Employee share plan tax update

The government has been pushing ahead with introduction of its new employee share plan tax regime since our most recent GuerdonNews® item on this subject (see HERE).

On 7 September 2009, the Chairman of the Board of Taxation announced that the Board is inviting submissions addressing the terms of reference for its review into elements of the taxation of employee share schemes (see HERE for the announcement and a link to the detailed terms of reference for the review).   The Board has been requested to examine:

1. How best to determine the market value of employee share scheme securities; and

2. Whether shares and rights under an employee share scheme that are provided by start-up, research and development and speculative-type companies should be subject to separate tax deferral arrangements outside of those proposed by the government’s 1 July 2009 policy statement (see HERE).

The closing date for submissions to the Board of Taxation review is 9 October 2009.

On 15 September 2009, the government released an Exposure Draft of the application and transitional provisions for the new employee share plan tax legislation, which were not included in the exposure draft of the main Bill that was issued on 14 August 2009 (see HERE for the 15 September release and HERE for the 14 August release and Exposure Draft of the main bill).  The one-week consultation period on the transitional provisions, which are contained in the Taxation of Employee Share Schemes (Application and Transitional Provisions) Bill 2009, closed on 22 September 2009.

The transitional provisions ensure the continued effectiveness of deferral arrangements established prior to the commencement of the new rules on 1 July 2009.  Quite reasonably, companies will have to provide the required information at the taxing point for such prior grants as part of their new employee share scheme reporting obligations.

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