Tax on spread at exercise.
Tax-advantaged treatment is available for certain stock option plans (company share option plan or for small, companies, enterprise management incentive plan), resulting in tax deferral and/or exemption for employees up to a certain limit. Tax-advantaged options under company share option plans are subject to particular grant requirements.
Please contact Baker McKenzie for more information.
Tax on sale, subject to annual exclusion.
Generally allowed without reimbursement by the subsidiary to the parent, provided shares actually issued to employees (i.e., deduction may be limited for shares withheld to cover taxes).
Administrative costs charged to UK subsidiary may be deducted only if a written agreement has been executed.
Income Tax:
Required to report grant and taxable event. Companies must register employee share plans with HMRC.
Withholding required.
No withholding obligation at taxable event for privately held companies where shares not considered "readily convertible assets." Annual share schemes return due by July 6th after the end of each UK tax year.
Social Insurance Contributions:
Yes, employee and employer contributions due at taxable event.
Employer may pass through employer contributions to employee by agreement or joint election (approved by HMRC).
Employer is required to withhold employee's contributions (including any assumed employer contributions). Please contact Baker McKenzie for joint election form. No social insurance contributions due at taxable event for awards issued by privately held companies where shares not considered "readily convertible assets."
The UK adopted the UK Prospectus Regulation Rules (“PRR”), which are modeled on the EU Prospectus Regulation. Although not entirely clear, Options may be considered a public offering of securities for purposes of the PRR.
A compliant prospectus may be required for the offer of Options in the UK, unless an exemption or exclusion applies. A "small offering exemption" is available if the offer is made to less than 150 persons in the UK. An "employee share scheme exemption" is available if the offer is made to existing or former employees (or directors), provided the offerees are provided with a short disclosure document that contains certain prescribed information about the offer. An exclusion for offers under a certain value threshold in the UK may also be available.
Additional requirements may apply if relying on certain exemptions/exclusions or if a prospectus must be filed.
Please contact Baker McKenzie for more information.
Generally, no, if right to terminate plan is reserved in writing.
Discrimination against part-time and fixed term employees and on the grounds of certain characteristics (such as age, sex and disability) is generally prohibited, which may have an impact on design of equity and other incentive plans.
A valid basis is required to collect, process and transfer personal data.
The EU Data Protection Regulation ("GDPR") became effective in all EU/EEA countries (including the UK at the time) on 25 May 2018. It introduced new requirements and increases the powers of data protection authorities, rights of data subjects and potential penalties for noncompliance.
Accordingly, companies should review their approach to data privacy compliance in the context of equity plan administration and consider on which basis they may be able to rely to collect, process and transfer data.
Registration and notification requirements with local data privacy authorities may also apply.
Although the UK departed the EU on 31 January 2020, the GDPR already had entered into force in the UK. Transfers of personal data from the EU/EEA to the UK are permitted to continue without safeguards as the European Commission has adopted an adequacy decision in respect of the UK.