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The first Employment-Related Shares & Securities Bulletin has been published by HMRC.
A number of issues concerned approved share incentive plans (SIPs). Responding to a question as to whether notification of awards to participants on an annual or six-monthly basis satisfies the ‘as soon as practicable’ wording in ITEPA 2003, Sch 2 para 75, HMRC said this depends on the trustees’ individual circumstances, but they regard notification on that basis as consistent with the legislative requirement.
A period longer than 12 months would be unlikely to be consistent with the requirement.
Trust deeds and rules which qualify the statutory language to specify that notification will be given less frequently than monthly are consistent with the legislative requirement, but those which omit or substitute the statutory wording altogether are not.
Another question concerned what happens on cessation of ‘association’ of companies on a demerger. HMRC confirm that s 498 says there will be no charge to tax on shares ceasing to be subject to a SIP in certain circumstances.
Where the relevant employment is employment by an associated company and that company loses the associated status due to a demerger, the demerged company will continue to be an associated company of the company which established the SIP immediately after the demerger because they will both have the same shareholders.
It may take several months or years for the shareholders to change sufficiently for the companies no longer to be associated.
For the purposes of s 498(2)(d) only, HMRC will accept that if substantially all of the share capital of both companies involved is listed on a recognised stock exchange, association ceases upon completion of the demerger.
A similar approach may also be acceptable where one or both of the companies is not listed after the demerger based on the specific facts of the case.
Finally, with regard to the meaning of ‘the same provision’ in the pre-emption conditions (Sch 2 para 33), HMRC confirm that para 33(3)(a) requires that an employee pre-emption provision must apply to all shares in the company’ not just shares of the same class as the ‘eligible shares’.
