Employee Share Incentives

Services provided by our Employee Share Incentives Solicitors

EM Law advises clients on all kinds of share schemes helping employees acquire shares to bring about tax savings and other benefits to incentivise employees.

• all HMRC tax-advantaged share plans including Save As You Earn (SAYE) Option Schemes and enterprise management incentives (EMI option schemes)
• growth share schemes
• joint share ownership plans
• company share option plans (CSOPs)
• long-term incentive plans and annual and deferred bonus schemes
• share options and stock purchase programmes
• conditional share awards and restricted stock
• phantom shares
• Employee benefit trust solicitors
• other bespoke tax efficient structures

We provide employment tax advice in relation to share incentive schemes including:

• tax planning for both employers and employees
• compliance with payroll tax requirements and P11D issues and liaising with HMRC in relation to this
• taxation of termination payments and benefits in kind
• current HMRC policy in relation to employee tax and HMRC reporting requirements
• tax treatment of internationally mobile employees and consultants providing services through personal companies and
• treatment of managers’ shares in private equity arrangements

In relation to Employee Benefit Trusts we advise on:

• their establishment, funding, ongoing operation and termination
• disguised remuneration considerations and appropriate documenting of arrangements between company and trustee
• statutory tax-advantaged employee-ownership trusts
• use of trust structures to optimise tax efficiency of share awards
• breach of trust issues and exercise of trustee discretion and
• impact of corporate transactions on trust arrangements and use of trust structure for post-deal incentives

Corporate Support

Suzy works alongside corporate teams to advise on company law, securities law and regulatory issues and corporate governance best practice considerations. She also provides advice and support on the share incentives considerations of corporate transactions. Suzy also works with employment lawyers to help manage the hiring or dismissal of employees where share incentive and executive remuneration schemes are in play.

International aspects of Share Schemes

We can advise on the international aspects of share incentive schemes including advising companies on launching and operating their plans globally and co-ordinating reviews by overseas advisers in relation to this, as well as advising overseas parents on the extension of their incentive plan to the UK.

What are the Share Incentive Plans (SIPS) and what are their tax advantages?

Employee Share Incentive Plans (SIPs) offer employees a tax-efficient way to acquire shares.

If held for five years within the plan, no Income Tax or National Insurance is due.

You will not pay Capital Gains Tax on shares you sell if you keep them in the plan until you sell them. If you take them out of the plan, keep them and then sell them later on, you might have to pay capital gains tax if their value has increased.

SIPs align employee and company interests, promoting long-term investment.

What are the tax advantages of Enterprise Management Incentives (EMIs)?

If you work for a company with gross assets of £30 million or less, it may be able to offer Enterprise Management Incentives (EMIs).

Your company can grant you share options up to the value of £250,000 in a 3-year period.

You will not have to pay Income Tax or National Insurance if you buy the shares for at least the market value they had when you were granted the option.

If you were given a discount on the market value, you’ll have to pay Income Tax or National Insurance on the difference between what you pay and what the shares were worth.

You may have to pay Capital Gains Tax if you sell the shares.

Do we have SIP in the UK?

Yes, the UK offers Share Incentive Plans (SIPs) that allow employees to buy company shares in a tax-efficient manner. SIPs encourage employee ownership and investment in the company.

Why do companies give employees shares?

Companies offer shares to employees as part of their remuneration package, in addition to salary and benefits. These shares are part of share incentive plans designed to align employee interests with the company’s success, boost motivation, and retain talent.

What are the tax advantages of a Company Share Option Plan?

This gives you the option to buy up to £30,000 worth of shares at a fixed price.

You will not pay income tax or national insurance contributions on the difference between what you pay for the shares and what they’re actually worth.

You may have to pay capital gains tax if you sell the shares.

What are the registration requirements for share schemes at HMRC?

All tax advantaged share options schemes that relate to UK taxpayers must be registered online with HMRC by 6 July following the end of the tax year in which UK taxpayers first participate in the share incentive arrangement. In addition, each EMI option must be individually notified to HMRC online, within 92 days after grant.

Is it a good idea for businesses to offer a share scheme to its employees?

Sharing company ownership provides employees with a stake in the success of the business. With the tax breaks available it is an attractive way to incentivise staff without simply offering a larger salary.

What are Growth Shares?

Growth shares are a special class of partnership shares which reward participants for the growth in value of the employer company above a threshold which is specified at the grant date.