29 October 2020
HMRC’s latest Employment Related Securities bulletin has been published and can be found here. It is the latest in a series of bulletins providing updates and further guidance on HMRC’s proposals for managing the impact of Covid-19 on share plans.
Sharesave / SAYE (Save as You Earn)
In HMRC’s June bulletin (which we alerted you on here), HMRC announced an extension of the 12-month payment holiday period for SAYE participants placed on furlough or unpaid leave during the coronavirus pandemic. HMRC have since updated the savings prospectus to reflect this payment holiday extension.
With the Coronavirus Job Retention Scheme ending on 31 October 2020 and being replaced with the Job Support Scheme, HMRC has now confirmed that SAYE participants working less than their usual hours and who are eligible for the new Job Support Scheme will be treated as being "part furloughed” for these purposes, meaning that those SAYE participants will still be able to rely on the SAYE payment holiday extension.
EMI (Enterprise Management Incentive Plans)
Although EMI plans are not available to most of our clients, we also wanted to give you a quick update on the confirmations HMRC give in this most recent bulletin regarding EMI plans.
In HMRC’s July bulletin (which we alerted you on here), HMRC confirmed that participants in EMI plans who have been unable to meet the EMI “working time requirement” of at least 25 hours per week (or if less, at least 75% of their working time) as a result of the pandemic will still be able to retain the benefits of these tax efficient options.
HMRC has now given an update on the legislative changes being made to support this approach. The Finance Act 2020 modified existing legislation to ensure affected participants with existing EMI options can still retain the tax benefits. The position in relation to new EMI grants, however, remains unclear and will be dealt with by the Finance Act 2021. Until this new Act receives Royal Assent in 2021, HMRC has assured it will use its “managerial discretion” to enable this approach to be taken for new EMI options as well.
The modifications appear to take effect from 19 March 2020 and are due to end in April 2021, although HM Treasury can extend the exception for a further 12 months if the pandemic has not ended by then.
Perhaps more importantly, HMRC has also confirmed that EMI plans will remain available for use under UK law following the end of the Brexit transition period. The UK post-Brexit approach to EMI plans had previously been unclear, as EMI plans were originally introduced under EU state aid rules.
The bulletin provides assurances that HMRC “continues to review the impact of coronavirus” on all UK tax advantaged plans, and notes the concerns that Covid-19 has caused in the context of employment related securities specifically.
HMRC continues to recommend that enquiries are submitted by email rather than post, due to potential postal delays. However, they confirmed that postal enquiries can still be received.
For affected Sharesave participants, the payment holiday extension to the Job Support Scheme will be helpful. As we have previously noted, it is worth checking existing Sharesave plan terms 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 assurances HMRC are giving for EMI plans are also very welcome and, whilst a fix for new EMI options using “managerial discretion” is sub-optimal, companies should nevertheless take comfort from HMRC’s public declaration that they will continue to support EMI.
We are also pleased that HMRC will continue to monitor the situation for UK tax advantaged plans. As we noted in our newsletter here, UK tax-advantaged plans are of great value to both employers and employees alike, and it is vital that HMRC continue to review the impact that Covid-19 is having in this context. With that said, it is clear HMRC are still having to play catch-up with Covid-19 policy development, which is perhaps unsurprising given the rate at which things are changing in this ‘new normal’.
We would be keen to receive further clarity from HMRC on how Share Incentive Plans (SIPs) could also be adapted for additional flexibility in light of the pandemic, to encourage and enable SIP participants to continue to participate in these challenging times.
If you have any questions about this alert, or if we can help you with your tax advantaged plan compliance, please do let us know.
Chris Fallon and Emma Parker