UK Employee Incentives Update | January 2024
Published on 17th Jan 2024
In this edition, we cover recent and upcoming developments in employee share plans, with updates on government consultations expected at or around the time of the UK Spring Budget. We also cover recent changes in the Dutch and Spanish tax regimes
What legal developments can businesses in the UK expect in 2024? | Updates on recent consultations expected
Our Knowledge Lawyers look at what lies ahead for business law, picking out particular legal developments affecting business.
This includes the announcement that the Spring Budget in the UK will be held on 6 March 2024. From an incentives perspective, we expect updates to be provided on two important consultations which closed during 2023 – the Treasury's call for evidence on tax-advantaged all-employee share schemes and HMRC's targeted consultation on employee ownership trusts and employee benefit trusts. We will keep you up to date with any announcements.
Autumn Statement 2023 | NICs changes
Our Insight covers the business tax measures announced at the Autumn Statement 2023. The cut in the main rate of employee Class 1 National Insurance Contributions from (12% to 10%) took effect from 6 January 2024.
HMRC's Employment-related Securities Service | Further EMI simplification measure
Measures to simplify the process for granting tax-advantaged enterprise management incentive (EMI) options were introduced in April 2023, with a further simplification measure (extension to notification deadline) to follow for EMI options granted on or after 6 April 2024.
Separately, HMRC has updated its guidance to remind companies operating employee share plans of the need to save a copy of all returns and notifications which are uploaded to the Employment-related Securities Service.
Employment-related securities options | UK Supreme Court clarifies deeming provisions
On 25 October 2023, the Supreme Court handed down the long-awaited judgment in HMRC v Vermilion Holdings Ltd, unanimously allowing HMRC's appeal.
The decision provides some clarity on the deeming provisions applicable to employment-related securities and options, which bring such share awards into the scope of employment income (rather than capital gains tax) for UK tax purposes.
On the horizon in the UK
Further reduction in allowances
From 6 April 2024, the capital gains tax annual exempt amount will be halved, to £3,000. This follows the reduction from £12,300 to £6,000 for the current tax year ending 5 April 2024. The dividend allowance is also being further reduced, from £1,000 to £500 a year.
These changes mean that many more employees participating in share plans will need to pay tax and understand their reporting obligations. This is an issue which has been highlighted in responses to the consultation on all-employee share schemes.
Important tax simplification measures announced
Separately, in a Tax simplification update policy paper published on 16 January 2024, the government announced a package of measures to simplify and modernise the UK tax system. This includes mandating the reporting and paying of income tax and Class 1A National Insurance Contributions on benefits in kind via payroll software from April 2026 and enhancing the non-reimbursed expenses service. Employers and industry bodies have been calling for employee tax simplifications, and further details are awaited with interest.
The Netherlands | revision of '30%-facility' and abolition of partial non-resident Dutch tax regime (as of 1 January 2024)
Our Dutch team reports on recent developments including the revision of the "30%-facility" and abolition of the partial non-resident Dutch tax regime.
Spain | Recent developments and the current state of play of Spain's Beckham Law
On 6 December 2023, the Spanish government issued a royal decree that revised the Personal Income Tax Regulations and changed the "impatriate" regime. The aim of the royal decree was to reflect the changes introduced by the Start-ups Law and clarify some issues raised by it.
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