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Treasury announces plans for simplification of employee share scheme tax rules

HM Treasury has announced plans to introduce changes to rules concerning tax-approved and non-approved employee share schemes in the Spending Review and Autumn Statement published this afternoon.

The precise scope of the plans is difficult to gauge from the details released so far, but the government aims to simplify the tax rules and achieve greater consistency. Among the proposed changes is the plan to clarify the tax treatment of internationally mobile employees for certain employment-related securities (ERS) and ERS options.

ERS refer to the rewards employees receive in return for their employment, among which employee share options and share awards are the most common. Just as an employee’s salary is subject to income tax and national insurance, the government seeks to ensure that it properly taxes income derived from employee share schemes. How this is calculated is complicated by the circumstances of the individual employee. In the case of those who work for UK companies overseas, the government plans to make it clear that they will be charged tax under the rules which deal with ERS options, rather than earnings as is usual.

Further details will be revealed when the government publishes the draft text of the Finance Bill 2016 due on December 9 2015. This will be followed by a consultation period ending on February 3 2016.

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