{"id":2425,"date":"2022-03-02T05:42:09","date_gmt":"2022-03-02T05:42:09","guid":{"rendered":"https:\/\/uk.legalvision.com.au\/?p=2425"},"modified":"2023-04-20T00:00:27","modified_gmt":"2023-04-19T23:00:27","slug":"employee-share-scheme","status":"publish","type":"post","link":"https:\/\/legalvision.co.uk\/corporations\/employee-share-scheme\/","title":{"rendered":"What is an Employee Share Scheme?"},"content":{"rendered":"\n

If you run a business and have a dedicated workforce who you hope will stay with your company, you may look into employee share schemes<\/a>. Employee share schemes are an excellent way of showing your employees that you trust and value them. It also shows that you would like them to stay and help grow your business. Finally, it provides a financial incentive for your employees to help boost productivity and grow your business. <\/span><\/p>\n\n\n\n

This article will explain an employee share scheme and touch on some of the benefits of using one.<\/span><\/p>\n\n\n\n

What is an Employee Share Scheme?<\/h2>\n\n\n\n

Employee share schemes are a way of sharing ownership of your company with your employees. You can reward employees with a financial stake in your company. <\/span><\/p>\n\n\n\n

In an employee share scheme, the employee is usually granted an option to purchase company shares. The option is usually for the market value of the shares when you grant the option. An option is simply a choice that the employee has to purchase the shares in the future if they wish. It does not mean that you grant the employees a share then and there.<\/span><\/p>\n\n\n\n

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This is an excellent incentive for employees to work hard and add value to the company’s growth. By the time the option becomes exercisable, the company’s share value should be (in theory) greater than the market value granted when the option was made. <\/span><\/p>\n<\/div>\n\n\n\n

How Do Employee Share Schemes Work?<\/h2>\n\n\n\n

Share schemes can come in very different forms. It is up to you to decide who benefits from a share scheme. For example, you may state that only employees will benefit from a share scheme or that non-employees such as consultants can also benefit.<\/span><\/p>\n\n\n\n

Once you have decided, you should then assess the two types of share schemes: unapproved schemes and HMRC-approved share schemes, approved by Her Majesty’s Revenue and Customs<\/a>. <\/span><\/p>\n\n\n\n

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HMRC approved share schemes give you tax advantages and are used more commonly. Thus, it is advised that you opt for an HMRC approved scheme if you can. <\/span><\/p>\n<\/div>\n\n\n\n

You can use a share incentive plan in an HMRC-approved share scheme. This is where a trustee holds the shares on behalf of the employees for at least five years. In this type of plan, no capital gains tax<\/a><\/span> is paid on the shares when they are sold if they are sold without leaving the trust. This means that you can give your employees shares, and they can sell them in five years without paying capital gains tax.<\/span><\/p>\n\n\n\n

You could also use a Save As You Earn plan. In this case, part of the employee’s salary is saved as part of a savings contract. The employee can then purchase shares at the market value when the plan was created, with a possible discount. <\/span><\/p>\n\n\n\n

Alternatively, you can use a Company Shares Options Plan. This is where an employee can purchase up to \u00a330,000 of company shares without income tax or national insurance contributions due to the difference in the value. Again, you can use this scheme with specific employees, and make it conditional on certain performance goals.<\/span><\/p>\n\n\n\n

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If you will use an HMRC approved scheme, you will need to seek HMRC approval to benefit from the tax advantages.<\/span><\/p>\n<\/div>\n\n\n\n\n\n Continue reading this article below the form\n <\/i>\n<\/a>\n

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