Services > Tax >

Share Scheme

How would you like to motivate your staff and at the same time increase their productivity and consequently that of your business?

Recent UK studies have shown that companies who provide their staff with equity based incentives have been able to do just that. Responding to this recent Government initiatives have promoted wider employee share ownership by removing some of the heavy administrative and financial burdens traditionally associated with Share Schemes.

In short there are currently 2 main types of share scheme widely available and these are as follows:

Enterprise Management Incentives (EMI)

This highly flexible share option plan has been specifically designed to meet the needs of unquoted trading companies.

In many industries, The EMI is now seen as a 'must have' for employers who wish to recruit and retain those employees who are vital for the future success of their business.

The main features are:

• The company is able to grant any number of employees an option over shares worth up to £100,000 for each employee at the time of the grant;
• There is no tax or NIC payable by either the company or the employee at the time of the grant;
• There will normally be no tax or NIC payable when the options are exercised;
• When the shares are sold, capital gains tax taper relief will start from the date on which the options were granted and the effective tax rate can be as low as 10%;
• The company can set performance criteria which must be achieved before the options can be exercised;
• The company can offset the costs of implementing the scheme against its taxable profits.

The Share Incentive Plan (SIP)

The Share Incentive Plan, formerly known as the All Employee Share Ownership Plan is a tax effective way in which all employees can become shareholders in the Companies for which they work.

The main features of the plan are:

• All UK employees will be eligible to participate;
• Employers can gift up to £3,000 p.a. of free shares (this can be subject to meeting personal, team, or divisional performance targets);
• Employees can buy up to £1,500 p.a. of partnership shares from their pre-tax income;
• Employers can gift up to 2 matching shares for each partnership share bought by employees;
• Free and matching shares will be free of income tax and national insurance contributions if kept in the Plan for 5 years, and taxable only on their initial value if taken out between 3 and 5 years;
• Partnership shares will be free of income tax and NIC if kept in the Plan for 5 years, and taxable on their initial value if taken out between 3 and 5 years, or on their current value if taken out in the first 3 years;
• There will be no tax on dividends paid on shares in the Plan if they are used (up to an annual limit) to acquire additional dividend shares;
• Employees who take their shares out of the Plan and sell at once will pay no capital gains tax (even if income tax and NIC exemptions apply).

Through the implementation of a number of share plans and by working closely with businesses such as your own, we have developed comprehensive share option packages which can be tailored to meet your company's specific needs. We can advise on the entire process of implementing the scheme from the design through to the annual compliance paperwork including the share valuation process.

Require more information?

If you would like more information or would like to ask us a question then call us on 0870 22 55 220.
To ask us a question online click here.