Reassessing staff share incentives
29 Jun 09
The UK's highest earners have now had two months to digest the impact on their pocket following the introduction of a top tax rate of 50 per cent and reduction in their basic personal allowance
This recent move has again highlighted the growing gap between income tax rates and capital gains tax rates (currently a flat 18 per cent).
As a result, the maximum differential of 22 per cent has increased to 32 per cent – and may increase to 33.5 per cent from 6 April 2011, if you assume the income will be subject to national insurance.
While HMRC will rightly be concerned about tax planning in relation to the new higher tax rate change, resulting in capital treatment rather than income, and even more so when employment income is involved; employers can still take advantage of the differential in the rates when providing share incentives to employees.
HMRC offer three formally approved arrangements: the share incentive plan (SIP), the company approved share option plan (CSOP) and the save as you earn (SAYE) option plan.
In addition, there is also the tax efficient enterprise management incentive scheme.
Any company whose employees benefit from share incentives should be looking at these arrangements to see whether they would benefit from replacing existing unapproved share incentive arrangement schemes.