Your Employees

Your key people

There are two plans which give income tax relief for selected UK taxpaying employees. Both of these are share option plans:

• The Company Share Option Plan (CSOP). No income tax (or National Insurance) on option gains (the paper gain made when, by exercising an option, an employee buys shares for less than their market value). Only when the shares are eventually sold, turning paper gains into cash, is any tax payable - but it will be capital gains tax (CGT), with annual exemption and taper relief often resulting in a significantly lower rate of tax compared with income tax. [Company Share Option Plan]

• Enterprise Management Incentives (EMI). Aimed at smaller companies (£30 million gross assets or less), with certain businesses excluded. Tax reliefs are the best of any UK share plan, and perhaps the best in Europe. Like the CSOP, option gains are subject to CGT, but taper relief works in a far more generous way, leading to a tax rate of as little as 10% for higher rate taxpayers. [Enterprise Management Incentives]. If you tell us what your company does and whether it is a subsidiary of or controlled by another company, we can give you some further guidance on whether it may qualify, although no reliance should be placed on that until you have taken formal professional advice.

Detailed conditions apply to each of these plans, and you have various choices about how to structure them. If your company can't meet any of the conditions, there are plenty of other approaches, but any financial benefit employees receive is likely to be subject (at least in part) to income tax and perhaps also National Insurance. For a guide to different unapproved plans, Contact Us

All your employees

There are two all employee plans which give income tax relief for UK taxpaying employees:

• Save As You Earn (SAYE) share options - often called Sharesave. As its name suggests, this is an option plan. Employees who agree to save a fixed monthly amount (minimum of £5, maximum of £250) for (normally) three or five years are granted options to buy shares at the end of the savings period, using the amount they will have saved plus a tax free bonus. The option exercise price may be set at up to 20% less than the shares' value at the time the option is granted. At the end of the savings period, each employee can choose whether to exercise their option, or simply keep the savings plus tax free bonus. 

  No income tax (or National Insurance) on option gains (the paper gain made when, by exercising an option, an employee buys shares for less than their market value). Only when the shares are eventually sold, turning paper gains into cash, is any tax payable - but it will be capital gains tax (CGT), with annual exemption and taper relief often resulting in a significantly lower rate of tax compared with income tax. Also, it may be possible to eliminate CGT entirely by transferring the shares into an ISA.  [SAYE Document]

• The Share Incentive Plan or SIP. This gives a choice of different ways in which employees may acquire shares.
  These are the main ones:

  Purchase - employees may buy Partnership Shares out of their pay, with full income tax relief. For example, an employee investing £1000 of their gross pay in shares in their employer company will not have income tax or National Insurance deducted, so they will have shares worth £1,000 allocated to them.

  Free - employees may be allocated Free Shares, without being required to pay income tax or National Insurance on their value.

  Matching - employees may be allocated up to two Matching Shares free for every one Partnership Share they agree to buy - again without being required to pay income tax or National Insurance on their value.
  

Shares must normally be left in a special trust for five years, any growth in their value over that time being free of tax. Various other detailed conditions apply. [SIP Document]

You have various choices about how to structure each of these plans. If your company can't meet any of the conditions attaching to SAYE options or the SIP, there are plenty of other approaches, but any financial benefit your employees receive is likely to be subject (at least in part) to income tax and perhaps also National Insurance. [Download Unapproved Plans Document]

Communication and Training

For your share plan to succeed, you will need to explain it clearly and simply to your participants when it's launched, and keep them informed about your company's performance over the plan's life. We produce crystal clear share plan communications - written guides, slide shows, intranet pages and other media - using communication styles suitable for your particular employees.

If you have employees who need training in share plans, please tell us about your needs and we will suggest a training solution. We are enthusiastic and engaging training providers, able to demystify share plans for any audience. Since the beginning of 2003 over 300 people have significantly improved their share plan knowledge in courses which we have designed and delivered.