Tag Archives: Chancellor

Simplification for Canada?

Canadian flagThe OTS is now tolerably well established in the UK. We have tried to keep an eye open for similar initiatives in other countries and develop links where possible. Canada had not featured on the OTS’s map until an approach came for Jeremy Sherwood to speak at a conference on Tax Simplification being organised by the Canadian Certified General Accountants in Toronto. Jeremy was prepared to make the sacrifice and visit Canada, but I played the heartless boss and suggested that a transatlantic trip for an hour’s session didn’t seem that efficient.

Could we perhaps participate in the conference via videoconference? The conference organisers thought that would work – and indeed it would add a real ‘extra’ to the programme. So Jeremy and I put some slides together, sent them off for printing out and found ourselves in one of the video rooms in 1 Horse Guards Road at 5pm one dark December day ready to speak to an attentive group in Toronto.

We spent 20 minutes or so talking through who we are, what we do and how we go about our work. We outlined the projects we had undertaken and were still working on and gave a flavour of the findings and actions that had resulted. The 60+ strong audience seemed to be paying careful attention (we had a good view, slightly oddly from the back of the room) and all seemed to go along well. Any jokes did take time to get a reaction – videoconferencing that far isn’t quite instant!

Questions were then invited and we had a succession of good points to discuss. One particularly interesting thread was the issue of our constitution – who did we report to? (Our reports go to the Chancellor.) Did we have a formal constitution from the government? (No – we are in effect set up through the Coalition agreement but that is not laid down by statute.) What happens if our reports are not taken up? (We naturally hope our reports make sufficient sense for them to be obvious candidates for progress – though we would never expect everything we recommend to be taken up automatically; consultation on anything significant is always going to be needed for a start.)

Overall, this was a constructive (and practical) way to spread the word about simplification. Whether Canada starts work on a simplification project remains to be seen – we sensed there was good support for such an initiative in the conference. If that does go ahead, Jeremy may yet get his transatlantic trip!

The conference report is at http://www.cga-canada.org/en-ca/ResearchReports/ca_rep_2012-12_tax_summit.pdf

John Whiting
Tax Director

Q&A on unapproved employee share schemes

JW_OTS_bannerThe OTS’s report on unapproved employee share schemes has been generally welcomed by those involved with share-based rewards. Here’s a summary of some of the points we have heard – plus our responses.

What are the chances of the changes coming in?

That is up to the Chancellor. We have had a very extensive consultative process to develop our recommendations, including input from HMRC and HM Treasury.  Significant changes will be subject to consultation but we anticipate initial responses in the Budget.

Will this be part of a general relaunch of employee share ownership?

Again that has to be up to the government. But it is clearly an area receiving a good deal of attention from the government – changes to tax advantaged share schemes stemming from our earlier report, the Nuttall report’s recommendation on widening employee share ownership and the ‘shares for rights’ proposals.

Are the recommendations going to raise money for the Treasury?

The OTS has to be revenue neutral in our package of recommendations but we have to balance that with a drive for simplification. We think the recommendations are broadly revenue neutral but it does all depend on how the ideas are taken forward. For example, changing the tax charging arrangements for share awards could raise money for the exchequer as income tax/NIC could be on higher values – though the tax would be somewhat delayed.

Is the employee shareholding vehicle a safe harbour employee benefit trust (EBT)?

Probably, but we do not want to badge it as such at this stage. As is well-known, HMRC have a serious problem with abuse of EBTs and are understandably nervous of opening up new avenues for avoidance. But we think that many companies would welcome a simple vehicle – probably a form of EBT – which operated under model rules and could be used to provide a market for employees’ shares. There would be restrictions such as not being able to own other assets and having to be UK-based, but it would be protected from the raft of tax traps we identified. We also think this vehicle will be needed for the Nuttall reforms and ‘shares for rights’ proposals.

Surely you should have just abolished Form 42?

This was probably the most frequent request at meetings and in our postbag! It is part of HMRC’s risk management procedures but we do think HMRC need to look at how much of the information they really need and justify it to taxpayers. We have suggested various improvements to ease the burden.

Have the OTS now finished with these areas?

In principle yes, though we are keenly interested in how the recommendations are taken forward and plan to stay involved. It may be appropriate to use our Consultative Committees and general contacts to help develop some of our ideas during any consultative process.

John Whiting
Tax Director, OTS

Unapproved employee share schemes

BlackberriesThis month sees the culmination of our two major reviews of unapproved employee share schemes, published today, and pensioner taxation, published next week.

Our final report on unapproved employee share schemes comes hot on the heels of the Government’s response to our review of tax advantaged employee share schemes in December. The Chancellor accepted the majority of our recommendations from that report and we sincerely hope our report on unapproved employee share schemes will be met in the same way.

As our Chairman Michael Jack notes, this area of the tax system is a “bramble patch” of complexity. Continuing this metaphor he hopes that the package of recommendations in our report will “enable users to access the blackberries more easily and with fewer prickles” from the “thorns of complexity”.

So what does the report say? Well, we have made six main recommendations, with three smaller, but still significant recommendations. These include recommendations on the general taxation of unapproved share schemes, international aspects, administration (including Pay as You Earn, Form 42 and valuation) and a proposal for a new vehicle for holding employee shares. Full details of our recommendations can be found in the report at the link below:

http://www.hm-treasury.gov.uk/d/ots_unapproved_employee_share_schemes_final.pdf