opportunity to learn from each other, with fun exercises and practical examples to help consolidate your knowledge.

Are there in-person networking opportunities?
Yes. One of the most valuable added benefits of the course is the networking opportunities that you get from being with your classmates outside of the office. So, although the teaching will be virtual, we will be hosting optional in-person networking sessions in London. Dinner and drinks are on us!

How will the course be examined?
Exams will be held virtually for the 2023 course. The examination dates are set out below.

What are the dates for the course?
Each part of the course will run over five short days. Times below are UK times.

Time: 09.30 to lunchtime

Part 1: 15-19 May 2023 Part 2: 18-22 September 2023
Exam: 3 July 2023 Exam: 6 November 2023

Do I need to book time off work to attend the course?
Course participants should plan to attend the course teaching in an uninterrupted virtual learning environment. We know this can be challenging at times, however, we do find a strong connection between active course participation and exam success. We therefore recommend you and your employer treat the time you are attending the tuition (i.e. until around lunch time each day) as being ‘out of the office’, just like you would if the course was in-person. There is time to work in the afternoons if needed, though.

Note that you should plan to attend all of the course tuition (and minimum attendance requirements apply). Course participants will also need to commit to self-study time to prepare for the exams.

How much will the course cost?
Our 2023 course price is £4,250 plus VAT.

Register and pay by 31 December 2022 to get our Early Bird rate of £3,950 plus VAT.

To register or if you have any queries, please contact us

What our 2022 course participants say...

"Blown away by the exceptional quality of the Tapestry team, delivery of the course and the materials. Well done!"
Louise Poulter, BP

"It is a must-do course for everyone involved in share related activities."
Hanna Oszczeda, Unilever

"Excellent content, delivered at a steady pace and explained really well. A great course for both those with some experience and those new to the area."
Steve Vanston, HWC

"An extremely valuable and informative course, delivered by experienced and knowledgeable people in a clear and concise way."
Elliot Alexander, Computershare

If you have any queries regarding the course, please do contact us. More information can also be found on our course website.

Best wishes

Team Tapestry

Tapestry Global Compliance Partners

Tapestry's Worldwide Wrap-Up: Tap-in to our global knowledge!

October 2022

Staying ahead of the curve on regulatory and tax compliance is a never-ending task for companies.

To help you keep on top of recent developments, here is our final quarterly Worldwide Wrap-Up of 2022, with some of the most recent changes that should be on your radar. We have summarised these topics briefly in this alert, however they will be covered in more detail along with other recent developments on our 5 October webinar.

Australia - securities law reforms due to take effect
Reforms to securities rules, aiming to simplify the regulation of employee share schemes, take effect on 1 October. A key change is the creation of a distinction between free and contributory plans (i.e. plans which require employees to make a payment). Offers under free share plans (whether offered by listed or unlisted companies), require no prescribed form of disclosure, so long as the offer states that it is made under the new rules. Contributory share plans must comply with additional restrictions and disclosure obligations. In addition, for unlisted companies, a contributory plan must comply with a monetary cap, the base limit being AUD 30,000 per employee in any 12-month period. Where a company has listed, or is due to list, the three month listing requirement will no longer apply. For both listed and unlisted companies, the requirement to file a Notice of Reliance with ASIC (the regulator) is revoked.
Tapestry comment
This is the second overhaul of the ESS regulations in less than 10 years and the reforms have been under consideration for some time. Although the changes are helpful (in particular the lighter regulatory touch that now applies to offers of free shares), the attitude still seems to be focussed too much on protecting employees and not enough on encouraging employee ownership. For offers where a contribution is required (which is fairly standard in all-employee plans), the disclosure requirements are detailed, especially for unlisted companies. With the addition of a new penalty regime, which includes the risk of criminal liability for the company and directors for certain misleading or deceptive statements/omissions, this could be seen as a lost opportunity to be bolder in promoting employee share ownership in Australia.

Canada - Quebec introduces tougher French language rules

Quebec has recently strengthened its French language law (the new rules took effect on 1 June 2022). Under the new rules, any document that is classified as a “contract of adhesion” (i.e. contracts where there is limited or no negotiation between the parties) and that are considered to form part of an employee’s “terms and conditions of employment”, will generally have to be made available in French. In a share plans context, the new rules are likely to apply to documents which are generally presented to the employee on a “take it or leave it” basis.
In addition, from 1 June 2023, if an employee is not provided with French language versions of the documents, there is a risk that the documents can be voided. Obtaining consent from the participants to receive the documents in English would not comply with the new French language law.
Tapestry comment
Previously, many companies have managed to avoid the French language rules by getting the employees to consent to using the English language only. It looks like this will no longer be acceptable, as there is a risk that a disgruntled employee may take action to assert their language rights. However, local counsel cautions that it is still too early to assess the practical implications of the language law changes and it remains to be seen how strongly the new rules will be enforced in practice.

Ireland - Employee tax compliance notification
As noted in our August alert (here) the Irish Revenue recently sent an Employer Notice to employers who have indicated that they operate unapproved (i.e. not tax-qualified) share plans, expressing their concern that employees may not be fully aware of their tax obligations where they are engaged in a share-based remuneration scheme(s). For example, where an employee has exercised, assigned or released share options and/or disposed of shares, it is the employee who is responsible for reporting and paying any taxes due.
The Irish Revenue requested that employers circulate the information provided in the Employer Notice to all employees to inform them of their tax obligations
Tapestry comment
This intervention by the Irish Revenue illustrates the importance of employers and employees being aware of and adhering to their obligations under Irish tax law in respect of share awards, and in particular, share options. Companies should make sure they have now circulated the requested information.

Poland - not another securities filing!
During our last Worldwide Wrap up (here), we were pleased to report confirmation from the Polish Financial Supervision Authority (KNF) that the existing filing required following the allocation of securities under an employee share plan did not apply to options, provided they qualify as "options" for the purposes of Polish law.
Unfortunately, the KNF has since added a new filing obligation. Where a company is relying on an EUPR exemption for an offer of shares to employees in Poland, the company may have to provide an information memorandum or an information document to employees. From 1 August, a strict interpretation of the new law is that the company must notify the KNF at least seven days prior to distributing this information document / memorandum to employees. Our counsel is currently querying and challenging the scope of the new rules and their applicability if using the employee exemption. The KNF has confirmed that they are reviewing and clarifying their internal policy, as they are aware it is unclear. We expect further clarification in due course. The filing does not apply to past offers.
Tapestry comment
The addition of new securities law filing requirements is always disappointing, and the KNF appears to be increasingly interested in share plans activity by companies. Whilst we await an update on the scope of the new rules, our counsel has advised that making the new filing is the cautious approach for any company relying on the employee exemption and issuing an information document.

Russia - new cross-border data transfer rules
New, stricter, rules on cross-border transfers of personal data came into force on 1 September 2022. Where a company makes cross-border data transfers, it must file a notification to the Russian regulator (Roskomnadzor) before 1 March 2023. After that date, the transfer of personal data to 'adequate' countries will require a notification to Roskomnadzor. Transfers to 'inadequate' countries will require the permission of Roskomnadzor.
Roskomnadzor will determine which countries are deemed 'adequate', but it is currently obliged to include member states of Convention 108 (this includes the EU and UK, although not the US).
Tapestry comment
While the ongoing war in Ukraine occupies most of our discussions with clients on share plan offerings in Russia, companies need to ensure that their data protection compliance team is aware of the tightening of the data protection transfer rules and the additional reporting obligations.

UK
The recent announcement of the "mini-budget" has sparked much discussion and market volatility. We will discuss the proposed changes and how they are relevant to share plans, including the current status of updates regarding changing tax and social security rates, the increased tax-qualified CSOP (Company Share Option Plan) limit from £30,000 to £60,000 and the relaxation around the classes of shares which can be used.
Tapestry comment
Aside from the market turmoil that has unfolded since the announcements, there is some positive news for share plans. Join our webinar to hear our views on the “mini-budget”.

Global tax rates
Compliance is key! Remember to be ahead of the game with global reporting deadlines. Coming in the next few days, weeks and months:

China SAFE Q3 filing - 10 October
Saudi Arabia - quarterly filing to CMA - 31 October
Philippines - annual filing to SEC - 10 January
Thailand - report (options) to SEC - 15/17 January

Tapestry comment
If you need this information for other jurisdictions not shown above, or if you need any assistance with any global filings, please do get in touch with us.

Global tax and social security
We will cover any tax changes and announcements since our WWWup in July, including:

Cambodia - contributions under the new pension system, the National Social Security Fund (NSSF), will begin on 1 October 2022.
Mauritius - new tax rates released end of July but apply from 1 July. A new tax band of 12.5% has been added to the existing bands of 10% and 15%.
Poland - Tax rates are progressive, from 12% to 32%. The tax rate in the first tax bracket was reduced from 17% to 12% from 1 July 2022.
UK - the 1.25% increase in NICs (social security) reversed from 6 November. Proposed changes to income tax: reduction in basic rate from 20% to 19%.

Tapestry comment
You may think that tax-rate and NI changes are limited to the first couple of months at the beginning of the calendar year but, particularly due to political and economic changes, many countries have implemented changes mid tax year. This wrap-up will cover a few of these updates.

If you have any questions, or would like to discuss any element of legal and tax compliance for your global incentive plans, do get in touch - we would be delighted to help!

Chris Fallon, Sarah Bruce and Sonia Taylor

Global updates / Newsletter / Press Releases - 10/06/2022

Irish Revenue issues Employer Notice
to share scheme registered employers

25 August 2022

The Irish Revenue recently sent a communication to employers who have indicated that they operate share-based scheme(s) for their employees, as reported on Form RSS1 (for reporting option plans) and/or Form ESA (for reporting other share-based remuneration). The Employer Notice in respect of unapproved (i.e. not tax-qualified) share options was issued to such employers on 12 August 2022 (here).

The Irish Revenue notes that employees may not be fully aware of their tax obligations where they are engaged in a share-based remuneration scheme(s), for example, where they exercised, assigned or released share options, and/or disposed of shares. As such, the Irish Revenue is requesting that all employers operating share-based remuneration scheme(s) circulate the information provided in the Employer Notice to all employees to inform them of their tax obligations under sections 128 (the charging provision) and 128B TCA 1997 (which sets out that the tax is to be paid on the Form RTSO1). Employers should be able to access this notice through their ROS (online reporting) inbox.

Remember that in Ireland, employees are actually responsible for reporting (on Form RTSO1) and paying any taxes arising upon exercise of their share options (which must be reported and paid within 30 days of exercise).

Our counsel in Ireland is aware that, in some cases, employers are operating payroll when their employees exercise share options but, by doing so, employers are inadvertently creating tax issues for employees. It is clear that the Irish Revenue are cross-checking information provided on the Form RSS1 and reaching out to employees who they have been notified have exercised share options but who have not filed a Form RTSO1.

It is important that employers and employees are aware of and adhere to their obligations under Irish tax law in respect of share awards, and in particular, share options.

We would like to thank our relationship law firm in Ireland McCann FitzGerald for providing us with the information in this alert.

Tapestry comment: this intervention by the Irish Revenue demonstrates a very real concern that employees are not aware of their reporting and tax payment obligations in respect of share options. The system in Ireland is unusual in requiring employer withholding for some types of employee share plan but not for plans that are treated as options for Irish tax purposes. This is not always straightforward as, depending on the terms of the plan, this may include a share purchase plan. If the plan is treated as a share option, the employee is responsible for declaring and paying any taxes, including social security, on the benefit. It goes without saying that employees do not want to be in default in their tax obligations and employers may want to take extra care to ensure that the obligations are explained. Employers will also want to make sure that their payroll is aware that withholding does not apply to option plans.

Please let us know if you have any questions about the share plan reporting obligations, whether in Ireland or elsewhere.

Sharon Thwaites and Matthew Hunter

Executive Remuneration updates / Financial Services updates / Global updates / News / Newsletter / Press Releases - 08/26/2022

Tapestry Update: UK Share Plans Summer Summary

August 2022

In this summer of heatwaves, holidays, government uncertainty, and ongoing coronavirus disruption, you could be forgiven for not keeping on top of the UK’s share plan news! We therefore thought it would be useful to summarise some of the recent updates that you may have missed, including on the UK Corporate Governance Code, financial services laws, HMRC guidance and, the current leadership election!

Changes to the UK Corporate Governance Code: malus and clawback

In March 2021, the UK Government launched an extensive consultation on reforming the audit, corporate reporting and corporate governance systems, which we covered here. Of particular interest to the share plans industry were proposals to revise the UK Corporate Governance Code, including strengthening malus and clawback provisions.

Publication of the Government’s response to the consultation in May this year, was followed in July by the Financial Reporting Council (FRC) Position Paper setting out how it will support the Government’s reforms.

The Government’s initial proposals for malus and clawback included a minimum list of required triggers, and a minimum application period of two years “after an award is made”. In their response to the consultation, it appears the Government has moved away from a minimum list of triggers, to an “illustrative set of conditions” for malus and clawback, allowing for greater flexibility for remuneration committees.

The FRC, who will transition into the Audit, Reporting and Governance Authority (ARGA), have confirmed they will be revising the Code. The intention is that the revised Code will apply to periods commencing on or after 1 January 2024 and, amongst other updates, will include strengthened reporting on malus and clawback arrangements, with the aim of delivery greater transparency.

Tapestry comment
Responses to the consultation indicated a number of concerns with the risks of a “prescriptive approach” to malus and clawback – many companies have specific triggers relevant to their circumstances. There were further concerns that some proposed triggers were not sufficiently specific. It is therefore promising to see the Government has taken note of this, and it seems likely that remuneration committees should be able to retain flexibility in their approach. That said, as a review by the FRC will now take place, companies should watch this space carefully – malus and clawback remain a key focus point for the Government, as well as for investors!

Proposed Financial Services and Markets Bill

The current Chancellor, Nadhim Zahawi, used his Mansion House speech on 19 July 2022 to set out ambitious plans to transform the UK financial services sector. A key focus was proposed reforms to bolster the competitiveness of the UK as a global financial centre. The Financial Services and Markets Bill was then published on 20 July, which implements the outcomes of the Future Regulatory Framework Review, and provides further detail on how some of these reforms will take effect.

If passed in its current form, the Bill will revoke hundreds of pieces of EU retained law, allowing them to be replaced by “a coherent, agile and internationally respected regime that works in the interests of the British people”. In addition to any changes for remuneration regulation in the FS sector, of particular interest in a share plans context would be the repeal of the UK Market Abuse Regulation and UK Prospectus Regulation, and any changes to those regimes in the replacement legal framework.

Tapestry comment
It will be interesting to see how far the UK Government deviates from the content of EU legislation, when so much of it was directed by the UK’s approach to securities, listing and transparency in the first place. Whilst any improvements on the reporting burden that companies face will be welcomed, any organisations operating across the EU and the UK will need to keep up with the changing face of UK financial services regulation in the coming years as it continues to diverge. Share plan practitioners will be hoping (perhaps optimistically) for some common sense changes to the Market Abuse Regulation, to support the smooth operation of “business as usual” share incentive arrangements. We will have to wait and see what exactly any new market abuse regime looks like.

HMRC guidance: tax elections & EMI valuations

As a reminder, s.431 elections allow UK taxpayers to ensure that any “restricted” shares they acquire (including e.g. shares acquired subject to post-vesting holding periods), will be subject only to capital gains tax on sale (rather than any further income tax and national insurance when the restrictions are lifted). This is achieved by subjecting the full “unrestricted” value of the shares to income tax and national insurance contributions, at the time of acquisition. HMRC has recently updated its guidance on section 431 elections confirming that elections can be made in formats other than HMRC’s standard forms, including electronically and/or as part of another document.

Separately, HMRC have recently issued guidance relating to Enterprise Management Incentives (EMI). EMI plans remain the most popular UK tax-advantaged plan, perhaps due to their unrivalled tax breaks. One aspect of granting EMI options includes the ability to agree share valuations with HMRC. During the Covid-19 pandemic, the period for which valuations were valid was increased from 90 to 120 days. However, from 1 December 2022 onwards, EMI valuations will be valid, once again, for 90 days only.

Tapestry comment
Although the guidance regarding section 431 elections reflects existing HMRC practice, formal confirmation is to be welcomed. Companies, administrators and participants alike can now have greater comfort when it comes to entering into tax elections, with potentially fewer separate documents to sign at the relevant time.

For EMI, HMRC are reigning back some of the flexibility given during the pandemic. Companies looking to grant in reliance on an agreed valuation should ensure that they are aware of the relevant timeframe.

Leadership elections: tax implications?

The Government has already made a number of changes to taxation since the beginning of this Parliament. Under current plans, several more changes are to come for both individuals and corporations. Although income tax and NICs thresholds will be frozen for a further three years (following recent changes to NICs), the basic rate of income tax will be reduced by one penny in the pound in 2024-25. Elsewhere, corporation tax is set to rise significantly in April 2023, from 19% to 25%, for larger companies.

Mr Sunak has not announced any specific intention to deviate from these plans immediately, but has indicated a future income tax rate drop to the basic rate of 16% by the end of next parliament. Ms Truss, however, has stated that she would reverse the increase in NICs rates, at a cost of £13bn per year, to boost incomes across the board. She has also proposed cancelling the rise in corporation tax, at a cost of £17bn a year, according to some government estimates.

Tapestry comment
We are in turbulent times both economically and politically. It is unsurprising that Mr Sunak does not intend to deviate from his own policies, however, the changes proposed by Ms Truss would have a big impact, particularly for larger corporations.

Whilst (perhaps understandably!) neither candidate has explicitly mentioned reform of the UK tax advantaged plans, or rules and regulations surrounding share plans more generally, history shows us that changes in government often eventually lead to changes in our share plans world – so watch this space!

As always, if you have questions about any of the content of this alert, or there is any assistance you need in relation to your share incentives, do not hesitate to contact us.

Suzannah Crookes and Tom Parker

Financial Services updates / Global updates / Newsletter - 08/18/2022

Tapestry's Worldwide Wrap-Up: Tap-in to our global knowledge!

7 July 2022

Staying ahead of the curve on regulatory and tax compliance is a never-ending task for companies.

To help you keep on top of recent developments, here is our third quarterly Worldwide Wrap-Up of 2022, with some of the most recent changes that should be on your radar. We have summarised these topics briefly in this alert, however they will be covered in more detail along with other recent developments on our 13 July webinar.

Canada - CRA considering reform of tax obligations for RSUs
In July 2021, the 50% tax reduction benefit available to qualified employee stock options was capped at $200,000. Under the new rules, where an option does not qualify for the benefit the company may be able to claim a corporation tax deduction for those non-qualified securities. The employer is required to report any non-qualified securities by filing the new Schedule 59 return.
Currently, the reporting obligation extends to RSUs and other rights which do not qualify for the 50% tax deduction. One consequence is that such rights count towards the $200,000 annual cap even though the employee may not receive a tax break.
The Canadian authorities have announced that this point is under review and that it is considering potential remedial measures.
Tapestry comment
A clarification in this area would be welcomed. It is likely that the tax authority did not intend that the new reporting would capture RSUs and other types of share plans where the employee is not entitled to the 50% tax deduction and it is good to see swift acknowledgement that the position needs to be clarified. This issue will be particularly important for those businesses operating both market value options (which can potentially benefit from the 50% tax deduction) and also RSUs (which cannot benefit from the deduction but may still be restricting the availability of the benefit by 'using up' some of the employees' allowance).

Poland - to file or not to file?

Currently, offers to two or more people in Poland require a securities notification to the Polish Financial Supervision Authority (KNF) within 14 days of allocation of the securities. This has been burdensome for many plan operators, particularly those with only low numbers of participants in Poland where the administrative requirements might be disproportionate. Helpfully the KNF has recently confirmed that options do not need to be registered, provided they qualify as "options" for the purposes of Polish law.
Tapestry comment
This will come as a relief to companies who offer options and have currently been subject to the registration requirements in Poland, particularly as options can be additionally challenging to report because of the potential for sporadic exercise dates and longer exercise windows. For some time, there have been questions around the offer of conditional awards for nil-consideration and whether such awards should be exempt from the filing - some might even argue that the case is even stronger than for options. Could this mean further award types fall away in the future? Watch this space!

Serbia - new securities law share plan exclusion
Good news! A new Capital Markets Act (due to come into force 6 January 2023) excludes employee share plans from the requirement to prepare a prospectus when making a public offering in Serbia.
Currently, employee share plans are not regulated, making an offer of shares to employees subject to the (sometimes conflicting) opinions of the Serbian Exchange Commission (SEC). As a result, companies are currently recommended to seek an official opinion from the SEC, with the likely outcome being that the SEC would take the view that an incentive plan is considered a public offer and, as such, subject to the prospectus requirements.
The new legislation will remove the uncertainty as no prospectus will be required.
Tapestry comment
As always, we are thrilled when securities laws have a clear path for employee share plans. Although the new Act does not come into force until January 2023, local counsel expect that the SEC might take a more lenient approach for 2022 offerings.

Sri Lanka - FX restrictions likely to continue
In 2021 foreign exchange restrictions were introduced in Sri Lanka which limited the ability to make outward remittances. The restrictions have been extended twice and were due to end on 2 July. Although no official update or extension has been published (at the time of writing!), the Foreign Exchange Department have informally confirmed the intention to extend the restrictions past this date.
Tapestry comment
Sadly, the current economic crisis in Sri Lanka means that, although an official publication of an extension might be delayed, the lifting of the restrictions seems unlikely. Counsel has advised us that companies should proceed on the basis that the restrictions will be extended, and those offering plans involving outward remittances will likely still face practical issues with getting money out of Sri Lanka.

UK Flag UK - bonuses to return for Sharesave plans?
Under a UK tax-advantaged SAYE plan, individuals must enter into a linked savings arrangement with an authorised savings carried, which may include a tax-free 'bonus' (essentially interest payable at the end of the savings contract) at a specified rate. This bonus rate has been set at nil for a number of years (since 2014), making the question of bonuses largely irrelevant in practice. However, the UK's tax authority (HMRC) has recently announced they are reviewing (with the intention of simplifying) the mechanism for calculating the SAYE bonus rate. Many have speculated whether this simplification process could be the first step on the road to the return of SAYE bonuses.
Tapestry comment
The intention of SAYE bonus rates is to ensure that SAYE savings contracts are broadly aligned with wider market interest rates. With the recent increases to the Bank of England base rate of interest, it is not difficult to imagine that HMRC may soon reintroduce a bonus rate that is greater than zero. A simplification in the bonus rate calculation process is always helpful, however this could of course swing both ways - there is a possibility that the simplification of the calculation process could result in a lower bonus rate than would have been calculated under the current mechanism. HMRC have said they will provide an update by the end of summer - so watch this space!

Global reporting
Compliance is key! Remember to be ahead of the game with global reporting deadlines. Coming in the next few days, weeks and months:
Australia - ESS statement (employees) - 14 July & ESS report (tax office) - 14 August
China - Shanghai SAFE Q3 filing - 10 October
India - quarterly tax certificate - 31 July
Saudi Arabia - quarterly filing to CMA - 31 October
Tapestry comment
If you need this information for other jurisdictions not shown above, or if you need any assistance with any global filings, please do get in touch with us.

Global tax rates
We will take a look at any tax-rate changes in the 10 countries starting their tax year in July.
Tapestry comment
You may think that the rush of the tax-rate changes is limited to the first couple of months at the beginning of the calendar year - but some countries start their tax year in July (or even at other points in the year)! This mid-summer wrap-up will cover a few start-of-the-tax-year updates.

if you have any questions, or would like to discuss any element of legal and tax compliance for your global incentive plans, do get in touch - we would be delighted to help!

Sarah, Sally and Emilie

Global updates / Newsletter - 07/08/2022

UK - Bonuses to return for SAYE contracts? New developments!

What is happening?

HMRC, the UK tax authority, has announced that it will be reviewing how it could simplify the mechanism for calculating the bonus rate applicable to a UK tax advantaged SAYE plan (sometimes called Sharesave, or Save as you Earn).

Remind me - what is the ‘bonus rate’?

Essentially, it’s interest.

Individuals who wish to participate in a UK SAYE must enter into a linked savings arrangement with an authorised savings carrier to save a specified amount per month. It is possible for the linked savings arrangement to provide that the participant will become entitled to a tax-free bonus - essentially this is interest which accrues on their savings, and is paid at maturity of the contract. The bonus is calculated based on a rate which is fixed at the start of the savings contract.

Why is this happening now?

The bonus rate is currently nil and has been set at this level for many years (since 2014). The bonus rate is set in accordance with an automatic mechanism, linked to market swap rates.

Whilst the announcement by HMRC does not specifically confirm that bonuses will become payable in future, in the current economic climate, this is something which seems more likely than in recent times. The timing of the review of the mechanism for calculating the bonus rate may not be coincidental.

What are HMRC actually reviewing – and when do we hear more?

HMRC are reviewing the mechanism for calculating the bonus rate. In HMRC’s ERS Bulletin 43, HMRC note that the current mechanism is “extremely complex”. The aim of the review will therefore be to simplify the method of calculating the applicable bonus rate.

In the meantime, HMRC have issued a new prospectus (the document which governs the terms of the savings contracts), which comes into effect for savings contracts entered into from 30 June onwards. The reference to the current bonus rate mechanism has been removed from this new savings prospectus.

HMRC have said they will provide an update (in a further bulletin) by the end of the summer. In the meantime, bonus rates are being held at nil.

If bonuses do become payable, what will this mean for UK SAYE?

The obvious implication is that, going forwards, participants will normally become entitled to receive interest on their savings, in the form of a tax-free bonus.

However, there is another potential benefit too. Where a bonus is payable, it can also be included in the amount of the savings the participant will make over the life of the savings arrangement. This amount is called the ‘expected repayment’. The ‘expected repayment’ is used to calculate the number of shares subject to the SAYE option. A bigger expected repayment therefore ultimately increases the number of shares subject to an SAYE option. This means a participant can buy more shares and maximise the value they are receiving from the SAYE plan.

Tapestry comment
A simplification of the bonus rate calculation mechanism is likely to be seen as good news. However, for SAYE participants, this may be tempered in the event that any change reduces the bonus rate which would otherwise have been due under the current mechanism.

There will be a number of things to think about in this context:

Will HMRC apply the change to existing SAYE contracts, or only those entered after the change takes effect? Generally, a change will only apply to savings contracts entered into on or after the date on which it comes into effect. Any change in the mechanism for calculating the bonus rates will not of itself impact existing contracts in any case, as the rate has already been specified at nil. If there is an increase in the rate itself (calculated under the new mechanism), we anticipate this is likely only to apply to savings contracts which are entered into after a further new savings prospectus, which specifies the new rates, takes effect.
Will a company need to amend its plan rules? A company would not normally need to amend its UK SAYE plan rules in relation to any change in bonus rate calculation, as this is not generally set out in the rules. Again, amendments are unlikely to be needed if bonuses start becoming payable, as rules are usually drafted flexibly to accommodate payment of bonuses, in line with the legislation. However, it will depend on exactly what has been included on certain points – so specific advice should be taken. A company may also need to update its pro-forma grant minutes (e.g. to allow bonus to be included in the ‘expected repayment’ to maximise the number of shares employees can buy). Given the early stages of this review, it’s probably too early for companies to make any updates just yet – but it is one to keep on the radar.
Will the employee communications need updating? If bonuses become payable again, then almost certainly, yes. Given there has been no bonus payable for many years, plan communications such as brochures, FAQs and invitation documents/application forms are unlikely to cater for this adequately at the moment. As rates are being held at nil whilst HMRC undertakes its review of the calculation, companies and administrators may want to wait and see whether HMRC’s further update later in the summer gives any indication of when rates may rise above nil before putting pen to paper on this. However, in an economic context where a rate rise is perhaps anticipated, companies and administrators may want to plan ahead.
What do companies need to do about their international SAYE arrangements? Whilst it does depend on how the plan rules are drafted, any change in UK SAYE bonus rates may not automatically apply to an international SAYE plan. A company which wants to track its UK SAYE plan will therefore need to check its plan rules and savings paperwork for the international arrangement, to see whether changes would need to be made. Legal advice would be needed – the position will be company specific.

Watch this space!

If you have any questions, please do contact us and we would be happy to help.

Suzannah Crookes and Emma Parker

Executive Remuneration updates / Global updates / Newsletter - 06/24/2022

Tapestry Team News - Hannah Needle FGE for GEO Board of Directors - Voting now open!

The Global Equity Organization (GEO) has announced that the election process for its Board of Directors is now open. We at Tapestry are big fans of GEO, having been supporters since its inception, and therefore we are delighted that our very own Hannah Needle is up for re-election this year!

Hannah Needle, FGE is a Legal Director and on the Board of Directors at Tapestry. Hannah leads on Tapestry’s legal services, and is therefore instrumental in the delivery, development and quality of the firm’s legal advice, both in the UK and globally.

Hannah brings with her 18 years of experience in the industry, working in global equity and incentives with many of the biggest and best global companies. She is a leading practitioner in this area and holds a number of positions representing the equity industry, amongst practitioners, companies and regulatory bodies.

Hannah has been involved in GEO since her first days in the global equity industry and is honoured to be running for re-election to the Board, after having served her initial 1 year term. She is also a member of GEO’s Provider Alliance Council and, for the last 6 years, has been an active member of GEO’s award-winning UK Chapter, including serving for many of those on the leadership committee.

Please join us in supporting Hannah!

To cast your vote, please visit the GEO election page website: here. Voting closes on 15th June. You must be a member of GEO to be able to vote.

Team Tapestry

Global updates / News / Press Releases - 06/08/2022

UK: Annual share plan return filing deadline approaches

12 May 2022

All employers operating in the UK must submit an employment related securities (ERS) return to HM Revenue & Customs (HMRC) by 6 July following the end of the tax year. The deadline for filing the ERS return for the 2021/22 tax year, which ended on 5 April 2022, is Wednesday 6 July 2022. As the registration and reporting process can take some time, we recommend that employers prepare and file their return with HMRC as soon as possible.

What do I need to do?

Register any new plan or arrangements well in advance of the filing deadline

Before you can submit your ERS return, all relevant share plans must have been registered online with HMRC via the registration services found here. To do this, you will need a Government Gateway user ID and password. Your UK payroll will typically have these details.
You do not need to register each non-tax advantaged plan or arrangement separately. A single registration (and return) covering all existing non-tax advantaged plans will be sufficient. Please note, however, that all UK tax-advantaged plans must be registered separately with separate returns filed.
UK tax-advantaged Share Incentive Plans (SIPs), Save As You Earn plans (SAYE plans) and Company Share Option Plans (CSOPs) must also be ‘self-certified’ online as being compliant with applicable UK tax legislation.
If your plan has been registered and self-certified (if relevant) previously, you will not need to register it again. Registration will only be required for new plans implemented during the 2021/22 tax year. You should be provided with a unique scheme reference number for the plan within 7 days of registration.

File the ERS return – including any nil returns

Once you have the unique scheme reference number for your plan, you will be able to file the ERS return.
To file the return, you must complete the relevant online template located on the UK Government website here.
Each template asks for prescribed information in connection with relevant ‘reportable events’.
The template that you must use will depend on the plan that you are completing the return for. Plans that are not UK tax-advantaged plans will use the “other ERS schemes and arrangements” template and there are specific templates for each of the UK tax-advantaged plans.
Once you have completed the template, you can run it through a formatting check and then submit the return here.

Key points to look out for

Net-settled awards: HMRC has issued specific guidance on the reporting of net-settled awards (see ERS Bulletin 33). You may need to check processes carefully to determine whether tax on awards is funded by net-settlement or a “sell to cover” arrangement, and then organise reporting accordingly.
Mobile employees: make sure you capture all of your plan participants who have been in the UK at any relevant time and have any UK income tax position in relation to their awards.
Transactions: make sure the relevant entities are reporting share award activity related to any corporate transaction and, if your group has acquired a business or company, make sure any share awards in that entity are included in reporting where appropriate.
No plan activity: where you have registered a plan, you must continue to file a return even where there has been no plan activity in the relevant tax year. In these circumstances, a ‘nil return’ should be filed.
Outages: in previous years, the website where the return is submitted has experienced outages. The web page that is found here will notify users of any current and planned issues or outages.
Terminated plans: if you no longer use a share plan, you will still need to make an annual return for outstanding awards. Once all awards have been settled, you can stop filing but only after you have informed HMRC that the plan has terminated. Further information on this is available here.
Templates: we recommend that you always download the most recent templates from here rather than using previously downloaded templates (note file names still have “2015-16” in the title). The templates are format sensitive and so generally no changes should be made. The checking service found here allows companies to check for formatting errors prior to filing the completed templates. We recommend using this service to as it is very helpful in pinpointing particular formatting issues so these can be corrected before any attempt to submit the templates.
EMI plans: there are different (and more onerous) requirements and deadlines for UK tax-advantaged Enterprise Management Incentive (EMI) option plans. Please get in touch if you operate, or are intending to operate, an EMI plan.

Why is it important to register and file accurate returns on time?

Failure to register and/or file the return on time can have serious consequences:

Financial penalties may be applied for returns which are materially inaccurate (potentially including both careless as well as deliberate errors).
Financial penalties automatically apply if you fail to correctly file your ERS returns by the 6 July deadline, even if no reportable events occurred in the tax year.
Newly adopted UK tax-advantaged plans will lose their tax-advantaged status if you fail to register and self-certify them by the deadline where awards have been granted in the 2021/22 tax year. This means that any awards granted under new SIPs, SAYE plans and CSOPs on or after 6 April 2021 would not be tax-advantaged.

Tapestry comment
For some companies, the online ERS return process is now an established part of the annual cycle of share plans activity. Whether or not you are new to the process, the message remains to plan ahead and give plenty of time for gathering data in the correct format and checking the content.

Recent guidance on, for example, reporting of net-settled awards, seems to indicate that HMRC will be looking at areas of alignment between the ERS returns and other elements of a company’s tax affairs (net settlement can in some cases impact the corporation tax treatment for example). We would therefore recommend that those managing the share plan return process should ensure data is aligned with that being used by other parts of the business.

The layout of the returns is inflexible and whilst the error checking service is very helpful in identifying pure formatting errors, there is no facility to include explanation of how awards have been reported in any cases which may be unclear. In these circumstances, we recommend companies keep a note of the approach they have taken and why, to support responses to any enquiries from HMRC in future.

If you have not yet done so, take time to ensure your plans are registered and that you are familiar with the requirements of the return(s) you need to file so that you can meet the 6 July deadline.

If you have any questions, please do contact us and we would be happy to help.

Suzannah Crookes and Paul Abthorpe

Global updates / News / Newsletter / Press Releases - 05/13/2022

Tapestry's Worldwide Wrap-Up: Tap-in to our global knowledge!

May 2022

Staying ahead of the curve on regulatory and tax compliance is a never-ending task for companies.

To help you keep on top of recent developments, here is our second quarterly Worldwide Wrap-Up of 2022, with some of the most recent changes that should be on your radar. We have summarised these topics briefly in this alert, however they will be covered in more detail along with other recent developments on our 11 May webinar.

Australia - employee share scheme tax reform
As discussed in our recent alert (here), legislation to remove the taxing point on cessation of employment for ESS awards received Royal Assent in February and will take effect from 1 July 2022. The removal of cessation of employment as a taxing point will apply to all existing ESS awards that have not yet reached a taxing point before the new law comes into effect in July.

Tapestry comment
This change brings Australia in line with many other jurisdictions, making administration of leavers much easier for global companies and giving "good leavers" the ability to settle taxes due at the applicable tax point. Where appropriate, companies should consider whether to advise participants with outstanding awards of this change to the tax treatment. Where companies have structured their ESS plans to make provision for the early tax treatment on cessation of employment (e.g., by providing for accelerated vesting or the removal of sale restrictions), they may wish to review those plan terms.

Canada - new date for extended trust reporting

Additional reporting for trusts in Canada was first proposed in 2018 (here) and is now firmly back on the agenda and due to come into force on 30 December 2022. The reporting applies to both resident and non-resident trusts. For non-resident trusts, the reporting will only apply to trusts which are already required to file a T3 return. The trusts will be required to provide additional information, including details of the identity of all trustees, beneficiaries and settlors of the trust, as well as the identity of each person who has the ability to exert control over trustee decisions regarding the appointment of income or capital of the trust.

Tapestry comment
As this change was proposed several years ago, many companies may have already factored it in to their reporting systems. In addition to the additional reporting obligations, there is a risk that trustees will not be able to provide the detailed information, either because they do not have access to the information or because they do not have the relevant consents to provide the data to the Canadian tax authorities. If you use a trust as part of your structure for offering shares to employees in Canada, you should consider whether it would be appropriate or possible to restructure the plan to remove the trust arrangement.

Global tax rates

With several countries starting the 2022 tax year in March and April, and new rates being announced since our last webinar, we will look at where rates have changed. Our international advisors provide us with new rates to update our OnTap database as quickly as they become available. In this Wrap-Up we take a brief look at some of the changes.
Bermuda - changes to payroll rates
New Zealand - increase in employee ACC levy
Singapore - proposal to increase top rate
UK - increase in social security

Tapestry comment
We will discuss the detail of these changes during our 11 May webinar.

Global reporting

Remember to be ahead of the game with global reporting deadlines. Coming up in the next few months:
Australia - ESS statement (employees) - 14 July and ESS report (tax office) - 14 August
India - quarterly tax certificate - 31 July
Portugal - share plan reporting on Form Modelo - 19-30 June
UK - annual employee share plan return - 6 July

Tapestry comment
If you need this information for other jurisdictions not shown above, or if you need any assistance with any global filings, please do get in touch with us.

Portugal - securities filing update

In our 11 May webinar we will discuss the pre and post-offer filings required in Portugal if a company is relying on the securities laws employee exemption. We also wanted to share with you some recent advice we have received regarding the details of those filings, including when they are not required - for example, filings may not be required if it is possible to rely on the financial thresholds exemption.

Tapestry comment
Although this latest confirmation doesn’t go as far as we would like, we are always pleased to see regulators remove unnecessary filings. We look forward to the day that all EU regulators remove the outstanding obligations for filings in relation to employee share plans!

Russia - sanctions and counter-sanctions

As the situation in Ukraine continues, the sanctions imposed both on and by Russia are making it increasingly difficult for companies assessing whether they can, and should, make awards to employees in Russia (see our discussion here). The current counter-sanctions imposed by Russia restrict the ability of companies based in countries deemed by Russia to be unfriendly (including the US, the UK, EU states and Australia) to deliver shares to employees residing in Russia. There is some uncertainty over the application of the current rules to free shares. Even where it may be argued that it is possible to deliver shares under the Russian regulations, the processes being followed by third-party administrators and banks due to other restrictions or sanctions may also make it practically impossible to deliver shares in the normal way.

Tapestry comment
Many commentators do not believe it is possible to deliver shares to Russian residents at the moment without potentially breaching the sanctions and associated rules. The market position for the majority of our clients and listed companies operating globally is that they are considering cash-settling or delaying grants/vests where possible, in order to protect both their Russian employees and the company. This is a sensitive and complex issue and each company will need to decide what is appropriate in the context of its incentive plans, whilst complying with a changing regulatory landscape.

If you have any questions, or would like to discuss any element of legal and tax compliance for your global incentive plans, do get in touch - we would be delighted to help!

Sally Blanchflower, Matthew Hunter and Rebecca Campsall

Global updates / News / Newsletter / Press Releases - 05/09/2022

UK - Investment Association statement on the impact of Russian sanctions

22 March 2022

The economic effect of the Russian invasion of Ukraine is having increasing consequences across global markets, as the conflict continues and as further sanctions take effect.

Yesterday, the Investment Association (IA) responded to queries from remuneration consultants in relation to the potential impact of the current economic circumstances on forthcoming LTIP grants. The two key issues are:

The quantum of long-term incentive grants in light of the recent fall in share prices
The ability of companies to set LTIP performance targets against the current economic backdrop, and whether a six-month delay in setting performance targets would be appropriate

LTIP grant sizes

The IA notes that its Principles of Remuneration state that grant sizes should be scaled back following a share price fall, to address the potential for windfall gains to arise where grants are made over a larger number of shares than would otherwise have been the case, due to depressed shares prices. The IA confirms that its members would expect that approach to be followed in the current circumstances.

Delayed target setting

In the context of the COVID pandemic, the IA supported a six-month delay in the setting of LTIP targets, due to the widespread uncertainty across all sectors. The IA notes that the impact of Russian sanctions is more limited and affects a smaller number of companies, principally those with material profits or revenues arising from Russian operations or the Russian economy. It notes that many of its members are willing to support a delay in setting performance targets by companies with a material exposure to Russian operations or the wider Russian economy. There is an expectation that any such delay should be linked to statements from the company on the impact of the current situation, the management of its Russian operations as well as its overall financial position and performance. The IA notes specifically that increased energy costs and other aspects of the macroeconomic impact of the Russian invasion would not be sufficient justification for delaying target setting.

Tapestry comment
The situation in Russia and Ukraine remains highly volatile and the impact of the associated sanctions and restrictions will have a significant and extended impact for some businesses, and will need to be factored into those companies’ remuneration committee decisions. However this publication also makes it clear that, for the much larger number of businesses affected indirectly rather than directly by the current situation, the IA does not expect to see delays for LTIP target setting.

In making these comments, the IA has reiterated to remuneration committees that it believes they should be careful not to insulate executives from the wider impact of the economic uncertainty, particularly in a manner that is inconsistent with the approach taken to the general workforce. Remuneration committees for those companies materially impacted by Russian sanctions will therefore need to consider the position carefully and ensure that executives remain sufficiently aligned with other stakeholders through their remuneration structures.

Our thoughts remain with all those affected by the conflict.

Suzannah Crookes and Sarah Bruce

Executive Remuneration updates / Global updates / News / Newsletter / Press Releases - 03/23/2022

Tapestry Team News - Hannah Needle FGE for GEO Board of Directors - Voting now open!

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