Comparison of share schemes

Produced by Tolley in association with Andrew Rainford

The following Employment Tax guidance note Produced by Tolley in association with Andrew Rainford provides comprehensive and up to date tax information covering:

  • Comparison of share schemes
  • Tax-advantaged schemes
  • EMI
  • CSOP
  • SIP
  • SAYE share option schemes
  • Employee shareholder shares
  • Non-advantaged schemes
  • Direct share acquisition or gift
  • Non-advantaged share options
  • More...

Comparison of share schemes

With four types of tax-advantaged share scheme available (as well as a scheme for employee shareholders), plus numerous other non-advantaged alternatives, it can be difficult for an employer to decide on the best choice for their own situation.

There are a number of simple differentiations that can offer a starting point:

  1. is this scheme available to all employees or a selected few?

  2. are shares to be offered immediately?

  3. would share options be preferable?

  4. is tax saving a major consideration?

  5. is the company willing to accept significant upfront cost and future administrative commitment?

Tax-advantaged schemes

There are currently four types of tax-advantaged share scheme, with varying conditions and requirements. Finance Act 2013 included measures to harmonise many of the requirements and restrictions across the schemes, but differences remain. These are described in more detail in the guidance notes on each individual scheme. EMI and CSOP are both selective which means that companies can choose who benefits and to what extent. SIPs and SAYE schemes must be offered to all employees with only very limited exceptions.

Under all these schemes, as a general principle, any increase in value that is not subject to income tax is liable to capital gains tax.

Major changes in respect of administration and compliance in respect of share schemes were introduced in Finance Act 2014. HMRC will no longer provide formal approval in respect of SIP, SAYE or CSOP schemes (it never did for EMI schemes), and so they are no longer referred to as ‘approved’. Instead employers operating these schemes need to self-certify that they meet the requirements under the legislation within the time limits. This is a requirement for both new and existing schemes, and schemes need to be registered and self-certified online by 6 July 2015 or the associated tax advantages will be lost.

Further to this, all returns of information (including non-advantaged activities previously reported on form 42 and notifications of new EMI options) now have to be filed online.

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