Employee Incentives Update | Autumn 2018
Published on 18th Oct 2018
Welcome to our Employee Incentives Update for autumn 2018.
This edition covers:
- additional flexibility for participants in SAYE plans;
- a focus on HMRC Spotlights;
- forthcoming corporate governance changes high on the agenda for quoted companies;
- proposals for ethnicity pay reporting; and
- recent international tax developments.
We hope that you find this update interesting. If you would like to discuss any of the issues raised, please let us know. Our contact details are set out below.
SAYE | Savings holiday
The previously announced extension to the save-as-you-earn (SAYE) savings holiday, from 6 to 12 months, took effect on 1 September 2018. HMRC has published an updated specimen SAYE prospectus. Originally intended to benefit participants on maternity and parental leave, all SAYE option holders are now able to take advantage of this increased flexibility.
HMRC Spotlights | An update
HMRC has published further Spotlights highlighting tax avoidance schemes that HMRC believes are being used by some companies to avoid paying tax, and has recently posted an update on its Tax Agents Blog in relation to one such scheme.
Quoted companies | CEO pay ratios
Quoted companies will be preparing for the revised Corporate Governance Code and the new reporting requirements which come into force on 1 January 2019.
This includes CEO pay ratio disclosure - a new obligation for quoted companies with more than 250 UK employees to publish ratios of CEO total remuneration to the median, 25th and 75th percentile remuneration of their UK employees. The Companies (Miscellaneous Reporting) Regulations 2018 are in the same form as the draft regulations previously published and apply to the financial years beginning on or after 1 January 2019.
It is important that remuneration committees take into account the remuneration levels across their companies and CEO pay ratios should help them consider this.
Given that the methodology has now been published and the Investment Association has called for early disclosure, remuneration committees will need to decide whether they disclose the ratios prior to 2020.
Ethnicity pay disclosure | Consultation on proposed new reporting obligation
On 11 October 2018, the government launched a consultation on 'ethnicity pay' reporting by employers. The consultation, which runs until January 2019, is part of a wider trend towards greater workforce transparency, and scrutiny of employers as a result.
AIM companies | Which corporate governance code to follow?
From 28 September 2018, every AIM company is required to adopt a recognised corporate governance code and disclose annually how it complies with its chosen code, where it departs from that code, and the reasons for those departures from the code. AIM companies should have reviewed the corporate governance standards they previously applied (if any) and determined whether it is the appropriate standard to use in the future.
In our recent Insight, we compare two established benchmarks for AIM companies – the Financial Reporting Council Code and the Quoted Company Alliance Corporate Governance Code – including in relation to remuneration and interaction with employees.
The recently updated QCA Corporate Governance Code is likely to prove attractive to many AIM companies, save for those who are particularly large or who might be considering a move to the main market in due course.
Belgium | Update on stock options and changes to benefits in kind
Belgium has a specific tax regime for stock options that can result in the taxation of a benefit in kind upon free grant of the option and subsequent relief of any gain upon exercise or sale. The law is clear when the options are granted by a Belgian employer. Until recently, though, there was some uncertainty where the options were granted by a foreign company that was not the employer.
The Belgian government has recently strengthened the rules for stock options received by the Belgian workers of a Belgian entity which is part of an international group, where such workers receive the grant from a foreign company in the same group.
There have also been recent developments in the taxation of certain benefits in kind in Belgium.
Netherlands | Tax Plan 2019
A significant change announced by the Dutch government in its Tax Plan 2019 is that the regime for extraterritorial costs for incoming employees will be shortened from eight to five years.
Under the regime, employers can essentially provide 30% of the salary of an incoming employee (receiving salary in excess of EUR 37,200) as a tax-free allowance. In addition, tuition fees for international schools can also be compensated on a tax-free basis.
One aspect of the change that has been subject to particular criticism is that it does not allow for grandfathering: except for tuition fees (which can still be reimbursed tax-free in 2019), it will apply to rulings that have previously been granted under the existing regime. This will affect many international employees working in the Netherlands.
International Tax Update | September 2018
For wider tax international tax developments, including an overview of the taxation of cryptocurrencies in Europe and an analysis of where we are on the taxation of digital multinational enterprises, please see our recent International Tax Update.
Read more >
On the horizon
In the UK, a National Insurance Contributions Bill is expected in the coming months. This will subject termination payments above the £30,000 statutory threshold to class 1A employer’s NICs (this measure has been postponed until 6 April 2019). The Chancellor may provide an update on this at the Autumn Budget on 29 October 2018.
Brexit Business Brief | Are we nearly there yet?
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