Share Schemes

It is generally believed that employee financial participation is a ‘good thing’. Employees with a stake in the company for which they work have a vested interest in the company’s performance. If the company performs well, they benefit, thereby providing employees with a tangible reason to work harder and resulting in increased productivity.

Employee financial participation may take the form of employees being given shares outright by their employer, or being granted an option over a number of shares.

Approved schemes

To encourage employee financial participation, tax advantages are available if the shares or options are granted within the confines of an ‘approved scheme’. Put simply, employees can benefit from the increasing value of a company’s shares without being subject to income tax and national insurance when they eventually sell them.

There are a number of schemes available including:

• Save As You Earn (SAYE)
• Company share option plans (CSOPS)
• Share incentive plans (SIPs)
• Enterprise Management Incentives (EMI)

Each of the schemes are different, we can give you clear guidance on how the scheme must operate and what the tax implications are so that you can understand what will work for you.

Unapproved schemes

Where shares and share options are granted outside of an approved scheme (known as ‘unapproved schemes’), there are no tax advantages.

Although unapproved schemes do not have the tax advantages associated with the approved schemes, they are useful in some circumstances. Because they do not need to meet the stringent conditions for Revenue approval, they are more flexible in their application and can be better tailored to the needs of the organisation. They are often used where the company wishes to reward selected employees only and where this is not possible within the confines of an approved scheme. Unapproved schemes are often cheaper and quicker to set up and there is no approval process that has to be undertaken.

Contact us to learn more.