Finance Bill

[back to previous text]

Mr. Clappison: I hope that the research that the Financial Secretary mentioned will examine the interests and needs of small employers, in particular—that group will perhaps be the most interested in changes of this nature, which involve that number of people—their employees, and the type of vehicles that such employers have that might be used to transport employees to work and, thereby, avoid the situation that we all want to avoid, in which too many journeys are made in cars carrying only one person.

Question put and agreed to.

Clause 60 ordered to stand part of the Bill.

Clause 61

Employee share ownership plans

Question proposed, That the clause stand part of the Bill.

Mr. Howard Flight (Arundel and South Downs): I, too, welcome you to our deliberations, Mr. O'Hara.

We welcome clause 61 and schedule 13, which address some of the issues that we raised in Committee on last year's Finance Bill about employee share ownership schemes, in particular the territory of people belonging to a scheme as part of a group and changing employment from one subsidiary to another. However, the issue that we raised last year in respect of non-UK employees was not picked up in schedule 13. The Government's amendment to our amendment No. 14 leads me to believe that they accept our point.

As the schedule stands, an employee share ownership plan cannot extend partnership share awards to non-UK employees who do not have a salary as defined for the purposes of the schedule. That issue has cropped up in practice and has led employers to adopt additional plans, with additional costs, if they have significant numbers of non-UK employees. The objective of our amendment is that non-UK employees will be able to contribute out of salary to the same plans to which UK employees contribute, and we suggest that that change should be backdated to last year, as we believe that a drafting error led to the omission.

Mr. Timms: Amendment No. 14 is similar to one moved by the hon. Gentleman in last year's Committee. In that debate, there was a suggestion that Opposition Members might seek to identify some groups of employees who were UK taxpayers, but not included under PAYE, who would benefit from the amendment that they proposed. In fact, there has been no further discussion about that. PAYE operates on the salaries of employees who are UK taxpayers but not on the salaries of those who are not within the scope of UK taxation. The hon. Gentleman made the intention of the amendment clear. We accept that an amendment along those lines could add a useful facility for employers who have employees working overseas, such as those on long-term secondment abroad. There is already provision in the plan to enable those individuals to be awarded free shares.

The amendment included a commencement date provision with effect from the passing of the Finance Act 2000, which is some time between now and July. That would be unnecessary and somewhat confusing. Partnership shares can be purchased only with deductions from salary, usually monthly or at the end of an accumulation period. The maximum deduction is £125 a month. Employees cannot make up deductions that have been missed so the amendment could only ever have a prospective effect. If the provision were silent as to commencement and so took effect on the passing of the 2001 Act, it would not be clear what that meant in practical terms for employers and employees.

I may have confused the Committee slightly. The reference in the amendment is to the passing of the Finance Act 2000, which was in July 2000. If no reference is made to that date, the measure would take effect on the passing of the 2001 Act. If no commencement provision is included, it would not be clear whether any change applied to the salary deduction or the later award of the shares. Other commencement provisions in schedule 13 that have a similar effect are more specific. The amendment provides commencement provisions in the same way.

In order to participate in an award, an individual must be eligible at the time of that award. In the case of partnership shares, the individual may participate in an award only if he meets the eligibility criteria at the time that the partnership share money relating to that award is deducted from his salary. If there is an accumulation period of partnership money deduction, the eligibility criteria must be met at the time of the deduction of the first payment relating to the particular award.

We have therefore tabled an amendment to amendment No. 14, which appears on the order paper this morning. I am grateful to you, Mr. O'Hara, for your helpful acceptance of this starred amendment. It provides that amendment No. 14 has effect in relation to awards of shares where the deduction of partnership share money, or, if there is an accumulation period, the first deduction of partnership share money relating to the award, is made after the passing of the Act. We are able to take on the helpful point that the Opposition made in a way that does not give rise to the potential difficulties that I described. I hope that we identified a way forward that will please the entire Committee.

Question put and agreed to.

Clause 61 ordered to stand part of the Bill.

Schedule 13

Employee share ownership plans: amendments

Amendment proposed, No. 14, in page 146, line 2, at end insert—

    `Meaning of ``salary''

    .—(1) In paragraph 48 after ``(PAYE)'' insert ``or which would be if that individual were within the scope of Schedule E'', after ``(expenses and benefits in kind)'' add ``or which would have been had the individual been within the scope of Schedule E''.

    (2) This paragraph shall be deemed to have had effect from the passing of the Finance Act 2000.'.—[Mr. Flight.]

Amendment made to the proposed amendment: leave out sub-paragraph (2) and insert—

    `(2) This paragraph has effect in relation to any award of partnership shares (within the meaning of Schedule 8 to the Finance Act 2000) in relation to which the eligibility time falls after the passing of this Act.

    (3) For this purpose ``the eligibility time'' means the time at which an individual, in order to participate in the award, is required, in accordance with paragraph 13(1)(b) of that Schedule, to be eligible to so participate.'.—[Mr. Timms.]

Amendment, as amended, agreed to.

11.30 am

Mr. Flight: I beg to move amendment No. 15, in page 146, line 2, at end insert—

    `Accumulation periods for partnership share awards

(1) In paragraph 41 there shall be added—

    ``(5) It shall not cause an award of partnership shares to cease to satisfy the requirements of this Schedule if where the completion of a qualifying period (within the meaning of paragraph 14) falls after the commencement of the accumulation period, an employee is made an award of partnership shares on the same terms as would have applied at the start of the accumulation period save for a rateable reduction in the number of partnership shares available to him to reflect the proportion of the accumulation period which has expired by the completion of his qualifying period.

    (6) It shall not cause an award of partnership shares to cease to satisfy the requirements of this Schedule if—

    (a) prior to the commencement of the accumulation period an employee indicates that he would be willing to participate in that award during that accumulation period, but not from its commencement; and

    (b) during that accumulation period an employee enters into a partnership share agreement on the terms which would have applied from the commencement of the accumulation period save for a rateable reduction in the number of partnership shares available to him to reflect the proportion of the accumulation period which has expired by the date of entry into the agreement.''.'.

Mr. Allen: On a point of order, Mr. O'Hara. After that exhausting piece of footwork by the Chair, it may be an appropriate moment to say that the usual channels, at great expense, have reversed the decision of the Refreshment Department, and that the chuck wagon is now very close to the Committee Room. While retaining a quorum in Committee, Committee members may want to avail themselves of refreshments—which will, I understand, be available for a period of no longer than 10 minutes.

The Chairman: I am grateful to the hon. Gentleman for what may not have been a point of order but was a most helpful intervention.

Mr. Flight: Thank you, Mr O'Hara, for accommodating the starred amendment to amendment No. 14. Amendment No. 15 picks up another part of the employee share ownership rules in the schedule that we feel could be improved, and reflects practical experience.

At present, awards of partnership shares can be made to employees under which they can purchase shares at market value from their pre-tax salary. That is usually done by means of what is known as an accumulation period, during which monthly deductions from payroll are contributed during 12 months into a fund that accumulates to buy the shares. We suggest a little more flexibility about such accumulation periods. It is possible to exclude anyone who has not served a minimum service period, but if that period is completed after the start of the accumulation period, such employees will be excluded from the award until the next year.

Equally, employees who are eligible at the start must make an immediate decision about whether or not to join. They cannot change their minds part way through—for example, once they are more certain about their financial position and ability to subscribe. However, people who sign up at the start can change their minds and reduce their contributions during the accumulation period. The net result of that is a little unfair, and causes practical difficulties. Would not it be simpler—as the amendment would allow—to let such people catch up during the year and offer them fewer shares to reflect the proportion of the accumulation period for which they participated?

Previous Contents Continue

House of Commons home page Parliament home page House of Lords home page search page enquiries ordering index

©Parliamentary copyright 2001
Prepared 1 May 2001