EUROPEANCHAPTER

The 2024 UK Autumn Budget introduced higher Capital Gains Tax (CGT) rates and employer National Insurance contributions (NICs), raising questions about the continued effectiveness of employee share plans. Despite these changes, share plans remain valuable due to their tax advantages, such as lower CGT rates compared to income tax and corporation tax relief for employers, as well as their ability to align employee and company interests. While the tax landscape has shifted, share plans continue to offer long-term benefits for both employees and employers, emphasizing the importance of strategic structuring and clear communication to maximize their impact.

Capgemini's eleventh employee shareholding plan attracted over 55,000 participants from 32 countries, reflecting strong employee trust in the company's strategy. The plan involved a €415 million capital increase through the subscription of 2.7 million shares at a discounted price, maintaining employee ownership at around 8% of the Group’s capital. To prevent shareholder dilution, Capgemini repurchased and canceled an equivalent number of shares for €474 million, ensuring alignment with its long-term strategic goals.

The recent Budget introduces changes that will impact the cost and compliance of employee share plans, including an increase in employers' National Insurance Contributions (NIC) from 13.8% to 15% from April 2025, which could make tax-advantaged share plans more appealing. Additionally, increases in capital gains tax (CGT) rates and reductions in CGT exemptions may lead to higher tax obligations for employees, potentially affecting the attractiveness of these plans, while employers may need to enhance support and communication to help employees navigate these changes. For internationally mobile employees, the new tax regime replacing the remittance basis introduces limitations and complexities, requiring employers to reassess their compliance strategies and tax equalization policies.