Background Note
SAYE schemes
13.SAYE share option schemes approved by HMRC allow employees to save under Save As You Earn contracts and to use the savings should they wish to exercise an option to buy shares in their company. They are all-employee schemes, designed to encourage employees to save, and to acquire a stake in the company they work for.
14.Under SAYE schemes a company offers its employees the option to buy, at a future date, shares in the company at a price set at the outset. Employees can choose to save in a 3 or 5 year savings contract. When the contract reaches maturity, a bonus is added, and the employee can use the proceeds to exercise the option and acquire shares, or alternatively may take the savings with the bonus, in either case free of income tax and National Insurance contributions.
15.The bonus rates to be used in SAYE contracts are set by the Government - at present, by HM Treasury and in future by HMRC, in accordance with a formula agreed with savings providers.
Administrative changes
16.The switch of certain administrative responsibilities from HM Treasury to HMRC and removing the need for communications to be made by post will streamline the process, ending duplication of work and enhancing communication with savings providers.
17.Currently, HM Treasury sets out specifications that linked savings arrangements must meet to be certified. There is a minimum period of 28 days between giving notice of withdrawals or variations (which can include interest rate changes) and the revisions coming into force. Under these changes, HMRC will take over administrative responsibility for the specifications, and the notice period will be reduced to 15 days. This ensures savings providers are notified of changes in certifications much earlier than is the case now.
Invitations issued shortly before a change in requirements for certified savings arrangements
18.The new provisions that HMRC may apply when an invitation to enter into an SAYE contract is issued just before a change in the requirements for certified SAYE savings arrangements reflect concern expressed by companies and administrators about the effect of the current rules.
19.At present if employees wish to enter into the savings contract but their application is accepted on or after the date of the change in the certification requirements, for example as to bonus rates, it is likely (depending on the facts of the case) that the application may be invalid, because the invitation reflects the old SAYE bonus rates which have been withdrawn.
20.The new provisions will have the effect that employers may be allowed to accept applications based on the old arrangements provided they are received within 30 days of the date of withdrawal or variation. For example, if the variation is a change in bonus rates, the previous bonus rate would apply for applications made on the basis of that rate.
21.Requirements for certified SAYE savings arrangements are reflected in a standard specification document, reissued with amendments to savings providers when changes in certified SAYE savings arrangements take place.
