Employee Incentives Update – Autumn 2019

Written on 10 Oct 2019

Welcome to our Employee Incentives Update for autumn 2019.

With executive pay remaining under scrutiny, in this edition, we take a look at the recent update from the Investment Association on executive director pension contributions.

Another issue that should be high on the board agenda is digital risk. Michael Carter explores the expectations on directors, and what they should be doing to tackle digital risk in their businesses.

We also look at a number of developments concerning employees, including the latest update from HMRC on employment related securities; the first reported case on employee shareholder status; and the further changes to the taxation of termination payments due to take effect next year.

Looking further afield, our Dutch and German teams highlight recent issues and upcoming changes that businesses operating in those countries should be aware of.

We hope that you find this update interesting. If you would like to discuss any of the issues raised, please let us know. Our contact details are set out below.

Executive pay | Executive director pensions

Executive pensions remain a focus of institutional shareholders. On 27 September 2019, the Investment Association issued an update on the position that its Institutional Voting Information Service will take on executive pension contributions for listed companies with year-ends starting on or after 31 December 2019.

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Employment related securities | Latest update from HMRC

On 3 October 2019, HMRC published its latest Employment Related Securities Bulletin. This includes some helpful updates on HMRC practice, in particular confirming the need for new working time declarations on the grant of replacement enterprise management incentive options on a company reorganisation.

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Disguised remuneration loan charge | Independent review announced

The government has commissioned an independent review of the Disguised Remuneration Loan Charge. The review will consider the impact of the loan charge on individuals and whether it is an appropriate response to the tax avoidance behaviour it was intended to tackle. It will report to the Chancellor of the Exchequer by mid-November.

In the meantime, the loan charge legislation remains in force during the review (as confirmed by HMRC guidance).

Employee shareholder status | How to terminate the status

Although the tax reliefs under employee shareholder status have been withdrawn in relation to shares acquired on or after 1 December 2016, historic arrangements remain in place. In a recent case, the Employment Appeal Tribunal considered how employee shareholder status can be validly terminated.


Termination payments | Further NIC changes

Further changes to the taxation of termination payments are due to take effect next year. As previously announced, the introduction of employer's class 1A national insurance contributions on termination payments above the £30,000 threshold are intended to come in from 6 April 2020.

HMRC has confirmed in a recent Employer Bulletin that when the new rules take effect, termination awards that comprise of cash payments will be paid and reported through the PAYE Real Time Information process, rather than via form P11D(b).

IR35 | Six months to go: are you ready?

With only six months until the further IR35 reforms are scheduled to take effect, many end users, staffing companies and consultancy companies are deciding how they are going to respond to the changes scheduled for April 2020.

Read more > from our specialist workforce solutions team

Digital risk | Boards and the challenge of technology

As digitalisation moves centre stage across all commercial sectors, Michael Carter (together with our corporate and digital transformation knowledge lawyers) considers the types of digital risk that businesses are facing, the corporate governance expectations and the steps that boards should be considering in this area.

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The Netherlands | Government announces plans to reform savings and investment regime

The Dutch government has announced plans to introduce a bill before summer 2020 to overhaul the savings and investment regime. Employees are currently typically taxed at a flat rate on deemed income from shares acquired under an incentive plan, alongside savings and investments. The reforms will differentiate between different categories of savings and investments.


Germany | Giving designer clothing to employees for free? Think of the tax!

In the retail sector, it is common for fashion brands to give away clothes, usually off-season or from runway shows, to their employees, or to sell the clothes to them at highly reduced rates. Our German tax and employment team reminds employers that they should not overlook the tax implications of this practice – whichever jurisdiction you are operating in.

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