Application date The new rules will generally apply to benefits provided under employee share schemes which are not taxed under the existing rules within 6 months of enactment of the Bill. There is further detail of the transitional arrangements below. Key features The proposed new rules will apply to benefits provided under arrangements that involve issuing or transferring shares to past, present and future employees or shareholder-employees (or their associates) of the issuing company (or a group company). However, they will not apply to arrangements that require employees to: pay market value for the shares on the scheme taxing date” (described in “share more detail below, but generally the date on which the employee holds the shares like any other shareholder); put at risk shares they acquired for market value, where the scheme provides no protection to the person against a fall in the value of the shares. They will also not to exempt schemes (which have their own specific rules, discussed below). Background The definition of share scheme” is a key component of the rules. “employee The core employee share scheme rules in the Income Tax Act 2007 currently apply to purchase agreements”. These are agreements to dispose of or issue shares to “share an employee, entered into in connection with the employee’s employment or service, whether or not an employment relationship exists when the employee receives a benefit under the agreement. Under current rules there is some uncertainty as to whether this definition encompasses arrangements entered into before a person commences a formal employment relationship and has received a PAYE income payment. This definition also excludes shareholder-employees to the extent to which they choose not to deduct PAYE. There is no policy rationale for excluding these classes of recipients of employee share scheme benefits. Detailed analysis Clauses 11, 12 and 14 propose that under sections CE 1(1)(d), CE 2, and CE 6 7D, a – benefit received under an employee share scheme is income of a person. Similarly,
Application date The new rules will generally apply to benefits provided under employee share schemes which are not taxed under the existing rules within 6 months of enactment of the Bill. There is further detail of the transitional arrangements below. Key features The proposed new rules will apply to benefits provided under arrangements that involve issuing or transferring shares to past, present and future employees or shareholder-employees (or their associates) of the issuing company (or a group company). However, they will not apply to arrangements that require employees to: pay market value for the shares on the “share scheme taxing date” (described in more detail below, but generally the date on which the employee holds the shares like any other shareholder); put at risk shares they acquired for market value, where the scheme provides no protection to the person against a fall in the value of the shares. They will also not to exempt schemes (which have their own specific rules, discussed below). Background The definition of “employee share scheme” is a key component of the rules. The core employee share scheme rules in the Income Tax Act 2007 currently apply to “share purchase agreements”. These are agreements to dispose of or issue shares to an employee, entered into in connection with the employee’s employment or service, whether or not an employment relationship exists when the employee receives a benefit under the agreement. Under current rules there is some uncertainty as to whether this definition encompasses arrangements entered into before a person commences a formal employment relationship and has received a PAYE income payment. This definition also excludes shareholder-employees to the extent to which they choose not to deduct PAYE. There is no policy rationale for excluding these classes of recipients of employee share scheme benefits. Detailed analysis Clauses 11, 12 and 14 propose that under sections CE 1(1)(d), CE 2, and CE 6 – 7D, a benefit received under an employee share scheme is income of a person. Similarly,