Share Options and Share Schemes

Legal services for share options and share schemes

Allowing employees to take out company shares is a popular way of engaging and retaining existing employees, and attracting new ones, in a tax efficient manner.

If you are considering introducing a share option scheme to your business, you will need to ensure you keep up to date with the legal requirements.

Rothera Bray has experience of working with businesses of all sizes to establish employee share schemes.

The team can provide clear advice on a wide range of schemes, both short-term and long-term, including Save as You Earn (SAYE), Enterprise Management Incentives (EMI), Company Share Option Plan (CSOP), and Share Incentive Plans (SIPs).

What are the advantages of share options for employers?

There are a number of advantages for employers when it comes to share options, including:

• They help to attract and retain staff
• They offer flexibility to create the option rights and terms to suit your particular business
• They remunerate employees in a tax efficient way
• They help to raise working capital
• They can act as a performance incentive for employees
• They can help with succession planning through gradually transferring ownership of the business to employees

What are the advantages of share options for employees?

Share options rather than immediate shares provide several benefits for employees including:

• There is no financial risk and employees do not have to exercise the option if the market value is less than the exercise price
• Employees can benefit from the business success they’re contributing to
• Employees feel more engaged and more included in the aims and direction of the business

What are the different types of approved share options?

HMRC tax advantaged options, formerly known as HMRC approved options, bestow special tax advantages for employers and employees if certain legislative requirements are satisfied, and include the following:

• Enterprise Management Incentives (EMI)-Your company can grant you share options up to the value of £250,000 in a 3-year period. You will not have to pay Income Tax or National Insurance if you buy the shares for at least the market value they had when you were granted the option, but you may have to pay Capital Gains Tax if you sell the shares.
• Save as You Earn (SAYE)-You buy shares with your savings for a fixed price. You do not pay Income Tax or National Insurance on the difference between what you pay for the shares and what they’re worth and the interest and any bonus at the end of the scheme is tax free.
• Company Share Option Plan (CSOP)-The option to buy up to £60,000 worth of shares in the future at a fixed price. There is no Income Tax or National Insurance contributions to pay on the difference between what you pay for the shares and what they are worth.
• Share Incentive Plans (SIPs)-Employees are offered a choice to buy shares in the business, with employees deciding how many shares to buy and employers choosing to match shares or top up the shareholding. You do not have to pay Capital Gains Tax on shares you sell if you keep them in the plan until you sell them, but if you take them out of the plan, keep them and sell them later on you might have to pay Capital Gains Tax if their value has increased.

What are unapproved share option schemes?

Non-tax advantaged options, formerly known as unapproved options, are simply share options that are not part of the UK government’s approved employee share schemes.

Only certain companies and specific team members qualify for approved share option schemes, however if you don’t meet the criteria for these schemes, for example you have non-UK based employees, you want to offer share options to non-employees, or your company is too big then share options can be granted under a non-tax advantaged option.

Why use Rothera Bray for share options and share schemes?

Our team of specialists will work closely with you to identify the best share option scheme for your business based on your objectives, and ensure you meet all the complex tax and regulatory requirements.

We work collaboratively with trusted tax advisers to ensure your share option scheme is both fully compliant and tax efficient.