New obligations on share plan trustees and administrators

Companies operating employee share plans should ensure that their share plan trustees and administrators are on board with two new sets of rules which could have significant implications. A brief summary is set out below.

Transaction reports

Firstly, from 3 January 2018, under EU Directive MiFID II, share plan administrators will require certain identification information about participants in share plans operated by listed companies in order to comply with new reporting requirements. Without this information, administrators will not be able to sell shares in the market on behalf of participants, not even where this is necessary to cover the tax due on the exercise of an option or the vesting of an award. For UK participants, a national insurance number will be required. However, for participants resident in other EU member states, the information varies.

It is important for companies to liaise with their administrators to make sure that they are supplied with the information they need by 3 January 2018 to avoid any problems with share disposals for share plan participants. Forms of notice of vesting and exercise may also require amendment.

Trust registration

Secondly, new money-laundering regulations require certain trusts to register online with HMRC and comply with record-keeping and notification obligations. Whether a trust is covered by the regulations and, if so, the extent of its obligations under those regulations depends on two things: 

• whether it is UK-resident or offshore; and
• whether it has UK source assets or income on which it is liable to pay UK taxes. Shares held by the trust in a UK company will be UK source assets and UK tax may be due if the trust is entitled to dividends or pays SDRT on the purchase of those shares, for example.

Companies should explore with the trustees of a Share Incentive Plan or employee benefit trust whether they are caught by the regulations and, if so, whether they are compliant. The deadline for registration varies according to the circumstances with the earliest deadline being 5 January 2018 (deferred from 5 October 2017 as a concession in the first year of operation of the new rules).