On the 16 January 2013 the Office of Tax Simplification, which is an independent office established in July 2010 to provide advice to the Chancellor to improve and simplify the UK tax system
, has produced a final report on the taxation for unapproved employee shares.
In this report they condemned the current regime stating that it was very obstructive to employees preventing them from obtaining share ownership. They have stated that this is in direct opposition to current government policy to broaden employee ownership.
To improve this regime the Office of Tax Simplification has made several suggestions as summarized below;
- The way shares granted to employees are taxed should be changed so that tax should only arise when share become marketable as opposed to the existing system where there is a dry tax meaning tax is charged up front on the value of the shares
- The rules are too complicated at present and these should be simplified
- The reporting requirements are too complicated and these should also be simplified
- PAYE deadlines should be relaxed on tax charges for employment related securities
- There should be a creation of an employee shareholding vehicle to encourage wider employee ownership
- The availability of HMRC share valuations and methodologies for valuation should be improved.
These recommendations have been submitted to the Chancellors office and draft legislation and consultation is expected in 2013.