Private Client Tax
Corporate & Business Tax
VAT Advice
Tax Investigations
Property Tax
Services for professional advisers
Knowledge Centre
News & Events
Careers and Opportunities
About ETC Tax
Contact Us
Full contact details available here.
Employee Incentives and Share Schemes
Making the complex simple
In today’s climate retaining employees is critical to many businesses future growth plans. There are lots of different ways to incentivise employees in a tax efficient and commercial way, and it can pay to explore a number of different options. It is critical that whatever route is chosen the business owners own future plans and objectives are not overlooked.
Using share schemes and similar, employees will be able to directly participate in the success of the business, hence encouraging and developing a more productive and efficient workforce.
Employee share schemes can also form a tax efficient part of a company’s succession planning, allowing selected key employees to have a stake in the business.
EMI
An EMI (or Enterprise Management Incentive) scheme is a type of approved share option scheme and is one of the most popular ways for companies to incentivise employees. EMIs can work very well; but as with all approved schemes, are not suitable for all companies as specific criteria apply. EMIs can often be used in conjunction with other share incentivisation options such as EOTs. Companies can sometimes set up multiple EMI schemes during their lifetime.
Other Approved Schemes
Other approved schemes include Company Share Option Plans (“CSOPs”), Share Incentive Plans (“SIPs”) and Save As You Earn (“SAYE”). Approved share schemes are usually afforded some form of statutory relief that makes their acquisition by employees, and award by employers, efficient from a tax perspective.
Each share scheme has specific rules and requirements set by HMRC. Employers must adhere to these regulations to ensure the schemes remain approved and employees can benefit from the associated tax advantages.
Growth Shares
Awarding growth shares to employees under a growth share scheme can be an excellent way to incentivise those employees to work alongside the management team to support the future growth of a company. Those employees awarded growth shares will be able to share in the success of the company financially and in a way which is tax efficient as there is no tax to pay when shares are awarded and it is only if the shares increase in value that CGT may become payable. Growth shares can also be an excellent tool for IHT planning; and we regularly advise clients on growth share schemes.
EOTS
An EOT has many features of other similar share schemes in that it can be used to incentivise employees, but is also an excellent tool for succession and exit planning. An EOT has many tax advantages and the selling shareholders can often benefit from a full CGT exemption on sale of the shares to the trust provided certain conditions are met. There are also significant IHT and income tax advantages. EOTS can be used in conjunction with an EMI scheme to provide added benefit and flexibility, and we have experience of both options.
Case Study
Corporate Business Tax
