HMRC has released the latest statistics on tax advantaged employee share schemes. The main schemes covered in the report include enterprise management incentives (EMI), company share option plans (CSOP), share incentive plans (SIP) and SAYE option schemes (SAYE).
With the switch over to online filing of annual share scheme returns for the 2014-15 year, HMRC had technical difficulties gathering data. As a result, statistics were not released last year and the comparison data for 2015-16 is 2013-14.
- The total number of companies operating approved HMRC share schemes dropped to 10,720 in 2015-16 compared to 11,460 in 2013-14.
- The decrease in total schemes can largely be attributed to a 12% drop in the number of companies operating an EMI scheme. Although there has been a reduction in schemes, the number of companies with employees exercising EMI options has increased as well as the total gains realised by those employees.
- The number of SAYE schemes has increased by 18% over the past two years. CSOP schemes were the only other tax advantaged schemes to experience growth up by 100 new schemes from 1,050 in 2013-14.
- The total cost of income tax and NICs relief for 2013-14 tipped over £1 billion, however, data was not available for SAYE in 2015-16 so there is no comparison. Excluding SAYE the total costs equate to £520 million for 2015-16 compared to £740 million for 2013-14.
A possible explanation for the drop in the number of schemes could be that employers were instead opting to implement Employee Shareholder Status (ESS). The stats for ESS are not included in the report, but based on our experience ESS was growing in popularity particularly in companies that could not meet the qualifying conditions for EMI schemes.
As the benefits of ESS were restricted in March 2016 and then abolished altogether for new entrants from December 2016, we would not be surprised if the trend in next year’s data shows another rise in the number of companies operating share schemes.
Another reason for the drop could be due to complexity. Each scheme has different qualifying conditions for the employers and employees to be satisfied. As a firm we have, if anything, seen an increase in the popularity of employee share schemes but it may be that more companies are offering shares in unapproved HMRC schemes. This route does offer more flexibility for the employer to structure as they wish but significant tax benefits can be foregone as a result.
Further issues have been experienced this year with the online filing system for annual share returns and as a result the normal deadline of 6 July was pushed back to 24 August 2017. Therefore, if you haven’t yet managed to file your return (including any nil returns) there is still time.
If you would like to discuss how an employee share scheme could benefit your company and its employees, please contact Tom Woodcock on 01242 237661 or firstname.lastname@example.org