CSOPs about to become a lot more attractive

CSOPs are about to become a lot more attractive. It means, in future, operating a company share option plan may be more attractive than your current arrangements so perhaps now is a good time to review your benefits package and, quite possibly, make changes to it. 

As part of its Growth Plan, back in September the Government announced in the Mini Budget in September that they planned to double the CSOP limit from £30,000 to £60,000. The change, which was announced by the Chancellor at the time, Kwasi Kwarteng, is designed to give companies more scope to incentivise and attract staff and, in particular, help companies that don’t meet the conditions to qualify for the more popular Enterprise Management Schemes. Also, from April 2023, there will be changes to some of the restrictive requirements on which shares in a company can be granted under CSOP options. 

HMRC has now published further details of what’s coming in its ERS Bulletin number 47. Earlier I spoke to share plans specialist Nicky Griffin about the changes:

Nicky Griffin: “If you're a company that already has a CSOP, which stands for company share option plan, that's one of the HMRC tax advantaged plans. Now, this is one of the few things that survived Liz Truss’s ill-fated growth plan budget so it was part of, and continues to be part of, the Tories growth plan. So the current limits on individual participation in a CSPO is market value of shares up to £30,000. That is doubling to £60,000 from 6 April this year and you get tax advantages just around that so it’s helpful when, obviously, you've got your employees looking to maximise their take home pay, so this is definitely helpful going forward. The bulletin makes it clear that the Revenue doesn't require you to actually amend your plan rules to take advantage of these new limits, which is very helpful. The other changes - if you are a company that to date has not been able to put in place a CSOP because there are technical room rules around the characteristics of the shares that can be used in this CSOP so a lot of private companies don't qualify, they are being amended to simplify the arrangements. So, if you've been told in the past, you couldn’t put one in place, you've got one or more than one class of ordinary share capital, it's worth having a look at the CSOP again. Now, the EMI which is the Enterprise Management Incentive scheme is still by far the most tax advantaged plan that you can put in place, but it's definitely worth making sure that you're taking advantage of all of the types of plans there are.”

Joe Glavina: “So HR’s role is to get the message out about this?”

Nicky Griffin: “Yes, absolutely. Undoubtedly if you've got an existing CSOP, have communication with your employees. So it's definitely worth reviewing that and checking it's up to date and if as a company you make the decision, it's obviously not compulsory, to use the full £60,000, but I think a lot of companies will, you need to make sure that actually what you're sending out reflects these changes and it's accurate and up to date.”

Joe Glavina: “I see the Revenue also say they will be making some minor changes to the ERS end of year return templates from 6 April. What’s that about?”

Nicky Griffin: “So all companies that give their employees shares are required to do an annual return in relation to those plans which is has to go to the revenue by 6 July each year. So, it's important to understand what information it is that the Revenue is trying to capture because you need to make sure you've got the processes in place to ensure that you can easily capture that information within your company because even if you as an HR professional are not doing these returns, it’s your tax or finance team, undoubtedly they will be coming to you for the information.”

HMRC has just published its February Bulletin, number 48, and in that they say they’ve updated their guidance on CSOPs to cover the forthcoming changes. They have updated both their technical notes and the Employee Tax Advantaged Share Scheme User Manual to reflect the changes being introduced from April 2023. We have put a link to both Bulletins, 47 and 48, in the transcript of this programme.

LINKS
- Link to HMRC’s ERS Bulletin 47 (January 2023)
- Link to HMRC’s ERS Bulletin 48 (February 2023)