Employers share decision is close (From Stroud News and Journal)

Employers share decision is close

EMPLOYERS who gave their workers unapproved share options between April 6, 1999, and May 19, 2000, only have a couple of days left in which to choose whether to pay their national insurance liability now or wait until employees exercise their options, say accountants at PricewaterhouseCoopers.

The government gave employers 90 days to decide whether to fix their National Insurance liability based on their share price on November 7, 2000, after they imposed the employers' liability from grant to exercise on options in the 1999 Budget.

Employers who gave share options to their employees after April 2000 have had the option of passing this cost to the employee.

Glyn Davies, tax partner at Pricewaterhouse-Coop-ers' Cardiff office said: "The National Insurance bill on unapproved share options granted between April 1999 and May 2000 would have been dependent on their market value when the employee exercises them, a limitless and unpredictable cost. To manage this cost, employers can take up the government's offer to 'pay tax now, but hopefully avoid more tax later'.

Mr Davies said employers should look at the likelihood of employees leaving before they exercise their share options and whether their company share price is likely to rise or fall. If they do decide to pay now, companies should consider what the impact on cash flow will be.

Mr Davies said businesses who choose to pay the National Insurance will now have until August 10 to make their election. This can be done via the Inland Revenue's website -www.inlandrevenue.gov.uk/nic/forms.htm

He added that businesses whose exercise price was more than the market value on 7 November 2000 or whose shares were not readily convertible assets on that date will automatically avoid any National Insurance cost on November 7, 2000, without the need for a formal election.