CORPORATE

Want to Motivate Your Employees Whilst Reducing Employment Costs?

Employee share schemes are a powerful way of encouraging your employees to think like owners, helping to make your business more productive, profitable and resilient.This is particularly important in the case of directors and key employees. 

Share schemes can also result in significant tax advantages for companies, employees or both, making them a highly cost-effective way to remunerate employees. They can also prove invaluable in recruiting and retaining key individuals. 


What types of schemes are available?

Enterprise management incentive (EMI) option scheme

- Tax-advantaged share option scheme designed for smaller trading companies.

- Employees do not pay income tax or National Insurance Contributions (NICs) on the gain realised upon the exercise of the EMI option. Instead, capital gains tax (CGT) is charged on any gain on sale of the EMI option shares themselves. Relief from corporation tax should also be available to the employer company.

- Given the generous tax reliefs, a company which qualifies to grant EMI options should always consider doing so before looking at any alternatives.

Company share option plan (CSOP)

- Tax-advantaged share option scheme, used to tie in senior employees.

- Where certain conditions are met, employers can give up to £30,000 worth of shares, which the employee can buy at the original price after three years of employment, without creating an income-tax or NIC liability.

- Instead, CGT is charged when the option shares are sold. Relief from corporation tax should also be available to the employer company.

Non-tax advantaged share option scheme

- Similar to CSOPs, but as they are not subject to any statutory requirements, they are much more flexible and are used by many companies in addition to a CSOP (to grant options above the limits on participation in a CSOP) or as an alternative, where the company or the individual does not qualify for CSOPs.

Rising popularity of share schemes

We are finding that more and more businesses are aware of the benefits having an employee share scheme can bring and have been receiving an increasing number of enquires in this area from a range of businesses.

If you wish to discuss implementing a share scheme in your business or share schemes generally, please contact Louise Kerlin on louise.kerlin@mmwlegal.com. Louise is a solicitor in our corporate department with particular expertise in the area of employee share schemes and incentives.

 

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