Save As You Earn/Share Incentive Plans

15 September 2008

We take another look at the eligibility rules for SIPs and SAYE plans following changes to ITEPA 2003 to extend the scope to resident but not ordinarily resident employees and what changes you may need to make to your plan rules.

SAYE and Share Incentive Plans must offer participation to all qualifying employees who are resident and ordinarily resident (R/OR) in the UK and may, in addition, offer participation to those employees who are resident but not ordinarily resident (R/NOR).

As part of the wider reforms on the taxation of non-domiciles and R/NOR individuals, the Government proposed to make it mandatory to extend participation to all qualifying R/NOR employees (as we reported in our last Budget edition of e-news).

Employers and various specialists lobbied HMRC on this issue making it clear that this could be unduly burdensome, especially given how few employees would benefit from the changes. HMRC were sympathetic and, on 30 May 2008, published amendments to the Finance Bill 2008 which retains the status quo and allows employers discretion as to whether to extend participation in these plans to R/NOR employees.

Although the outcome of this U-turn is that the position remains unchanged, all SAYE and SIP plan rules will still require review. Alterations to other parts of the legislation by the Finance Act 2008 mean that references to the definition of "eligible employees" to specific legislation are likely to be incorrect and may, if left unamended, inadvertently require the offer to be extended to R/NOR employee under the terms of the rules. This would be unfortunate given the Government's climb down on the point.

We can review your plan rules and draft the necessary board resolution to make the necessary amendments. Any changes must be made before making a new offer to employees under the plan.

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