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Last week, the European Commission approved “the prolongation of the UK Enterprise Management Initiative (EMI) scheme ” under EU State Aid rules.
In their news update, the European Commission stated that the UK authorities notified their plans to extend the scheme in March 2018. It seems extraordinary that this notification was left so close to the lapsing of the original approval.
The Commission’s assessment found that EMI was “necessary to help UK SMEs attract and retain talented and skilled personnel.”
Broadly, a company with assets of £30 million or less, unless categorised in an excluded activity, can offer an EMI scheme to key staff and grant share options up to the value of £250,000 in a three-year period.
These share options would not be subject to Income Tax or National Insurance so long as the employee buys the shares for at least the market value they had at the point when the option was granted. If the employee subsequently sells the shares at a profit, Capital Gains would be payable.
The HMRC originally stated that “EMI share options granted in the period from 7th April 2018 until EU State Aid approval is received may not be eligible for the tax advantages presently afforded to option.”
However, the case summary published on the EU’s State Aid Register only indicates that the ruling would expire on 6th April 2023. In reality, the ruling is likely to expire when the UK ceases to be a Member State of the EU.
The expectation is that the European Union (Withdrawal) Bill will include legislation to cover enshrining EMI schemes into UK law unless the UK decides to join the European Economic Area, in which case State Aid Rules will still apply.
As no start date was specified, the inference is that there should be no interruption of state aid approval for EMI scheme.
However, as yet, HMRC has not published a bulletin to confirm the details going forward. We will issue a news alert when this happens.
In the meantime, if you would like further information on the Enterprise Management Incentive or other share schemes, please email us at tax@cooperfaure.co.uk.
At CooperFaure, we have received the following notification from HMRC on arrangements aimed at getting around the upcoming 2019 Loan Charge for individuals in Disguised Remuneration Schemes.
“HMRC is aware of a number of arrangements being promoted which claim to enable users to escape the 2019 loan charge. HMRC’s view is that these arrangements do not work and users are advised not to sign up to them. While promoters claim that these arrangements work, users should be clear that HMRC does not agree. Any arrangements to avoid the loan charge, which seek to deceive HMRC as to what is really happening, may be fraudulent.”
“A number of previous cases promoted as being compliant and legal have resulted in criminal convictions for the key people involved and extensive investigation of several hundred users. HMRC will investigate all of these arrangements and is likely to take similar action if it finds any that are seeking to deceive. At the very least, anyone who takes part in an offensive arrangement is likely to face penalty sums, chargeable along with any tax and interest that will be due.”
“Tax avoidance doesn’t pay. Most arrangements simply don’t work and people can end up paying more than they were trying to avoid. Users may have a long-term requirement to deal with the cost, commercial and tax fallout from these transactions with no support from the promoter of the original arrangement. If users are worried about their financial position, it is better to contact HMRC rather than risk more investigation and what is likely to be a larger bill.”
We at CooperFaure endorse the HMRC view on this matter and would counsel anyone who has received loans under a Disguised Remuneration Scheme to take advantage of the current settlement opportunity.
The deadline to register your interest is 31st May 2018. If you are not already in discussions with HMRC, this can be done by email with them either to cl.resolution@hmrc.gsi.gov.uk for contractor loan schemes or ca.admin@hmrc.gsi.gov.uk for all other disguised remuneration schemes.
The deadline to submit the required information to HMRC is 30th September 2018.
If you would like to arrange an initial consultation that is free and without obligation to discuss your circumstances, please email us at tax@cooperfaure.co.uk.
At CooperFaure, we are working with an array of clients to ascertain whether their projects qualify for R&D Tax Relief and, if so, to ensure that all the qualifying costs are being claimed.
This week, we secured out largest single Tax Credit payment for a client of over £270,000 and we continue to have an enviable track record of agreeing with HMRC a 100% recovery of every claim submitted.
Our experience is that HMRC is actively working to support innovation by streamlining their processes to accelerate the payment of R&D Tax Credits.
However, the latest statistics from HMRC make interesting reading. For the 2015-16 tax year, the total value of R&D tax credits claimed was £2.9bn which represented a £470m increase from the previous year.
Total number of submitted claims in that year was 26,255, a 19% increase from the previous year.
Although these are substantial year-on-year increases, the HMRC estimates that less than 10% of companies with eligible R&D spend are making a claim. The stark reality is that companies are missing out on billions of pounds of tax relief that they are entitled to.
This is likely due to a large extent to a perception that the process is time-consuming, cumbersome and disruptive to the business. The truth is the complete opposite.
Another misconception is that R&D is only the domain of the manufacturing, science and technology sectors.
In 2015-16, there were successful claims from a vast array of other sectors including:
– agriculture, forestry and fishing;
– electricity, gas, steam and air conditioning;
– construction;
– transport and storage;
– accommodation and food;
– financial and insurance;
– education;
– health and social work;
– arts, entertainment and recreation;
– and admin and support services.
In other words, R&D Tax Relief is open to all businesses.
Our philosophy is to provide an affordable, personal service that starts with a conversation about your business and an honest appraisal as to whether your activities would qualify.
We have a dedicated team of R&D tax specialists and technologists who work with you and your team to understand the research and development that you have undertaken.
This enables us to ensure that we claim the full R&D Relief that you are entitled to and to present the technical report to HMRC in a meaningful, jargon-free way.
Finally, we manage the process from start to finish to ensure that there is minimal disturbance to your business.
If you would like to arrange an initial consultation that is free and without obligation to discuss your circumstances, please email us at tax@cooperfaure.co.uk.