FINANCE
By Sam Jones, Corporate Tax Senior Manager, Kreston Reeves
SHARE SCHEMES A knock out blow in the talent bout? Recruiting and retaining talent is a key issue for many businesses. The job market is buoyant, salary packages are increasingly competitive, and an SME may feel it’s not able to compete. You may have already reviewed your benefits package or bonus scheme, but have you considered a share option scheme for your key management team and those employees who you cannot be without? This is particularly the case with the increase in NICs because of the social care levy announced recently (both for the Employer and Employee). Younger generations aren’t always seeking a ‘big ticket’ salary but are instead looking at share ownership and incentives within the company they are working for. This is particularly true for start-ups and tech companies.
❛❛ Share options are
only available with a limited company; they cannot be implemented in a partnership or an LLP ❜❜
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SO, WHAT IS A SHARE OPTION SCHEME? Share options are a way of rewarding key employees by providing them with the opportunity to purchase shares in the company, typically at a discounted price. Being a shareholder in the company, your key employees can benefit from any increase in the value of the company as it grows. Share options are only available with a limited company; they cannot be implemented in a partnership or an LLP. There are HMRC tax advantaged schemes, and an Enterprise Management Incentive (EMI) scheme is the most common scheme utilised by SMEs. Under EMI, a qualifying company can grant employees share options up to the value of £250,000 in a three year period. The employee will not suffer Income Tax or National Insurance if they buy the shares for at least the market value when they were granted the option. Any growth in share value from the date of grant of the option to sale of the shares should be subject to tax at (currently) a 10% rate (up to £1m of gain) and 20% beyond that.
