Qualifying conditions for company share option plans – company

By Tolley in association with Ken Moody

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

  • Qualifying conditions for company share option plans – company
  • Qualifying company or group
  • Eligible shares
  • Different share classes
  • Restrictions and conditions
  • The grantor of the options
  • Company reorganisations and changes of control
  • Registration etc

From a corporate perspective, the qualifying conditions for CSOPs are relatively relaxed. Following Finance Act 2013 the requirements for the tax advantaged share schemes have been largely harmonised.

There are no restrictions on the gross assets of the company or group, nor on the number of employees that are able to work for them. Similarly, the type of business they operate makes no difference at all.

In other words, any company that wishes to do so, with the notable exception of a subsidiary company whose shares are not listed, is able to implement and benefit from the use of a CSOP.

HMRC guidance on general requirements which must be met is at ETASSUM41000 onwards.

Qualifying company or group

Either a single company or a group can operate a CSOP. In a group situation, the main point to be satisfied is that the company which has established the scheme and over whose share options are to be granted must have control, either directly or indirectly, over any subsidiaries that wish to invite their employees to participate.

For these purposes, control is defined by ITA 2007, s 995. As a general rule, this means that any subsidiary company where the parent’s shareholding is over 50% should be able to take part.

Eligible shares

The requirement relating to shares can be found in ITEPA 2003, Sch 4, paras 15–20 and those relating to share options in paras 21–25.

Types of Share

Shares used for a CSOP must form part of the ordinary share capital of one of the following:

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