Employee Share Schemes
We know how stakeholding can motivate key staff, what the tax efficient options are and how to implement the best share schemes for your business.
The design and implementation of commercially-effective and tax-efficient incentive employee share schemes are hugely powerful for our clients in helping to lock in key members of staff, recruit additional talent and motivate those individuals to achieve more for the business.
Aside from things like performance-related pay and flexible benefits arrangements, a considerable amount of our work revolves around ways to bring key employees and recruits into stakeholding, without handing them a very unwelcome (and counter-productive) tax charge for the privilege.
Design-solutions which this team typically introduces to our clients include:
- the superbly flexible and effective Enterprise Management Incentives (EMI) option scheme
- the supporting Company Share Option Plan (CSOP)
- unapproved share option schemes
- growth share schemes
- partly paid share arrangements
- employee benefit trust structures
And combinations of the different arrangements, all provided to help you drive the business forward.
The different means by which stakes can be awarded to employees have different taxation consequences, too many to outline overall here. However, by way of example, EMI boasts the following (favourable) taxation implications:
- No Income Tax arises upon grant of the EMI option;
- No Income Tax arises upon exercise of the EMI option as long as the option price paid is no less than the market value as it was at the date of grant;
- Capital Gains Tax is typically payable upon disposal of the shares (and the 10% Business Asset Disposal Relief applies as long as the grant of the EMI option was at least two years prior to the date of that disposal);
- Corporation Tax relief arises on the increase in value enjoyed by the employee at the date of exercise (ie on the value at exercise less the option price paid).
Accounting for share plans can be complex. Most UK companies must record an expense in their profit and loss account for any employee share options they make. Our team can offer specialist advice on the accounting consequences of the different arrangements aforementioned and ensure full compliance with your reporting requirements.
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