Welcome to our Employee Incentives Update for January 2018.
With a spotlight on listed companies and executive pay, this edition covers:
- the consultation on the proposed changes to the UK Corporate Governance Code;
- the Investment Association’s new Public Register of listed (FTSE All-Share) companies that have received significant shareholder opposition to proposed resolutions;
- proposed CEO pay ratios;
- an update on HMRC’s new Trust Registration Service; and
- some recent international developments, including from Sweden, which has adopted a new tax-advantaged plan similar to EMI.
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.
New UK Corporate Governance Code consultation | Executive pay
The Financial Reporting Council launched a consultation in December 2017 on a comprehensive shake-up of the UK Corporate Governance Code.
From a remuneration perspective, the proposed changes largely reflect the recommendations set out in the government’s response to last year’s Green Paper.
Investment Association | New public register
On 19 December 2017, the Investment Association launched its Public Register of listed (FTSE All Share) companies that have received votes of 20% or more against any resolution (or withdrew a resolution) prior to their AGM or general meeting in 2017.
The press announcement confirms that the new Public Register aims to “increase transparency, accountability and scrutiny of listed companies by shareholders, media and the wider public”. The data published for 2017 reveals that over one in five FTSE All Share companies feature on the Public Register, and that pay-related issues topped the list of shareholder concerns.
CEO pay ratios
The Business, Energy and Industrial Strategy Committee confirmed in the government’s response to its 3rd report on corporate governance that the government supports the recommendation to require quoted companies to publish pay ratios between the CEO and both senior executives and all UK employees.
We await publication of the draft regulations, which are expected to be published before March 2018, for implementation by June 2018 – clearly a tight timetable! In the meantime, the Investment Association is urging voluntary compliance in relation to CEO pay ratios.
Trusts Registration Service | Employee benefit trusts
HMRC has launched its new Trusts Registration Service, which is intended to provide a single online route for trusts and complex estates to comply with their registration obligations and provide information on the beneficial owners of the trust.
For companies operating employee benefit trusts (EBTs), the obligation to register applies to EBTs that incur a UK tax liability. This means that many off-shore EBTs will not need to be registered. However, the trustees of any EBTs which have incurred a UK tax liability do need to register their trust under the TRS.
Sweden | New tax-advantaged employee share options
The Swedish government has set out new rules for small and early-stage companies to promote the recruitment and retention of key employees.
The new rules are intended to reduce the tax burden for both the employee and the employer. The new rules entered into force on 1 January 2018 and apply to options granted after 31 December 2017.
France | Finance Act for 2018 published
The first Budget of the newly elected French government has now been adopted by the French Parliament.
The Finance Act for 2018 (adopted and published in December 2017) includes some of Emmanuel Macron’s most significant promises of tax cuts made during his campaign; the most highly anticipated one being the introduction of a 30% flat rate tax applicable to most investment income.
The Netherlands | More detail on the 20% bonus cap for financial undertakings
Amsterdam is an attractive option for financial services organisations looking to enter the EU market. The headline 20% cap on employee bonuses is often seen as a hindrance, but there are a number of exceptions, or alternatives, that can mitigate or avoid the impact of the cap.
On the horizon
In the UK, employers should be aware that some of the previously announced changes to the taxation of termination payments come into force on 6 April 2018. The new rules remove the current distinction between contractual and non-contractual payment in lieu of notice (PILON) clauses, to treat both as fully taxable earnings (subject to income tax, and employer’s and employee’s NICs). The introduction of employer’s NICs on other termination payments above the £30,000 limit has been postponed until April 2019. We will set out the new rules in more detail in our Spring Update.