Employee Incentives Update | October 2020
Published on 7th Oct 2020
This edition covers recent developments in share incentives and employee tax, looking at measures announced by the chancellor in the Winter Economy Plan and further clarification from HMRC on the impact of coronavirus on enterprise management incentive options. We also report on proposed measures recently announced in the Netherlands.
We hope that you find this update helpful. If you would like to discuss any of the issues raised, please let us know. Our contact details are set out below.
Coronavirus | HMRC clarifies impact on enterprise management options and employment-related securities deadlines
Since the last edition of our Employee Incentives Update, HMRC has issued further clarification on the impact of coronavirus on enterprise management incentive (EMI) options.
HMRC published a bulletin setting out its views on employment-related securities deadlines during the pandemic and on changes to the EMI working time requirements. The legislative changes are intended to ensure that an EMI option holder being placed on furlough, working reduced hours or taking unpaid leave due to the pandemic do not trigger a "disqualifying event" for tax purposes. Click here for our Insight.
HMRC has also confirmed that new EMI options may be granted to employees on furlough or working reduced hours due to the coronavirus emergency.
EMI options | Further update from HMRC expected
HMRC stated in February that it would provide more information (when known) on the new domestic state aid regime that will be followed after the end of the transition period. The EMI tax regime currently remains subject to the EU State Aid approval rules.
An update from HMRC on this – ideally well in advance of the end of the transition period on 31 December 2020 – would help avoid any uncertainty. We expect that this will be set out in a future HMRC employment-related securities bulletin, and we shall cover any developments in the next edition of our Employee Incentives Update.
The Netherlands | Option grants by innovative companies and new payroll tax proposals
The Dutch government is currently working on new measures to meet the needs of certain start-up and scale-up companies in the Netherlands that grant stock option rights to the employees as an incentive. This reflects the policy approach taken elsewhere in Europe to provide support to such companies through tax-advantaged options, such as the long-established EMI option regime in the UK and the rules adopted in Sweden in 2018 for small and early-stage companies.
The Dutch government has also announced the introduction of a temporary scheme on the basis of which employers may be eligible for a tax reduction for payroll taxes in case a specific job-related investment is made.
Winter Economy Plan | Chancellor sets out further economic measures to weather the COVID-19 storm
Following the cancellation of this year's Autumn Budget, the chancellor announced the Winter Economy Plan on 24 September 2020. This is the government's latest stimulus package intended to provide more targeted support for jobs and businesses in the light of the ongoing pandemic.
Winter Economy Plan | New Job Support Scheme announced
A crucial part of the Winter Economy Plan was the announcement of new measures for employers to support jobs when the Coronavirus Job Retention Scheme ends on 31 October 2020.
The new Job Support Scheme (JSS) will open on 1 November 2020 and is intended to support "viable jobs that create genuine security", the chancellor stated. HMRC has published a fact sheet on the JSS, with further guidance promised.
Coronavirus | Job Retention Bonus
The Job Retention Bonus (JRB) was announced earlier this year as part of the Chancellor's Plan for Jobs.
The JRB is a taxable one-off payment to employers of £1,000 for every employee who they previously claimed for under the CJRS (provided such claim was not made fraudulently) and who remains continuously employed until 31 January 2021. Eligible employees must earn at least £520 a month on average between 1 November 2020 and 31 January 2021. HMRC published guidance on 2 October 2020, with more technical detail to follow.
To agility and beyond | 'Work from home' reprise highlights the need for a change in employer practices
The government's latest response to Covid-19 raises the possibility that homeworking and the opening and closing of workspaces will be a continuous measure into 2021 for UK businesses.
Employers should carefully consider the employment law, tax, and health and safety considerations of moving to an employment model that involves an element of homeworking. From a tax perspective, both the employer and employee need to be clear about the implications of such arrangements, and careful consideration is required.
Finance Bill 2021 | Changes to the tax treatment of termination payments
Draft legislation making a couple of technical changes to the tax treatment of termination payments has been included in Finance Bill 2021. These are not substantive changes (they are stated to be intended to "remove unintended outcomes and bring fairness" to the rules), and will apply in specific factual situations.
One of the measures provides an alternative post-employment notice pay (PENP) calculation, where an employee's pay period is defined in months, but their contractual notice period or post-employment notice period is not a whole number of months. This is intended to place guidance issued by HMRC in October 2019 on a statutory footing.
The other change seeks to align the tax treatment of PENP for individuals who are non-resident in the year of termination of their UK employment with the treatment for all UK residents.
The changes are intended to have effect from 6 April 2021.
IR35 update | End-user liability when its supply chain fails to pay
New HMRC guidance clarifies the supply chain compliance risks and obligations that end users need to take into account as they prepare for changes to the IR35 regime that come into force in April 2021.
This briefing by our workforce solutions team sets out what checks end users who use personal service company contractors will be expected to carry out on their supply chain if they are to avoid the risk of transferred tax debt liability.