Employee Share Plans in Europe and the USA - Sorainen

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Employee Share Plans in Europe and the USAThe United Kingdom6.3 For disposals of shares made on or after 6 April 2008 and on or before 22 June2010 a single CGT flat rate of 18% applied. 16 For disposals of shares made from23 June 2010 onwards, a new CGT rate of 28% applies, in addition to theexisting rate of 18%. For individuals, the rate of CGT remains at 18% wheretheir total taxable gains and income are less than the upper limit of the incometax basic rate band (£37,400 for 2010-2011). The 28% CGT rate applies togains (or any part of gains) above that limit. 176.4 A UK tax resident is not subject to capital gains tax on the first £10,100 (2010-2011 tax year) of gains each tax year. 187. Employee benefit trusts7.1 An employee who is a discretionary beneficiary of an employee benefit trust 19will not be taxable for that reason alone, unless and until he actually receivesany benefits. At that point he may be taxed on the receipt of those benefits. Ingeneral, an employee who receives benefits from an employee benefit trust istaxed as if he had received the benefit directly from his employer.7.2 A company may receive any statutory corporation tax deduction in relation toshares received by employees from an employee benefit trust (see paragraph4.2.1 above). If this is not available, it may still be possible to obtain a deductionin respect of contributions made by the company to the employee benefit trust,although careful structuring will be needed to ensure that a deduction isobtained.16171819For disposals of shares prior to 6 April 2008, taper relief reduced any taxable gain according to the timeelapsed between the date of acquisition and the disposal of shares. Where shares were held by anemployee for 2 or more years, taper relief would reduce the taxable gain on the shareholding by 75%,giving an effective rate of tax for a (then) top rate (40%) taxpayer of 10% (2007-2008 tax year).However, as from 6 April 2008, taper relief was abolished.Gains which arose prior to 23 June 2010 will not be taken into account in determining the rate (or rates)at which the gains of individuals arising on or after 23 June 2010 should be charged. In addition,taxpayers are able to off-set losses and the annual exempt amount (£10,100 for 2010/2011) (seefurther below) against gains in the way that is most beneficial to them.A married couple/civil partners may combine their tax free allowances so that in practice capital gainstax is not due on the first £20,200 of gains for the 2010-2011 tax year.An employee benefit trust is often referred to as employee share ownership plan (ESOP) in the UK.Employee benefit trusts are normally operated with other employee share plans operated by thecompany, for example a share option plan. ESOPs provide a way of holding existing shares for usewith employee share plans.UK/1729295/03 199 September 2010
Employee Share Plans in Europe and the USAThe United Kingdom8. Data protection8.1 Employees should be fully informed, in advance, of the collection, processingand disclosure of their personal information in connection with an employeeshare plan. 208.2 The processing should be covered by a registration with the office of the UKInformation Commissioner and a series of general "data protection principles"set out in the Data Protection Act 1998 (DPA), should be followed. Theseinclude, for example, a requirement that all processing should meet one of aseries of specific justifying conditions and requirements in relation to general fairprocessing, security and destruction when information is no longer needed.Further restrictions will apply if employee information is to be transferred outsidethe European Economic Area.8.3 In many cases, companies have taken the approach of obtaining employees'consent to the data processing in relation to an employee share plan as a meansof meeting the specific justifying conditions. Some doubt has been expressed asto whether, strictly, such an approach is valid and a possible alternativeapproach may be for the data processing to be justified on the basis that it isnecessary for the purposes of the legitimate interests of the company.9. Employment lawPlease refer to paragraph 4 on pages 5-6 of this guide. This explains theemployment law issues which are generally applicable to a greater or lesserdegree in all the countries covered by this guide. There is a risk that employeesmay claim a right to continued participation in an employee share plan or thatrights under a plan may be included in compensation on termination.Companies should seek specific advice on these issues and other employmentlaw issues which may be applicable.10. Further informationA more detailed analysis of employee share plans in the UK can be found inClifford Chance's publication "Employee Share Plans in the United Kingdom".20The EU Directive on Data Protection has been incorporated into UK law by virtue of the DataProtection Act 1998.UK/1729295/03 200 September 2010
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Employee Share Plans in Europe and the USA - Sorainen

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