HMRC have published the long delayed survey which they commissioned on Save As You Earn (SAYE) and Share Incentive Plans (SIP), which considers whether the schemes have met their policy objectives. The survey on SIPs was due in 2005.

While the report provides some useful statistics, it is disappointing that HMRC have failed to address some particular concerns of advisers and employers:

Raising £250 SAYE upper limit

For example, given that the SAYE scheme has a maximum limit on savings of £250 last set in 1991, which, accounting for inflation, would be equal to about £400 today, it is disappointing that the report fails to address the regular demands that this limit be raised. While the report does conclude that 51% of employees who are not participating in their company’s SAYE scheme say that they do not contribute because of cost, there is still a debate to be had on whether the upper limit discourages companies from implementing a scheme in the first place.

Flexibility to change SAYE savings amount

This is another major concern that has been totally ignored and it is hard to see why it should not be allowed under a SAYE contract but is allowed under an SIP contract.

Tax free transfer of SAYE Shares into Pension Plan

Currently SAYE is the only tax advantaged savings vehicle where capital gains is charged if the shares are transferred into a pension plan. There is no charge with an ISA or SIP, so why should there be with SAYE? This question goes unanswered.

Reducing SIP holding period from 5 to 3 Years

According to the survey the length of time that shares must be held under a SIP to obtain the full tax benefit was not a reason given by employees for non participation in schemes. However other research and anecdotal evidence has shown that many companies believe that reducing the relevant period from five to three years would significantly encourage greater participation.

It is hoped that HMRC will address these points in due course when they comment on the survey’s findings and put forward any proposals for change.

The survey can be found at: http://www.hmrc.gov.uk/research/report59-main.pdf

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