Updated statistics on tax-advantaged plans in the UK

The updated statistics from HM Revenue & Customs (‘HMRC') published in July 2009 re the use of tax-advantaged employee share schemes in the UK in 2007-08 give us some insight into the adverse effect of the economic downturn on the use of share plans. 

There are four tax-advantaged schemes in the UK, namely Save-As-You-Earn (‘SAYE'), Share Incentive Plans (‘SIP'), Company and Discretionary Share Option Schemes (‘CSOP') and Enterprise Management Incentive (‘EMI') schemes.  The statistics, which come from annual returns made to the HMRC, do not include any information on ‘unapproved schemes' (i.e. schemes which do not comply with legislative requirements for tax-advantaged treatment).

Interestingly, the total number of ‘live' tax-advantaged schemes increased year-on-year from 10,840 in 2006-07 to 11,330 in 2007-08 (an increase of 490 schemes or 4.5%).  This continued the steady trend in growth in the total number of live schemes over the 8 years from 5,180 in 2000-01 (i.e. an increase of 6,150 or 118%).

Within these totals, however, we see some interesting changes.  For example, the number of companies operating SAYE schemes continued to decline, down 12% from 780 in the prior year to 700 in 2007-08 (and down from 1,110 in 2000-01).  Also, the number of companies operating SIPs declined 9% from 940 in 2006-07 to 860 in 2007-08.  The figures show that only 180 companies operated both an SAYE and a SIP in 2007-08.

The numbers of employees benefitting under these schemes also showed a decline.  The number of employees who received option grants under SAYE schemes in 2007-08 was down to 520,000 from 570,000 the year before; and the number of employees receiving shares through a SIP was down to 500,000 from 530,000 in the prior year.

There was an even larger decline of 22% in the number of live CSOPs from 3,000 in 2006-07 to 2,330 in 2007-08.  The number of employees to whom options were granted declined by an even larger 50% from 130,000 in 2006-07 to 65,000 in 2007-08.  The HMRC has attributed this decline mainly to one large company not operating its scheme in the year.

So, this raises the question: where is the growth in tax-advantaged share schemes?  The answer is in the number of EMI schemes, 2,830, an increase of 0.7% on the year.  The number of employees granted options actually rose by 2% to 26,400 and the average value of shares under option continued to rise, achieving a growth rate of 4%.  The HMRC puts the growth in these schemes down to the different characteristics of EMI.

The HMRC reports that 300,000 employees exercised options under SAYE schemes and the estimated cost of the income tax relief was £130 million and NIC relief was £90 million.  These numbers were down dramatically from 2006-07 when 400,000 employees exercised options and the reliefs were estimated at £310 million and £210 million respectively.

The value of income tax and NIC relief for participants in SIPs was estimated at £130 million (£200 million in 2006-07) and £90 million (£140 million in 2006-07).  Similar figures for EMI were 8,800 exercising options with income tax relief of £170 million (up from £160 million in 2006-07) and £70 million (no change from 2006-07).

No reliable estimates are available for the total number of employees who have participated in a tax-advantaged scheme in the year, because some employees will have participated in multiple schemes and, therefore, adding together the annual totals would over-estimate the number with shares and/ or options.

The link to the statistics is:  http://www.hmrc.gov.uk/stats/emp_share_schemes/menu.htm.