Share schemes can be beneficial to employees and employers when it comes to the tax advantages that they offer, which should be carefully considered by the clients you are working with.
Two main types of employee share schemes
With Company Share Option Plans (CSOPs) an employer can grant options to an employee to buy shares within a certain timeframe and at a specific and fixed price, which will not be less than the market value.
Up to £30,000 of options can be granted through CSOPs to each employee and this can include part-time staff.
The tax advantage of CSOPs is that no income tax or National Insurance can be charged on the grant and between three to 10 years after the grant when the option is exercised.
Enterprise Management Incentives (EMIs) are self-regulated and no HMRC approval is needed.
An employer grants employees options of up to £250,000 to buy in shares within a timeframe of a maximum of ten years.
Again no income tax or NICs will be charged on the grant or when the option is used.
Employees will only be charged Capital Gains Tax when the shares are sold and only for the difference between the sale charge of the shares and the exercise cost paid.
Here to help
If you are helping your clients to set up share schemes, or you are yourself considering the offer of shares to employees, it is important that you understand the tax impact of each share scheme.
To get the best possible share scheme for your client’s company, you will need advise from an expert.
Contact us today for more information on this.