Budget 2008

Approved Employee Share Schemes - GT

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 not more than £30 million at time of grant.
  • Company must have fewer than 250 employees.
  • Maximum market value on grant of unexercised qualifying options in one company or group £120,000 (£100,000 2007/2008) per eligible employee (includes existing company share option plan (CSOP) options).
  • Option must be capable of exercise within 10 years from grant, tax charges can arise if exercised after this period.
  • No tax orNIC payable at time of grant.
  • No tax orNIC 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 for disposals pre 6 April 2008.

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).
  • 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

  • Maximum of £1,500 per person per tax year.
  • Amounts not reinvested can be carried forward for up to 3 years.
  • 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.
  • Minimum specified contribution must not be greater than £10 per month.
  • Savings contracts of either 3, 5 or 7 years term.
  • May grant at up to 20%discount on market value.
  • Gain and/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 for diposals pre 6 April 2008.

Corporation Tax Relief

  • Available for most employee share awards in the employer or parent company.
  • 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.
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