TaxCorporate TaxSMEs in line for share options concessions

SMEs in line for share options concessions

Plans to allow the cost of share option schemes to rank alongside remuneration for corporation tax purposes will help increase the competitiveness of small businesses, according to a Treasury paper.

Link: SMEs go back to school

The proposal should end the need for companies to set up complex and burdensome trust arrangements to enable them to obtain a CT deduction.

The paper said the expense of the arrangements – which could be challenged by the Inland revenue – deters small companies.

Removing the need for them for Revenue approved schemes or Enterprise Management Incentive schemes will benefit smaller firms by making it easier to recruit and retain the staff they need to become more competitive.

Current arrangements can cost between £5,000 and £100,000 to set up with running costs of up to £30,000 a year.

The proposed scheme will make a CT deduction available where the employee is chargeable to UK income tax as a result of receiving shares or exercising share options or would be, but for relief under EMI. It will not amend Share Incentive Plan schemes which already have a CT deduction.

The Treasury said amount of the new deduction will be market value less employee contribution, the same as the starting point for Schedule E and NIC charges and should not require much additional record-keeping.

The paper said: ‘Accountancy treatment of share based payments is currently under review. Neither the IASB nor FRED31 change the principles applicable to the tax treatment of share schemes.’

The concession will cost the Treasury £45m next year rising to £95m in 2007/2008.

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