UK - HMRC Publishes Research on Tax Qualified Plans

Tapestry Newsletters

10 September 2020

HMRC has recently published new research on tax qualified plans, carried out by the Social Research Institute at Ipsos MORI (an independent research organisation). The research covers the four UK tax qualified plans: Save As You Earn plans (also called SAYE or ‘sharesave’), Share Incentive Plans (SIPs), Company Share Option Plans (CSOPs), and Enterprise Management Incentive plans (EMIs).

In addition to the key goal of suggesting improvements and considering how uptake could be encouraged, the research aims to:

  • understand the motivations for, and barriers to, participation in tax qualified plans;
  • explore customer awareness and knowledge of the current offerings;
  • consider the process and burden of administering the schemes; and
  • consider how the plans are communicated.

Key findings from the report

The key findings from the report include:

  • Awareness and understanding of tax qualified plans is generally limited.
  • Outsourcing both the set-up and management of plans is common.
  • Perceptions of the value of tax qualified plans have changed over the past decade, with them being seen as less valuable when compared with other initiatives for motivating or retaining staff.
  • Small companies find them expensive, while the rapid pace of change in some industries (e.g. tech) makes them unappealing.
  • Interest is limited amongst younger employees and stronger amongst older employees with more experience (and more money to invest).
    - All seen as attractive and flexible schemes with CSOP/EMI both offering ways for employers to retain valued staff in senior positions. 
    - Holding periods of these schemes can often act as a deterrent for some employees.
  • SAYE
    - Where SAYE is offered there is some evidence of improved motivation among employees.
    - Lack of bonus rates and the perceived inflexibility of this scheme may have limited use.

Suggested improvements and encouraging uptake

In terms of improving participation, the report suggests:

  • Further tax incentives, especially for smaller firms.
  • SAYE: increased flexibility with the rules and features, including:
    - the ability to increase the upper monthly contribution limit; 
    - offering a reduction on the three-year holding period;
    - increasing interest and bonus rates to be more competitive with ISAs; and
    - offering a financial incentive from the government/employer to encourage lower paid employees to consider SAYE plans.
  • SIP: increased flexibility with the rules and features, including:
    - the ability for smaller employers to receive an additional tax incentive when providing free shares to employees; and
    - offering employers the ability to increase partnership share limits.
  • Education
    - Possible HMRC education for employers on the benefits of tax qualified plans.
    - A focus on better communication with employers and employees (especially younger and less senior staff).
    - HMRC could even take the opportunity to communicate the plans to young people whilst they are still in education.

Tapestry Comment
While the UK’s current range of tax qualified plans offer great benefits for both employers and employees, and we commonly see them in the market today, Ipsos MORI’s report for HMRC is a breath of fresh air. It is great that HMRC have carried out this research and that the results indicate positive things for UK tax qualified plans.

The benefits of tax qualified plans identified by the report, such as improved motivation, retention and the financial benefits, would only multiply with some loosening of the existing rules. With more flexibility, clarity and education we expect these plans will gain a renewed interest. 

This is definitely one to watch. It isn’t currently clear if and when any of these suggestions will be taken forward, but a rejuvenation of the available tax qualified arrangements has been long requested and would open up exciting opportunities for share plans in the UK.

If we can help you with your tax qualified arrangements (in the UK or globally), please do let us know.

Carla Walsham

Contact Us

Tapestry Compliance

Multi-award winning boutique law firm

Copyright 2023. All rights reserved.