Employment securities

Employment Related Securities:

Don’t get caught in the tax anti-avoidance trap

Tax expert Nick Wright, associate director at Jerroms Miller Specialist Tax, explains the Employment Related Securities rules and why you must tell HMRC about your employee gift and share option schemes

TAX EXPERT NICK WRIGHT

Gifts and awards of shares, commonly known as Employment Related Securities (ERS), are widely recognised as an effective way of incentivising, rewarding and retaining staff.

But to stay on the right side of the anti-avoidance tax legislation, you must ensure you tell HMRC about any ERS schemes in your business, including any one-off awards or gifts.

ERS also covers schemes such as Share Incentive Plans (SIP), Save as You Earn (SAYE), Company Share Option Plans (CSOP) and Enterprise Management Incentives (EMIs).

They relate to past, current and future employees, and, in terms of reporting obligations to HMRC, they apply to most transactions with few exceptions. So, for example, if a business is sold to its management team in an MBO, HMRC will still need to be notified under ERS rules, even though the new team has incorporated the company from scratch and effectively paid full value.

ERS is also a consideration when it comes to selling your business and when issuing shares to an employee, even if that employee has paid market value, or what you think is market value, for the shares. The rules are very wide ranging; there will still be hoops to jump through.

WE’VE ENCOUNTERED QUITE A FEW COMPANIES WHERE EMPLOYEES HOLD SHARES BUT ERS HAS NEVER BEEN TAKEN INTO ACCOUNT

We’ve encountered quite a few companies where employees hold shares but ERS has never been taken into account, making the whole tax situation quite a challenge to unravel.

Not only are there potential income tax charges, but there are also online filing obligations. You must declare ERS by July 6 following the end of the tax year or penalties will start to stack up.

Niche readers can call 0121 693 5000 or email me on nickwright@jerromsmiller. co.uk for advice on how to avoid getting caught up by antiavoidance rules or miss online returns filing deadlines.

Licence to practice lawIf you have a legal dispute, you’ll want help from someone who’s up to the mission. With a licence to practise law, Dav Mahet told us about his journey towards running TML Solicitors WORDS BY TOM YOUNG

NICHE COVER STORY TML SOLICITORS

Now pay attention, 007. For Dav Mahet, the road to running TML Solicitors has been long and winding. Having started his career as an entrepreneur, he didn’t come into law until much later, yet now runs one of Leicester’s most well-respected law firms.

“Before I went to uni, someone had told me to do law, because they’d had a dream in which I was a lawyer, but I wasn’t interested because the other course I was looking at had less hours! At 18, fewer hours appealed.”

Dav got a degree in Business Information Systems and tried a few different careers, including working for Siemens, working in sales, and promoting events in Leicester. He moved up to Manchester to work for a newspaper, before being offered the same job in Leicester. By the time he’d moved back in 2002, that job was no longer available, so he decided to set up his own magazine.

After growing the magazine to the point of distributing 30,000 copies a month across Leicester, Birmingham and Coventry, at the age of 25, Dav sold the magazine, ready for a new challenge.

STIRRED, NOT SHAKEN

A friend with a shop wanted to exit his business – Dav had just sold the magazine and was therefore in a position to be involved in a new opportunity.

“I ended up buying his shop. Initially, it was great! It was an off-licence, and I’d never been in that shop environment before. It was something different. But by the end of the summer, I was going a bit stir-crazy, just sitting in the shop all day.”

Dav contacted De Montfort University and asked if he could do a course. Having told them about his previous degree, they advised that he come in for a meeting.

“The lecturer’s name was Vaughan Hall – he sat me in his tiny, broom cupboard office, and asked ‘what do you want to do?’

“‘I don’t know,’ I said, ‘I just want to do a course to get my brain ticking again.’

“‘The law course has just started.’ And I thought, ‘OK, law, I could do that’. And he said: ‘Off you go then – your lesson’s started.’

“Aghast, I said, ‘I haven’t even got a pen!’ He took a pen from his pocket, handed it to me, and said, ‘there’s your pen – off you go.’ My law career was born.”

DOCTOR? NO. LAWYER? YES.

While working on his GDL (Graduate Diploma in Law), Dav’s mentor was a local solicitor, who was working at a city centre law firm at the time.

“I’d often pop in and see her, and they ended up giving me a Christmas placement because they’d heard my backstory. I was a mature student – already 30 at that point – with a varied career history. I’d shown them copies of my magazine, and they ended up giving me a training contract. I ultimately qualified there.”

Dav found it an adjustment, having previously been the boss in his other jobs, now he was working with people younger than him, but more advanced in their legal careers.

“One of them said to me: ‘Do you want a cup of tea?’

“‘No, I’m alright.’

“’Oh, well we do…’, and I suddenly realised they wanted me to make it. I was in the kitchen, stirring their tea, when I thought to myself: ‘I’ll set up my own law firm.’”

LICENCE TO KILL PRACTICE LAW

TML Solicitors was founded in 2013, and Dav took sole control in 2018. At the time, they had eight staff. Dav is passionate about helping people, and the new firm allowed him to take lead on doing so.

When they began, TML practised multiple aspects of

NICHE COVER STORY TML SOLICITORS

law, including civil litigation, immigration, and personal injury, but Dav ultimately decided he wanted to follow a more focused path.

“I want to be a law firm with four or five core areas where we excel. Those are conveyancing, commercial property, family law, criminal defence, and wills and probate.”

The post-pandemic world has seen a rise in couples seeking divorces and in people wanting to prepare their wills – doctors and nurses especially. TML also work on some of the most high-profile criminal defence cases in Leicester, including murder, drug trafficking, and high-level fraud. There have been massive changes in the property market over the last few years which has vastly developed the commercial property and residential conveyancing departments. Dav has seen exponential growth across all departments, leading to his team expanding to 26.

“People come to us with problems, whether that’s wanting to buy a house, resolve family issues, needing defending on a criminal case, or requiring help with their will – problem-solving is something I’ve always enjoyed and been good at.”

It’s through Dav’s past business experience that he has the know-how to establish this thriving law firm. Success is great, but it’s in failure that we learn our lessons. Resilience and perseverance are key.

THE WORLD LEICESTER IS NOT ENOUGH

Continued growth is important for TML’s progress. While keen to continue being an influential law firm in Leicester and the East Midlands, Dav has aspirations for national expansion.

“We’re considering an office in the north – we like the idea of Newcastle – and another down south in London, and that will grant us national reach. That’s the long-term goal, with the head office remaining in Leicester.”

The other goal is to continue working with good people. As the team has expanded, a greater diversity of backgrounds and experience have joined.

“My co-director, Reena Bhalla, is a massive support to me in the business. She is a great driving force for the business – she’s the oil in the machine; it wouldn’t run as smoothly without her. And she’s really helped drive us forward.

“Some of our staff come straight from university or college; one used to work in a chip shop, and when she came for the interview, we knew she was going to be really good, so she joined on an apprenticeship. We’ve trained her, and after three to four years, she now runs her own conveyancing transactions and is a key member of the team.

“We look at the person more than the experience – we don’t mind if they need to be trained; it’s about them wanting to get to a certain place. It makes me so proud to watch our staff grow and develop.”

THE MAN WITH THE GOLDEN GLOVES

Earlier this year, Dav took part in a charity boxing match to raise money for Leicester’s mental health charity, Prosperity CIO. He won the fight!

“I’ve been boxing at Respect Fitness in Oadby for some time, just as a hobby. It’s run by Barinder Singh, an amazing coach and trainer. They put on shows to raise money for people with mental health, drug and alcohol issues. It encourages men to talk about their mental health – something they still don’t often do – and I’ve known people who’ve struggled with their mental health and seen the issues it creates. Encouraging them to open up was massive for them personally.”

“I decided to take part in the boxing match for Prosperity. It involved 12 weeks of training, the fight happened in March, and I fought someone much bigger than me – I was 92kg at the time, he was 135kg. There were about 1000 people in the crowd, and I suspect most of them were looking forward to seeing me get punched in the face!”

TML has sponsored the show every year, with another coming up in December as part of a continued commitment to supporting Prosperity’s mental health services.

Within their office, TML operate an open-door policy for anyone struggling with mental health issues, always making themselves available, and ensuring that anyone needing to talk has the right person to talk to. They also hold regular social events, so the team can feel part of a community.

They’ve also supported a handful of individuals, including helping to send athletes to the Olympics.

“If I see something good in someone and believe they can achieve what they’re setting out to do, I want to help them along.”

Dav has sponsored a boxer, Ryan Hearst, who recently won his first professional fight, and a young girl, Ysabel Juniper-Smith, who is looking to join Britain’s Olympic karate team. He also sponsored Darren Bradbury’s recent challenge of cycling from London to Newcastle to raise money for Menphys.

“It’s a chance to give back to the community, and if we think we can help an event, we’ll try and get involved.”

Both Dav and TML continue to have a positive impact on Leicester’s community and legal scene. If you would benefit from their legal advice, visit tml-solicitors.co.uk.

There were about 1000 people in the crowd, and I suspect most of them were looking forward to seeing me get punched in the face!

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