HMRC were criticised for their handling of a recent employee share scheme case by the tribunal judge, who noted that they had conducted their investigation “without apparently troubling to look at the scheme rules”. The recent case is not the first time tribunal judges have been critical of HMRC’s conduct.
The case in question involved an employee share option scheme. The taxpayer exercised his share options in October 2007, paying £7,636 for shares worth £111,579. The scheme rules stated that the taxpayer should pay over the PAYE due on the exercise within 90 days, but he was not told the amount to pay by his employers until March 2008.
HMRC charged tax on under ITEPA 2003, s.222 on the basis that this was not within the 90 day limit imposed by the scheme rules. The taxpayer appealed as he could not have paid the PAYE before being told the amount to pay.
The tribunal allowed the appeal, agreeing with the taxpayer that the date of exercise could not be the relevant date as he was not informed of the amount to pay until March 2008.
The tribunal judge stated that s.222 was introduced to target grossly abusive schemes and that there was nothing abusive about this scheme. The case again shows that it often pays to challenge HMRC, especially when they are being over-zealous in their application of the law.
The suggested content of the Finance Bill 2013 has now been published. If it obtains Royal Assent then the new rules it contains will form part of UK tax legislation from 6 April 2013. As ever, it is a long document and briefly here are some of the highlights:-
- The proposed statutory residency test is included in the Finance Bill 2013. It has been changed from the draft published under the last consultation and it is therefore worth reviewing these new rules in more detail if they apply to you or your clients.
- Income tax reliefs are to be limited to £50,000 or 25% of total income
- Shares acquired through an EMI share option scheme could qualify for Entrepreneurs relief after 1 year from the date of the option’s grant (as opposed to the current rules where the shares had to be owned for a year before a sale). The 5% shareholding requirement is also removed from shares acquired under EMI options.
- Pension payments made by employers will only be an exempt benefit to an employee, not the family of an employee.
As ever there are a number of changes. If you would like advice on any of these please contact Eaves and Co for further details on how the Finance Bill 2013 could affect you.
For an overview of the Budget 2012 visit our website http://www.eavesandco.co.uk/links/Budget2012.pdf