Share Incentive Schemes

Share Incentive Schemes

Share incentive schemes can be an important part of a remuneration package offered by new and growing businesses.  They are a popular method to attract and retain valued/key employees and to incentivise/reward such employees for the growth in value in their company which they have themselves contributed to.

Types of share schemes

There are a variety of share schemes, including share option schemes, and they are either tax-approved or non tax-approved. Tax-approved schemes confer tax benefits on the shares/options issued and the qualifying criteria for tax-approved schemes are defined by HMRC. Any share scheme outside of HMRC’s qualifying rules is a non tax-approved scheme

The current tax-approved schemes are:

  • Enterprise Management Incentives (EMI)
  • Share Incentive Plans (SIPs)
  • Save As You Earn options schemes (SAYE)
  • Company Share Option Plan (CSOP)

The EMI scheme is currently the most tax beneficial share option scheme in the UK.

Where plans do not fall into one of the above tax approved schemes then they will either be:

  • Non tax-approved share options,
  • Non tax-approved shares / securities

Share options are popular with both the employer and the employee as (i) they avoid diluting the equity interests in the company and (ii) for a tax approved option, there will usually be no income tax or national insurance on grant or exercise of the option.

The option arrangements will need legal drafting and the value of the options to be acquired will need to be determined by means of a valuation. Specialist tax and financial reporting advice should also be taken.

Get expert assistance

If you are considering setting up a share scheme, please contact our specialist commercial lawyers to discuss your requirements and for detailed legal advice on the various schemes. Call 0330 09456 500, email or complete our Contact Form and we’ll get back to you.

Share Incentive Schemes

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