HMRC have published the long delayed report 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 report 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 directly fails to address regularly raised requests for this limit to 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
Moreover, other concerns, including the lack of flexibility to change the savings amount once the SAYE contract has commenced (which is can be done under SIPs but not under SAYE) also seem to have been bypassed.
Tax free transfer of SAYE Shares into Pension Plan
When HMRC responds to this survey, one other point to bring SAYE onto a level playing field with other tax advantaged savings vehicles (like ISAs and SIPs) would be to allow shares arising on the exercise of an SAYE option to be transferred without a capital gains charge.
Reducing SIP holding period from 5 to 3 Years
It is also difficult to understand how 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. 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 report can be found at: http://www.hmrc.gov.uk/research/report59-main.pdf
