Legal and Finance: Share Schemes Offer Excellent Tax Breaks
The benefits of some of the tax breaks given by the Chancellor in his Pre-Budget Report could be lost if new proposals by the Accounting Standards Board are approved, accountants RSM Robson Rhodes have warned. Although the Government was trying to encourage employee share ownership, under the ASB proposals, published in early November, companies would be required to show the cost of options in their profit and loss accounts as a charge to employers.
John Smith, partner at RSM Robson Rhodes, said recent evidence of the Government's enthusiasm was the Employee Share Ownership Schemes Act 2002, extending some of the tax benefits attached to share incentive plans.
This meant companies could obtain immediate corporation tax deductions for payments to an SIP trust. This accelerated the tax relief, as previously a deduction could only be made when, and if, the shares were actually distributed to employees.
In the Pre-Budget report Gordon Brown also announced that the Government was introducing a major change to the tax laws guaranteeing statutory corporate tax deduction for the cost of providing shares for employee share schemes.
Smaller companies, in particular, will benefit from the certainty of a tax deduction without the complexity and cost of setting up trust structures, which some of the larger companies currently use. …