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Clause 47 - Share incentive plans: power to adjust maximum annual awards etc

Finance (No. 2) Bill – in a Public Bill Committee at 4:15 pm on 8th May 2014.

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Photo of Shabana Mahmood Shabana Mahmood Shadow Minister (Treasury) 4:15 pm, 8th May 2014

I beg to move amendment 14, in clause 47, page 43, line 35, at end insert—

(a) The Chancellor of the Exchequer shall, within six months of this Act receiving Royal Assent, undertake a review of the impact of changes made by this section to the Income Tax (Earning and Pensions) Act 2003 (share incentive plans) on—

(i) the uptake of Share Incentive Plans;

(ii) changes made to the maximum value of Share Incentive Plans that can be awarded to an employee;

(iii) changes made to the maximum amount of an employee’s salary that can be used to purchase Share Incentive Plans;

(iv) the types of business using Share Incentive Plans.’.

Photo of Gary Streeter Gary Streeter Conservative, South West Devon

With this it will be convenient to discuss clause stand part.

Photo of Shabana Mahmood Shabana Mahmood Shadow Minister (Treasury)

The clause amends schedule 2 of the Income Tax (Earnings and Pensions) Act 2003, to allow future changes to share incentive plan annual limits to be made by Treasury order. The order-making power would apply to the maximum value of SIP free shares that can be awarded to an employee and the maximum amount of an employee’s salary that can be used to purchase SIP partnership shares, both of which we have just discussed in relation to clause 46, under which those limits have been increased.

I hope that I will make myself popular with the Committee by saying that amendment 14 is intended as a probing amendment, designed to continue the debate that we have just had on clause 46.

The amendment is designed to press the Government and to ensure that we will be able to assess the impact of the changes that are being made. Of course, we support the principle, but I am sure that all Members agree that that principle should be effective in practice. I should like to press the Minister on take-up levels and the types of businesses, and therefore employees, that are using the tax-advantaged schemes.

We have already had lengthy discussions during the debate on clause 3 about the savings ratio being revised downward and the inability of many people to save anything at all, and we have discussed pension savings today, which are clearly important. We want to ensure that the measures before us encourage saving and that the people who need to be aware of it are aware of it, and use it in the way envisaged by successive Governments.

Does the Minister know how much money companies will have to spend on human resources to ensure that they cover all aspects of clauses 46 and 47? Could the resource implications for companies prevent the proper take-up of such schemes, or prevent some types of business or sector from using them at all? Are there cold spots in terms of sectors and take-up? If so, does the Minister plan to review and reconsider any issues relating to such sectors with take-up cold spots?

We also discussed the shares for rights scheme earlier in Committee. Getting information on it has been difficult, so we want to continue to press the Government on the measure. The scheme is a long-standing feature of the tax system, and we support it, but we should look into its impact so that we can ensure that any increases to the limits will better enable employees to save, invest, and contribute to their own futures, alongside their gaining a real stake in the companies they work for.

Photo of David Gauke David Gauke The Exchequer Secretary 4:30 pm, 8th May 2014

Clause 47 alters the mechanism for future increases to the limits on the value of shares that employees can obtain under share incentive plans. As I set out during discussion of the previous clause, SIPs are all-employee share schemes under which employees can purchase shares, or have shares awarded, with favourable tax treatment.

The clause amends the legislation to allow future increases in SIP limits to be made by Treasury order, without the need for a provision in the Finance Bill. That will align the process between SIPs and save as you earn share option schemes. The change will come into force on Royal Assent.

The hon. Lady said that she hopes to be popular with the Committee by making it clear that amendment 14 is just a probing amendment. I am grateful for that and can reassure her that she is already popular, and I am sure that she has all her Back Benchers behind her on this occasion.

The amendment would require the Chancellor of the Exchequer to review the impact of the changes set out in clause 47 on the uptake of SIPs, the maximum value of free shares that can be awarded, the maximum value of partnership shares that can be purchased by plan members, and the types of businesses offering SIPs. The Government believe that such a review is unnecessary.

HMRC already publishes significant data on SIPs on an annual basis, including the number of companies offering the scheme, the number of employees who have  purchased or been awarded shares, and the average value of those shares. Detailed data on the use of the schemes are also published by representative groups in the industry. All of that will provide sufficient information to allow the detailed assessment of the impact of the change. The measure is expected to have a negligible effect on businesses.

The clause makes worthwhile improvements to SIPs. In addition, HMRC will continue to publish data on SIPs as part of the annual share scheme reporting cycle, so processes are already in place to allow the policy’s impact to be assessed. I therefore hope that the clause will be agreed to and that amendment 14 is, indeed, probing.

Photo of Shabana Mahmood Shabana Mahmood Shadow Minister (Treasury)

One always likes to be popular. I am grateful to the Minister for his comments and, further to his clarification, I am happy to beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 47 ordered to stand part of the Bill.