Tax
Employee share schemes
If you are looking to recruit new employees, or incentivise and retain existing staff, an employee share scheme can be a tax-efficient and cost effective option to form part of the remuneration package offered.
Why offer an employee share scheme?
Employee share schemes provide a way to give employees a current or future stake in your business and help improve its performance. This helps to instil loyalty and motivate your employees which a normal remuneration package of salary, bonuses and benefits might not. Similarly, they can be a useful tool for attracting new employees to the business by offering as part of their remuneration.
What schemes are available?
There are many different types of employee share schemes including share options, share awards, HMRC approved and unapproved. Within these categories many different scheme approaches are possible. It is a complex area and the appropriate scheme will depend on the objectives of the business as well as the needs of your employees. We can help to advise you on the right one for your business tailored to your specific circumstances.
The most common HMRC approved scheme for small and medium sized companies is Enterprise Management Incentives (EMI). It offers significant tax incentives and is very flexible. Other HMRC approved schemes include:
- Enterprise management incentives (EMI)
- Company share option plans (CSOP)
- Share incentive plans (SIP)
- Save as you earn (SAYE) schemes.
If an approved scheme is not suitable, for example, where the relevant conditions cannot be met by the company or more flexibility is required, we can help you to design and implement a bespoke share scheme. This could include joint share ownership plans (JSOP), growth or hurdle shares. Such schemes can be used to incentivise and retain staff by offering tax efficient rewards for future growth in the value of a company where an approved scheme is not appropriate.
Employee owned companies are also growing in popularity. This is where the company is mostly or totally owned by an employee ownership trust (EOT). There are significant tax benefits for business owners transferring their companies to an EOT and it can be a useful tool for facilitating succession, where a founder shareholder wants to pass their business on to the workforce. Read more about employee owned businesses here.
For more information and a summary of the key features of some of the most common employee share schemes, please click here.
How can we help you?
Hazlewoods team of share scheme specialists will work closely with you to:
- Advise on the most suitable plan for your business
- Design the share scheme and value the shares
- Obtain agreement from HMRC on the share valuation
- Liaise directly with your solicitors responsible for producing the relevant legal documentation
- Register the scheme with HMRC and assist with on-going reporting obligations (e.g. annual returns).
