Finance Act 2008 - Share schemes and Incentives Changes

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05 August 2008

Enterprise Management Incentive (EMI) Schemes

Since the enactment of this year's Finance Act, only companies with fewer than 250 full-time employees cam operate EMI schemes (a 'just and reasonable' fraction is taken into account for part-time employees). Also, shipbuilding, producing coal and producing steel have become excluded activities.

Save as You Earn (SAYE) and Share Incentive Plans (SIPS)

Under these schemes, employees who are resident and ordinarily resident in the UK must be offered participation. Those who are resident, but not ordinarily resident in the UK do not. Many schemes meet this requirement by referring to Section 15 of the Income Tax (Earnings and Pensions) Act 2003 (ITEPA).

The provisions of Section 15 ITEPA have been changed by the Finance Act 2008 and now extend to all employees who are resident in the UK, whether or not they are ordinarily resident. This could have the effect of extending participation in these schemes to include 'not ordinarily resident' employees which companies may not want.

Who will the changes affect?

Employers who offer these schemes to their employees and whose rules refer to Section 15 ITEPA may be affected. However, these changes will be of no consequence if all of an employer's employees are resident or 'ordinarily resident' in the UK.

What action should I take?

As the amendments introduced by the Finance Act 2008 will not apply to each company, it is important to identify whether your scheme rules will be affected by this change, and if so whether this will, in practice, have any effect.

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