Global employee share scheme: world in motion

We are regularly told that the world is becoming a global village and almost
every day it seems that international conglomerates are buying companies (and
football clubs) around the world.

This has been recognised by the expansion of IFRS and the news that the US is
the latest country to adopt what is fast becoming a worldwide standard.

As many employees both in the UK and overseas know to their cost, there is no
such single basis for taxing share options and other incentives.

Each country has different rules to tax employees on what we in the UK call
employment-related securities and giving valuable tax breaks for arrangements
that are deemed worthy.

At the moment, if an employee works in the UK for a subsidiary of, say, an
American company and receives share options, while these might have been
specifically designed to be tax effective in the United States, on exercise they
will be taxed as unapproved options here.

The position could be even worse the other way around where there is penal
legislation in the United States to tax stock options that do not fit within
relatively narrow parameters.

This duality of treatment is replicated across Europe adding to staffing
costs and hindering international staff mobility at a time of anticipated
recession when companies need all of the flexibility that they can get.

Assuming that we don’t want to follow some Gulf States and give up on
personal taxation altogether, surely it is time for the powers that be across
Europe, or even the globe, to develop an approved employee share scheme template
with similar tax benefits and accounting rules across all territories.

The EU’s travails with the consolidated corporate tax base illustrate that a
widely accepted code for all taxes is probably decades away.

However, in the narrow field of share incentives, many employees and their
multinational employers would really value a trans-national share incentive
scheme approved in most jurisdictions.

Wouldn’t it be great if Alastair Darling stepped up to the plate and started
the process now?

Philip Fisher heads the employment tax and rewards team
at PKF and is the author of Employee Share Schemes.

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