Grants of equity awards are an important component of employee compensation in the United Kingdom—just as they are in the United States. The United Kingdom provides preferential tax treatment (for both employers and employees) for equity incentive plans that meet certain requirements (“approved share plans”). A bill was recently introduced in the UK Parliament which, among other things, is intended to simplify the rules on these plans. Generally, the changes should make the operation of approved share plans easier, and extend the circumstances in which preferential tax treatment is available. Companies should, however, consider amending their approved share plans when the changes come into force. We summarize the proposed changes and consider the impact they will have on the operation of approved share plans.
Plan amendments for the rules changes may be particularly important for US companies whose equity plans include approved schedules for UK employees: their schedules may not be considered to have been automatically amended for the legislation once it becomes law.