New era for employee share plans in the UK

The British government has given the green light to substantial simplification and reform of all four approved share ownership schemes during the course of the next 15 months, following an exhaustive review, which concluded that major changes had to be made quickly to head off strangulation of the employee share ownership sector by overregulation and excessive bureaucracy.
The significant changes include: 
  • alignment of the definition of retirement as a good leaver circumstance across all approved plans; 
  • harmonization of the other good leaver provisions across all approved plans; 
  • permitting tax-free exercise of approved Company Share Option Plan (CSOP)/Sharesave options or removal of Share Incentive Plan (SIP) shares early in the event of certain cash takeovers 
  • the removal of prohibitions on shares with restrictions being used in approved share plans. 
In the SME sector, certain companies will be able to grant Enterprise Management Incentive share options at an effective tax rate of only ten percent, through the extension of Entrepreneurs Relief from full tax liability.

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