HM Treasury’s United Kingdom Budget 2007

Grant Thornton

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 at any time, based on grant price.
  • Available to qualifying trading companies with gross assets of no more than £30 million at time of grant.
  • Maximum market value on grant of unexercised qualifying options in one company or group £100,000 per eligible employee (includes existing CSOP options).
  • Option must be capable of exercise within 10 years from grant, tax charges can arise if exercised after this period.
  • No tax or NIC payable at time of grant.
  • No tax or NIC on exercise if exercise price is at least market value at date of grant subject to disqualifying event provisions.
  • Sale of shares subject to capital gains tax.
  • Shares qualify for taper relief from date options granted.

Share Incentive Plan (SIP)

  • Shares must be non-redeemable, fully paid, ordinary shares, but can be of a special class.
  • Must be available to all employees satisfying eligibility requirements.
  • Dividends can be reinvested tax free into further shares (dividend shares) to a maximum of £1,500 per person per tax year.
  • Free, matching or partnership shares can be awarded.
  • Income tax free award if qualifying conditions met.

Free shares

  • Maximum of £3,000 worth of shares per tax year can be given per employee.
  • Minimum holding period must be at least 3 years but may be up to 5 years at the option of the company
  • Must be held for 5 years to benefit from full income tax relief.
  • Allocation may be conditional on achievement of 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.
  • Must be held for 5 years to benefit from full tax relief.

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 and tax relief as free shares.

Dividend shares

  • Minimum holding period of 3 years

Save As You Earn (SAYE) Option Scheme

  • Must be available to all eligible employees.
  • Monthly contributions must not exceed £250.
  • Savings contracts agreed term of either 3 or 5 years.
  • May grant at up to 20% discount on market value.
  • Gain or bonus on exercise at end of term is tax free.

Company Share Option Plans (CSOP)

  • Maximum value of shares under options £30,000 per employee at date of any grant.
  • Exercise price must be not manifestly less than 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

  • Available for most employee share awards in the employer or parent.
  • A deduction is typically available on the difference between the market value of shares at the time of exercise and the amount the employee actually pays.

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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