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OTS review of unapproved share schemes, an Employee Shareholding Vehicle and the Nuttall Review

The Office of Tax Simplification ("OTS") has completed its review of unapproved employee share schemes and has published its final report .This follows the publication of the OTS report on approved
The Office of Tax Simplification ("OTS") has completed its review of unapproved employee share schemes and has published its final report .

This follows the publication of the OTS report on approved share plans which was released in March 2012. Many of the OTS recommendations from the previous report have been accepted by the Government and will be incorporated into the next Finance Bill   (expected in March 2013).  

The OTS report on unapproved share schemes makes six main recommendations aimed at making these share schemes easier for employers, employees and HM Revenue & Customs to implement and administer.  These recommendations deal with the concept of a "marketable" security, international assignees, an Employee Shareholding Vehicle,  Form 42, PAYE simplification and valuation.

Following publication of the Nuttall Review,which made recommendations to promote and encourage employee ownership as a business model, we are particularly interested in the OTS recommendation to introduce an "Employee Shareholding Vehicle" (or safe harbour employee trust). This will enable companies (particularly smaller, unquoted companies) to manage their share arrangements and create a market for employees'  shares.  It would be a vehicle to meet the need to facilitate sales by employees of relatively modest quantities of shares that they have acquired via a share plan. The OTS recommends that consultation on a new share holding vehicle would also take into account the particular type of employee benefit trust considered in the Nuttall Review, namely one which meets the need to hold a (probably generally static) large percentage of the shares in a company for the benefit of employees.  We agree with the OTS view that "these two needs should be considered together, in order to have a consistent approach to a common theme, and to avoid complexity and contradiction in any resulting legislation". 

For the full OTS report, see the HM Treasury website.

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