If you are looking for a way of motivating and incentivising your employees (in a cost effective and tax efficient way), you may wish to consider setting up a Share Option Scheme for your employees, to encourage them to remain with the company until a key defined target or objective is achieved - such as hitting performance targets, or a sale of the business, or a flotation, for example. Such a scheme can reward employees for their loyalty or permit employees to obtain and sell shares in a tax-efficient manner over a period of time in order to help increase motivation and performance.
Clearly thought needs to be given to the repercussions of giving employees shares in the business. We can discuss these issues with you and advise on the pro's and con's of setting such a plan in motion.
Types of share option schemes
There are numerous ways in which share option schemes can be set up to match the specific aims of the company and to take advantage of tax benefits. This can be done by granting options to employees to purchase shares at a pre-determined price after a fixed time period or after specific targets have been reached, or by the company matching employees' purchases of shares with shares offered to them for free or at a discount, or by the company simply giving employees free shares.
HM Revenue & Customs (HMRC) Approved Schemes
In order to take advantage of the tax breaks, share option schemes are required to meet certain qualifying conditions set out by HMRC. Some schemes can be implemented without those requirements being fulfilled but these (called 'unapproved share schemes') will not have the same tax advantages.
Approved share option schemes come in a number of forms - including Company Share Option Plans (CSOP) and Enterprise Management Incentives ("EMI") schemes. See below for full details of both of these.
Whatever you are planning to do, please talk to us initially so we can listen to you and what you wish to achieve. There is no charge for talking to us in this way and for getting our advice on how you might achieve your aims.
We would be delighted to speak to you - please do not hesitate to call our large Corporate Law team so we can get to know you and your business. As we say, we are always there for businesses who are in our BLUE LAW scheme, so we invite you to join BLUE LAW now. Once you have joined, we try to answer any legal enquiries that you have, free of charge. If legal work is needed, we give you a price, and you are then free to "shop around". If you wish to speak to us now, please click on "Please Contact Me Now” or call us on 0800 084 3256. We look forward to always being there for you.
