Budget 2004

Grant Thornton


Personal Taxation

Grant Thornton

Approved Employee Share Schemes

Enterprise Management Incentive (EMI)

  • no formal approval required (advance assurance available)
  • maximum value of shares over which unexercised options exist not to exceed £3 million per company
  • available to qualifying trading companies with gross assets of no more than £30 million
  • maximum value of unexercised qualifying options in one company or group £100,000 per eligible employee
  • no tax or NIC on grant
  • no tax or NIC on exercise if exercise price is at least market value at date of grant
  • sale of shares subject to capital gains tax
  • shares qualify for taper relief from date options granted

Share Incentive Plan (SIP)

  • 3 types of share can be used alone or in any combination
  • dividends can be reinvested tax free into further shares (dividend shares) to a maximum of £1,500 per person per tax year
  • shares must be non-redeemable, fully paid, ordinary shares, but can be of a special class
  • employee eligibility restrictions apply

Free shares

  • maximum of £3,000 of shares per tax year can be given to employees
  • must be available to all qualifying employees
  • minimum holding period of 5 years to benefit from full income tax relief
  • allocation may be conditional on performance targets

Partnership shares

  • deduction made from employees’ salaries to purchase shares
  • full tax relief on purchased shares
  • maximum £1,500 per tax year subject to overall maximum of 10% of salary
  • minimum specified salary deduction must not be greater than £10 per month
  • company may specify the maximum number of shares in an award
  • subject to same minimum holding period as free shares

Matching shares

  • employers can give up to 2 matching shares for each partnership share
  • must be of same class and carry same rights as partnership shares
  • subject to same minimum holding period as free shares

Savings related share options

  • must be available to all eligible employees
  • maximum savings of £250 per month
  • minimum specified contribution must not exceed £10 per month
  • may grant at up to 20% discount on market value
  • gain or bonus on exercise at end of term is tax free

Approved company share option plans (CSOP)

  • maximum value of shares under CSOP options £30,000 at date of any grant
  • exercise price must be close to market value of shares at time of grant
  • no tax on grant or exercise if option exercised within 3 to 10 years after grant
  • taper relief from date of exercise

Corporation tax relief

For accounting periods beginning on or after 1 January 2003 corporation tax relief is available for most employee share awards. This is typically based on the difference between the market value of the shares and the amount subscribed.

The figures shown here are subject to ammendment as the Finance Bill passes through Parliament.

This information has been prepared only as a topical guide to tax and personal financial matters. No responsibility can be accepted by us for loss occasioned to any person acting or refraining from acting as a result of any material contained in this publication.

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