Jump to main navigation Jump to main content. Last updated Thursday, Aug. On the list of winners and losers from yesterday's federal budget, Bill Holland places himself squarely on the losers side of the equation. The chief executive officer of CI Financial Corp. Holland said in an interview. The change affects cash-settled stock options, which are options that allow employees to opt to be paid out their gains in cash rather than receiving shares of the company when they exercise the options.

Under current rules, companies can deduct the cost of these options as a compensation expense while employees can also claim a capital gains deduction for the profit from the options.

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The federal government yesterday said it would no longer allow this double deduction for the options, saying cash-settled options will be deducted either by the employer or the employee, but not both.

The change, effective immediately yesterday afternoon, will affect a significant minority of companies that have been adopting cash-settled options in recent years, said compensation consultant Ray Murrill of Towers Watson.

The practice has been especially popular for oil and gas companies, he noted, but others have also used it. Companies will likely now convert their cash-settled options into regular options exercisable only for shares, Mr. Murrill said, but may also look down the road at shifting compensation into other things such as share units to reduce use of options. There's no doubt which way CI Financial will go, according to Mr. The company will use regular stock options in the future. Finance Minister Jim Flaherty said the loophole is being ceo stock option loopholes by "some relatively hisse takas forex people, so they can pay their fair share too.

Use of the option loophole was beginning to become common because it was a "good deal" for companies, who essentially got the best of both worlds, said Bruce Flexman, chair of the tax policy committee at the Canadian Institute of Chartered Accountants. On the flip side, Ottawa is also changing the stock option rules to ensure that employees aren't forced to pay more in taxes than they make off of the options.

That will reduce employees' stock holdings in their companies, which Mr. Tilak said runs against the grain of governments pushing for workers to have more equity in their companies to discourage excessive risk-taking. What the budget means for your finances. Ottawa unveils smallest spending increase in a decade. The budget's big numbers. Discover content from The Globe and Mail that you might otherwise not have come across.

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Ottawa closes stock option tax loophole Add to Tara Perkins and Janet McFarland. Comments Share via email Share on facebook Share on twitter Share on LinkedIn Print. More Related to this Story What the budget means for your finances Ottawa unveils smallest spending increase in a decade The budget's big numbers.

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