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Taxation >
Share and Share Option Schemes
Many employers incentivise their staff by offering them shares in the company. Either the employee purchases shares immediately, benefiting from a discount, or is given an option to buy shares in the future at today’s price, thereby benefiting from any increase in value.
Key advantages for employers are that they act as a golden handcuff and can attract the right people.
This not only ties the employee into the company in the immediate future, but also incentivises the individual by allowing him or her to participate in the success of the company going forwards.
Such schemes can be structured to suit the employer. However, unless they are “approved” schemes they can lead to significant tax charges on both the employee and the employer. This can damage the motivational aspect of the scheme, whilst also making it expensive to implement.
Both of the “approved” schemes mentioned below give generous tax benefits, are flexible, and allow a choice of which employees can participate.
This is an approved share option scheme allowing employees to purchase shares at sometime in the future at today’s value. The employee benefits from the rise in value between the date they are given the option and the actual value when they eventually buy their shares. This gain is free of Income Tax and National Insurance.
An additional benefit for the company arises because it receives a corporation tax deduction for the same amount.
Company Share Option Plan
This approved share option scheme is similar to the above EMI scheme. It is not quite as flexible as the EMI and is therefore less common, but many of the advantages of the scheme are the same..
Two other share schemes more common in larger employers are the Save As You Earn (SAYE) scheme and the Share Incentive Plan (SIP).
Hart Shaw’s share scheme experts can give you practical and cost effective advice on which scheme might suit your company and how to implement your chosen scheme. We can also project manage getting the scheme up and running.
Commonly in such cases we will also provide assistance regarding the valuation of the shares under the scheme. For more information on our share valuation services please visit our Business and Share valuation page.
For more information on the wider aspects of employment tax and remuneration planning generally see our Employment Tax Planning page.
For a current view on the current level of HMRC Enquiries see our Fee Protection Insurance Blog.
More details of our services can be found via the following links:
Contact Steve Vickers on 0114 251 8850 or email him steve.vickers@hartshaw.co.uk to find out more about Share and Share Option Schemes and their benefits and how we can help you implement a scheme tailored to your requirements.
We offer all businesses a FREE review of their business activities in the form of a face to face meeting, at your offices, with a Partner who specialises in the area of expertise relevant to you. Please contact Brendan Hall on 0114 251 8850 for more details.
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