Most share option schemes, with an eye to tax benefits, use the Enterprise Management Incentive (EMI) scheme.
For qualifying arrangements, there are tax incentives for the employer and employee.
The point to emphasise with EMI arrangements is that they can only be made by employers with their employees.
Unapproved option scheme
Unapproved share option schemes can be organised but there is no tax advantage for the recipient, who would be liable for income tax on the difference between the exercise price and the market value of options when exercised.
Employees may also be liable to pay NIC if the shares are readily convertible ta cash – for example, if a company is being sold.
However, unlike EMI arrangements, unapproved schemes can be offered to contractors, advisors, consultants and employees.
Growth shares provide the recipient with a share in the growth of the company from the date at which they were issued.
Recipients pay no tax on exercise of these arrangements but will pay capital gains tax when shares are sold.
Growth shares are useful if involving non-employees. They also minimise any dilution of value for existing shareholders.
Consider your options…
If you are considering an option or share scheme with key employees or other individuals, we can help. Please call so we can discuss the first steps.
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