10 June 2020
HMRC this week published its newest and much awaited Employment Related Securities bulletin here. This bulletin is the latest in a series of updates and details HMRC’s proposals for managing the impact of Covid-19 on share plans and share plan filings with HMRC.
Sharesave / SAYE (Save as You Earn)
The bulletin addresses the impact of placing Sharesave participants on furlough or unpaid leave:
- Payments made to furloughed employees under the UK Government’s Coronavirus Job Retention Scheme (CJRS) arrangement can constitute salary for SAYE purposes, and SAYE contributions can be deducted from those payments.
- If employees have taken unpaid leave, HMRC will permit their monthly SAYE payments to be made via standing order rather than a salary deduction.
- Individuals may choose to take an extended holiday from their savings contracts without terminating their SAYE savings contract (and therefore triggering lapse of their options). Currently the SAYE rules only allow a payment holiday of up to 12 months. Under this new concession, provided the reason for the delay is related to coronavirus, HMRC state that the 12 month limit will not apply (however note that the maturity date will be pushed back by the total number of months missed). The bulletin notes that all employees with a savings contract in place on 10 June 2020 can delay the payment of monthly contributions beyond 12 months in these circumstances.
This is welcome but the scope of how the concession will work is still unclear. More detailed updates are due to be published in the coming days as to how these changes will work in practice.
SIP (Share Incentive Plan)
As with Sharesave, if SIP participants are furloughed, payments made under the CJRS arrangement can constitute salary for SIP purposes, and SIP contributions can be deducted from those payments.
SIP participants are already permitted to stop their deductions from salary under the general SIP rules. This bulletin confirms that if they do so, they will not be allowed to make up missed contributions.
Company Share Option Plans (CSOP)
HMRC has confirmed that if employees (or full-time directors) are furloughed because of coronavirus, this will not be treated as a disqualifying event, and the individuals will continue to be treated as employed by the business for CSOP purposes.
EMI (Enterprise Management Incentive Plans)
EMI valuations will now be valid for an additional 30 days in addition to the existing 90 days, provided there have been no material changes to the factors used to determine the valuation during that time.
HMRC is still considering the impact on this type of plan, and further information will be published in due course.
HMRC have again reiterated that filing deadlines will not be extended. However the bulletin does comment that coronavirus may potentially be treated as a ‘reasonable excuse’ for late filing.
HMRC have requested that enquiries are submitted by email rather than post, but have confirmed that postal enquiries can still be received.
Many employees across the country have either been furloughed or have taken a period of unpaid leave. For businesses operating a Sharesave, SIP or CSOP, this bulletin is a welcome confirmation that these individuals are still able maintain their participation in these share plans if they wish to do so. The payment holiday extension concession and the helpful approach to alternative payments are particularly welcome for Sharesave plans. We always say this, but the devil really is in the detail and the Sharesave change is no exception to the rule. Existing Sharesave plan terms should be checked to see whether and how the new payment holiday rules can operate in practice, and employee facing guidance will need to be updated too. The update is also light on detail and the scope of exactly when they can be relied on is yet to come; care will be needed when relying on the revised rules! Please do let us know if we can help with this.
Sadly, however, there is no equivalent concessionary treatment yet available for SIPs in light of the pandemic.
It is also noticeable that the EMI valuation concession appears to apply to EMI valuation applications only, and not to valuation applications under other tax advantaged plans such as CSOP or SAYE.
Finally, and as predicted in the Tapestry bulletin last week, HMRC have not extended the filing deadline for share plan reporting, and the 6 July deadline remains. However the bulletin does allow for the possibility of a late filing excuse resulting from coronavirus (although it should be noted that this is not an automatic excuse, and would still need to be proved).
Sarah and Chris