In my consultancy role, I combine assisting fee-earners with client work with working on various industry bodies (notably the Share Plan Lawyers Group) and liaising with HMRC and HMT. In that capacity, the employee share taxation impacts of the new Private Intermittent Securities and Capital Exchange System (PISCES) has been occupying much of my time recently.
If you could make one change to tax, what would it be?
Almost every aspect of employee share taxation comes down to, or is at least significantly impacted by, the arcane art of share valuation. Fiscal share valuation is based on a very limited body of legislation containing a range of nebulous concepts, with a relatively small body of case law available to help to elucidate those concepts. While the guidance provided by the HMRC valuation manual is invaluable (and the specialists at Shares and Assets Valuation are, in my experience, very open to reasoned discussion of the issues), it seems wrong as a matter of principle that such critical issues are not more clearly codified. Professional share valuers may, of course, disagree, but the greater certainty that a more detailed body of legislation in this area would provide would make easier the lives of taxpayers, advisers and HMRC.
If I may be permitted an additional very specific suggestion, I would suggest that the s 431 regime for restricted employment-related securities be made ‘opt-out’ rather than ‘opt-in’. In practice, the properly-advised almost always make the election (whereby employees are taxed on the share acquisition by reference to their value as if they were not subject to restrictions), so the current opt-in regime merely provides a trap for the unwary or ill-advised.
What’s topical in your world?
The employment tax challenges presented by the new PISCES seem to be one of the big topics of the moment. In particular, the impact of a company operating a PISCES arrangement on the potential status of its shares as readily convertible assets (meaning that any income tax charge arising is collectible under PAYE and is accompanied by corresponding NIC charges) has been the subject of significant debate. So too has the question of tax-advantaged options (under the EMI or CSOP regimes) being allowed to be exercised to allow option holders to participate in a PISCES arrangement.
What has been very notable in each case is the readiness of HMRC (and HMT) to engage with stakeholders and their willingness to do something to ameliorate (or at least clarify) the position. Clearly, the Government is very keen for PISCES to work, to stimulate the private company shareholding environment (with the marked recent move away from listings). That has been reflected in the speed with which legislation has been promulgated (in this year’s Finance Bill) to allow existing tax-advantaged options to be exercised early in a PISCES situation and considerable helpful HMRC guidance on the RCA issues.
Has a recent tax case caught your eye?
The Supreme Court decision in Cobalt Data Centre [2024] UKSC 40 is a capital allowances case, but I think it may have a real impact on my area. The Lordships’ view on the circumstances in which a variation of a contract is treated as forming an entirely new contract is significantly narrower than previously thought. Applied to share options, that may cast into doubt HMRC’s long-held views on when an amendment to an option constitutes cancellation and regrant of a new option.
You might not know this about me but...
Bridge was my main hobby at school years and university, but it took a back seat for the next 30 years when career and young family were my priorities. One of the joys of semi-retirement is that I have returned to the bridge table, playing mostly with the partner that I played with in my very first bridge tournament, at school, 49 years ago.
In my consultancy role, I combine assisting fee-earners with client work with working on various industry bodies (notably the Share Plan Lawyers Group) and liaising with HMRC and HMT. In that capacity, the employee share taxation impacts of the new Private Intermittent Securities and Capital Exchange System (PISCES) has been occupying much of my time recently.
If you could make one change to tax, what would it be?
Almost every aspect of employee share taxation comes down to, or is at least significantly impacted by, the arcane art of share valuation. Fiscal share valuation is based on a very limited body of legislation containing a range of nebulous concepts, with a relatively small body of case law available to help to elucidate those concepts. While the guidance provided by the HMRC valuation manual is invaluable (and the specialists at Shares and Assets Valuation are, in my experience, very open to reasoned discussion of the issues), it seems wrong as a matter of principle that such critical issues are not more clearly codified. Professional share valuers may, of course, disagree, but the greater certainty that a more detailed body of legislation in this area would provide would make easier the lives of taxpayers, advisers and HMRC.
If I may be permitted an additional very specific suggestion, I would suggest that the s 431 regime for restricted employment-related securities be made ‘opt-out’ rather than ‘opt-in’. In practice, the properly-advised almost always make the election (whereby employees are taxed on the share acquisition by reference to their value as if they were not subject to restrictions), so the current opt-in regime merely provides a trap for the unwary or ill-advised.
What’s topical in your world?
The employment tax challenges presented by the new PISCES seem to be one of the big topics of the moment. In particular, the impact of a company operating a PISCES arrangement on the potential status of its shares as readily convertible assets (meaning that any income tax charge arising is collectible under PAYE and is accompanied by corresponding NIC charges) has been the subject of significant debate. So too has the question of tax-advantaged options (under the EMI or CSOP regimes) being allowed to be exercised to allow option holders to participate in a PISCES arrangement.
What has been very notable in each case is the readiness of HMRC (and HMT) to engage with stakeholders and their willingness to do something to ameliorate (or at least clarify) the position. Clearly, the Government is very keen for PISCES to work, to stimulate the private company shareholding environment (with the marked recent move away from listings). That has been reflected in the speed with which legislation has been promulgated (in this year’s Finance Bill) to allow existing tax-advantaged options to be exercised early in a PISCES situation and considerable helpful HMRC guidance on the RCA issues.
Has a recent tax case caught your eye?
The Supreme Court decision in Cobalt Data Centre [2024] UKSC 40 is a capital allowances case, but I think it may have a real impact on my area. The Lordships’ view on the circumstances in which a variation of a contract is treated as forming an entirely new contract is significantly narrower than previously thought. Applied to share options, that may cast into doubt HMRC’s long-held views on when an amendment to an option constitutes cancellation and regrant of a new option.
You might not know this about me but...
Bridge was my main hobby at school years and university, but it took a back seat for the next 30 years when career and young family were my priorities. One of the joys of semi-retirement is that I have returned to the bridge table, playing mostly with the partner that I played with in my very first bridge tournament, at school, 49 years ago.
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