In (very) brief, a SAYE scheme is one where an eligible employee is able to enter into a fixed-term ‘savings contract’, saving up to £500 per month...
At the end of the contract, company shares are purchased at a fixed or discounted rate with no Income Tax being charged on any gain.
The Savings Holiday
To remain eligible to retain membership of this tax-advantaged share scheme, the employee must be an employee ‘at all times’. This has been interpreted as continuous employment with continued deductions, though short absences that do not involve the termination of employment are ignored.
This is not imposed by the SAYE legislation (the Income Tax (Earnings and Pensions) Act 2003) but an interpretation by HMRC’s ‘prospectus’ that is formed into providers’ savings contracts. The prospectus allows for certain excepted absences including maternity, parental leave and sickness for a maximum period of 6 months, i.e. a holiday from SAYE contributions in those instances.
Changes 06 April 2018
Autumn Budget 2017 (Point 3.24) said that ‘employees on maternity and parental leave will be able to take up to a 12 month pause from saving into their SAYE employee share scheme increased from 6 months currently’.
This would have meant a change to the prospectus, a change to guidance and a change to contracts, all for it to be effective 06 April 2018.
In the ‘Employment related securities bulletin’ on 07 March 2018, HMRC have announced that the 06 April 2018 effective date has been delayed to 01 September 2018. Further, the extended 12-month SAYE contribution holiday will apply to all exceptions, not just for people taking qualifying parental leave.
The reason for the delay is explained as having listened to representations from the share plan industry. I suspect it also has something to do with the required changes to HMRC’s Employee Tax Advantaged Share Scheme User Manual and the prospectus.
Although, a positive aspect of this delay will allow companies and share plans more time to review the rules of their SAYE scheme and ensure they are amended in line with this change.