Income Tax: Stamp Duty Relief for Share Incentive Plans
Published 29 October 2018
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Who is likely to be affected
Employers and employees who use or advise on Share Incentive Plans (SIPs).
General description of the measure
This measure will make a minor correcting amendment to section 95 of the Finance Act 2001 (exemptions in relation to approved share incentive plans) (‘section 95 FA 2001’) concerning stamp duty and stamp duty reserve tax relief for SIPs. This puts the legislation onto the basis already as operated by HMRC and will not change the basis on which relief is available.
Policy objective
This change clarifies the availability of stamp duty and stamp duty reserve tax relief for SIPs.
Background to the measure
Stamp duty and stamp duty reserve tax relief for approved employee share ownership plans was introduced by section 95 FA 2001. That section was substituted by section 723 of, and paragraph 257 of Schedule 6 to, the Income Tax (Earnings and Pensions) Act 2003 (‘ITEPA’) so that it applied in relation to SIPs. At the time, tax advantaged share schemes such as SIPs had to be approved by HMRC before an employer could begin to operate them. This was reflected in section 95 FA 2001 (as so substituted) which made reference to ‘approved share incentive plans’.
In 2014, the Government introduced self-certification for the tax advantaged share schemes that had required approval by HMRC. Changes were made in Finance Act 2014 (s51 and Schedule 8) to replace HMRC approval of SIPs with a self-certification process. The legislation concerning SIPs is contained in chapter 6 part 7 of and Schedule 2 to ITEPA. Among the changes made to the SIP legislation by FA 2014, were that references to ‘approved share incentive plans’ were amended to ‘Schedule 2 SIPs’. In error such references in section 95 FA 2001 were not amended.
Detailed proposal
Operative date
This measure will be effective from 6 April 2014.
Current law
Chapter 6 of Part 7 of, and Schedule 2 to, ITEPA and the provisions mentioned in section 515 of ITEPA 2003 (including section 95 FA 2001) together constitute the SIP code.
Parts 2 to 9 of Schedule 2 ITEPA set out the requirements for a SIP to be a Schedule 2 SIP. Part 10 of that Schedule provides that for a SIP to be a Schedule 2 SIP notice of the SIP must be given to HMRC in accordance with that Part.
Section 95 FA 2001 provides (subsection (3)) that where, under an approved share incentive plan, partnership shares or dividend shares are transferred by the trustees to an employee
(a) no ad valorem stamp duty is chargeable on any instrument by which the transfer is made, and
(b) no stamp duty reserve tax is chargeable on any agreement by the trustees to make the transfer.
Proposed revisions
Legislation will be introduced in Finance Bill 2018-19 to amend section 95 FA 2001. This will remove references to ‘approved’ in subsections (1) and (2) and in the heading and in subsection (3) ‘an approved share incentive plan’ will be substituted by ‘a Schedule 2 SIP’. This will align the section with the other provisions of the SIP code.
Summary of impacts
Exchequer impact (£m)
| 2018 to 2019 | 2019 to 2020 | 2020 to 2021 | 2021 to 2022 | 2022 to 2023 | 2023 to 2024 |
|---|---|---|---|---|---|
| nil | nil | nil | nil | nil | nil |
This measure is not expected to have an Exchequer impact.
Economic impact
This measure is not expected to have any significant economic impacts.
Impact on individuals, households and families
There is no anticipated impact on employees who use SIPs as this measure only corrects legislation so that it is on the basis already operated by HMRC. The measure is not expected to impact on family formation, stability or breakdown.
Equalities impacts
It is not anticipated that any of the proposed changes will impact on any individuals with protected characteristics.
Impact on business including civil society organisations
It is not anticipated there will be any impacts on business administrative burdens as this measure is correcting an error in legislation and makes no change to the overall policy. There is no impact on civil society organisations.
Operational impact (£m) (HMRC or other)
There will be no significant operational impact.
Other impacts
Other impacts have been considered and none have been identified.
Monitoring and evaluation
The measure will be kept under review through communication with affected groups.
Further advice
If you have any questions about this change, contact Income Tax Structure and Earnings by email: [email protected].