The following Employment Tax guidance note Produced by Tolley in association with Andrew Rainford provides comprehensive and up to date tax information covering:
IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant tax changes associated with Brexit began to take effect. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit ― personal and employment tax implications guidance note.
An option becomes an underwater option if the current price of the shares under option has fallen below the price payable on the exercise of the option. Underwater options cause concerns when there is no reasonable prospect of share price recovery in the short or medium term, eg two to five years.
Underwater options commonly arise if after an option is granted:
there is a bear market where share prices fall generally
specific events affect a particular sector, eg bank shares in the early stages of the 2008 financial crisis, or in the aftermath of the EU referendum on 23 June 2016, when the FTSE 250 index dropped sharply, although it later recovered
there is war or a natural or other disaster, eg oil companies shares after a major oil spill
there is lack of confidence in a particular company or its management, eg following highly publicised criticism of Board members
For the option holder, the option has no value and there is no financial incentive or reward.
For the employer, if underwater options do not incentivise employees, or have a demotivating effect, staff performance and retention may be affected. Employees can move job without losing valuable options and may seek better rew
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