Case – Growth shares

Intro

The company was growing quickly and profits were increasing year on year. To incentivise employees the management wanted to put in place a share scheme.

Issue

The management wanted the up-front cost to be as low as possible. Unfortunately advance assurance from HMRC was not available.

How we solved it

We suggested issuing various classes of growth shares to the employees at nominal value. These shares only had value once a certain hurdle rate had been reached in the future which meant that on issue the shares only had par value.

The outcome

The employees were able to sell shares once significantly above the hurdle and achieve capital gains tax treatment(and a 20% tax rate) rather than income tax treatment under the Employment Related Securities legislation (at tax rates of up to 8.75%/33.75%).