On October 30, 2024, the UK Chancellor delivered the new Labour government’s first budget, which included tax increases that may impact employee share plans. The most notable changes include the following: In light of the increased costs, if they are not doing so already, employers may wish to consider whether to pass some, or all, of the employer NICs to employees, which is permitted for stock options and other share-settled awards (such as share-settled RSUs/PSUs). Because the…
2022 will be viewed as a year of political turmoil in the UK with three different prime ministers during the year. While all were leaders of the UK Conservative party, the tax policy objectives were significantly different leading to proposed changes being reversed in some cases. For more information on the latest developments in the UK, see our recent NASPP guest blog post here. *Thank you to our colleague Gillian Parnell in our London office…
With the introduction of a new Health and Social Care (“HSC”) Levy in the United Kingdom on April 6, 2022, we wanted to take a few minutes to revisit a unique aspect of granting equity awards to employees in the UK: the ability to shift the employer’s responsibility for paying National Insurance contributions (“NICs”) on equity award income to the employees who receive the awards. This may be particularly important for companies that are already…
When granting equity awards, one of the most important questions is the tax effect of such awards. Granting awards that have a negative tax impact on the employee or the company is counter-productive and should lead companies to consider other ways to incentivize their employees. On the other hand, should companies maximize the availability of favorable tax treatment for equity awards in certain countries? This is not an easy question to answer. Favorable Tax Treatment…
There are a few countries that require special annual reports for share plan transactions (in addition to regular annual payroll reports). Australia and the UK are among these countries and are both on a fiscal year that differs from the calendar year. The UK tax year ended on April 5 and the Australian tax year will end on June 30. The UK Annual Share Plan Return (formerly known as Form 35, for tax-qualified awards, and Form…
I recently moderated a webinar during which my UK colleagues and representatives from Her Majesty’s Revenue and Customs (“HMRC”) explained the new share plan registration requirements in the UK. These requirements apply to any company offering a share plan (whether tax-qualified or not) to employees in the UK. The registration has to be completed by July 6, 2015, but for practical reasons, should be completed well in advance of this date. During our webinar, the…
As I work with companies expanding into the UK, one issue that comes up regularly is whether to transfer the employer social taxes due on equity income (known as employer National Insurance Contributions or NICs) to employees. Employer NICs are due on equity income if the taxable event occurs at a time when there is a market for the company’s shares (typically, when the shares are publicly traded). If due, employer NICs are payable at a rate of currently 13.8% and are uncapped (meaning they are due no matter how much income the employee realizes). This distinguishes the UK from many other countries (e.g., the US or Germany) where social taxes are also due but only up to a certain threshold (or income ceiling). Often the employee has already reached this threshold with her regular salary such that no social taxes are due on equity income.
Because employer NICs in the UK are uncapped, if a company makes significant equity grants to employees in the UK, the employer NICs liability can be crushing. But the UK again distinguishes itself from virtually all countries by allowing the employer to transfer the employer NICs due on income realized from most equity awards to the employee.