There are a number of government approved share schemes which offer certain tax advantages to employees. The approved schemes are:
- Share Incentive Plans (SIP),
- Save As You Earn (SAYE) schemes,
- Company Share Option Plans (CSOP) and
- Enterprise Management Incentive (EMI) schemes.
The schemes are designed to help incentivise employees by giving them the opportunity to invest in the business they work for. This in turn helps businesses retain and recruit key staff and offer tax efficient benefits.
A number of consultations have recently been launched which may bring about changes to the operation of employee share plans and make them more appealing to employees whilst at the same time removing some of the more onerous requirements associated with setting up the schemes.
The use of employee share plans does not have an inherent financial risk for employees as they are under no obligation to exercise an option to purchase shares if the price is below the exercise price. However, there are some other risks such as the shares loosing value if the profitability of the business decreases or the expectation that employees should take a lower salary in exchange for being offered share options.
The qualification rules and the advantages and disadvantages for each scheme are complex. Please contact us if you would like to explore the possibility of setting up a scheme for your company.
John Elliott, Tax Partner