In Ireland, we have an Approved Profit Sharing Scheme (APSS) which is the most popular scheme in the country for employers to remunerate their staff in a tax-efficient way.<\/p>\n
In the UK, there\u2019re employee share schemes for companies to offset costs and reward employees flexibly. These UK schemes allow participants\u00a0to pay lower (often significantly lower) rates of tax than they would compare to ordinary income.<\/p>\n
In this article, we\u2019ll cover the following topics. Skip to the relevant section below:<\/p>\n
An employee share scheme (UK stock option plan) is a way for employers to share company ownership with employees as part of their remuneration package. This can involve giving free shares or granting options to buy shares at an agreed price in the future.<\/p>\n
Here\u2019re\u00a0the 4 HM Revenue and Customs (HMRC) approved tax-advantaged share schemes in the UK:<\/p>\n
An EMI option scheme<\/u><\/a> gives a participant the option to buy up to \u00a3250,000 worth of shares at an agreed purchase price. Ideal for small companies having assets of \u00a330 million or less.<\/p>\n Plan period:<\/strong>\u00a0Typically held over 2 years before sale to enjoy a lower CGT rate*<\/p>\n Participants:\u00a0<\/strong>Can invite selected employees only<\/p>\n Discount for purchasing shares:<\/strong>\u00a0depending on scheme design<\/p>\n Limits:\u00a0<\/strong>Employees can buy up to \u00a3250,000 worth of shares<\/p>\n Tax:<\/strong> CSOPs give a participant the option to buy up to \u00a330,000 worth of shares at a non-discounted purchase price.<\/p>\n Plan period:<\/strong>\u00a0Typically held over 3 years before sale to enjoy more tax benefits<\/p>\n Participants:\u00a0<\/strong>Can invite selected employees only<\/p>\n Discount for purchasing shares:<\/strong>\u00a0No discount under CSOPs<\/p>\n Limits:\u00a0<\/strong>Employees can buy up to \u00a330,000 worth of shares<\/p>\n Tax:<\/strong> Under a Sharesave scheme<\/u><\/a>,\u00a0employees are granted the option (i.e. the right) to buy shares in the company at a future date at a discounted purchase price (i.e. exercise price), using their accumulated savings from their salary. When your plan ends, you\u2019ll have 2 options: use your savings to buy shares\u00a0OR\u00a0<\/strong>take back all contributions.<\/p>\n Plan period:<\/strong>\u00a03 or 5 years (depending on your savings contract)<\/p>\n Participants:\u00a0<\/strong>Must invite all eligible employees<\/p>\n Contribution:<\/strong>\u00a0Post-tax salary<\/p>\n Discount for purchasing shares:<\/strong>\u00a0Up to 20%<\/p>\n Limit:\u00a0<\/strong>Employees are able to contribute between \u00a35 and \u00a3500 per month<\/p>\n Tax:<\/strong> A SIP scheme<\/u><\/a>\u00a0work by keeping the shares awarded in a trust for employees until they either leave the job or decide to take the shares from the plan.<\/p>\n If you, as an employer, decide to set up a SIP, you can choose to offer your employees one or a combination of 4 ways to get the share:\u00a0Free Shares<\/strong>\u00a0(free to employees),\u00a0Partnership Shares<\/strong>\u00a0(paid by employees),\u00a0Matching Shares<\/strong>\u00a0(free to employees) and\u00a0Dividend Shares<\/strong>.<\/p>\n Plan period:<\/strong>\u00a0Typically held over 5 years before withdrawal to enjoy more tax benefits (possible to withdraw earlier)<\/p>\n Participants:\u00a0<\/strong>Must invite all eligible employees<\/p>\n Contribution:<\/strong>\u00a0Post tax salary (for partnership shares only)<\/p>\n Discount for purchasing shares:<\/strong>\u00a0Up to employers\u00a0(for partnership shares only)<\/p>\n Limits:<\/strong> Tax:<\/strong> Enjoy tax benefits<\/u><\/b> Attract & retain the best talent<\/strong> Create ownership among employees<\/strong> Build wealth<\/strong> Enjoy tax benefits<\/strong> It is the process of creating and managing shares for employees in a company. The process involves everything from tracking and reporting changes in ownership to updating documents\/policies\/procedures, communicating with HMRC and stakeholders, consulting your board of directors, and staying compliant.<\/p>\n Since there\u2019re many administrative tasks and advanced knowledges involved, companies usually 1\/Become experts themselves<\/b>, 2\/Hire experts<\/b>\u00a0or 3\/Use software program<\/b>\u00a0to manage share plans for their organisation. The first option is usually the most impractical one as everyone is busy and would rather spend the majority of time on their core business. The second and third options would make more sense to most companies.<\/p>\n At Global Shares, with our award-winning software platform and dedicated team of over 300 equity professionals, we can cover everything, from advising on the best form of enrolment for participants to trading, compliance, tax and everything in between.<\/p>\n So, if you\u2019re already convinced that a UK employee share scheme is right for you, speak to us today. Our experts will walk you through the following steps and help simplify your employee share plan management and administration.<\/p>\n In Ireland, we have an Approved Profit Sharing Scheme (APSS) which is the most popular scheme in the country for employers to remunerate their staff in a tax-efficient way. In the UK, there\u2019re employee share schemes for companies to offset costs and reward employees flexibly. These UK schemes allow participants\u00a0to pay lower (often significantly lower) […]<\/p>\n","protected":false},"author":3,"featured_media":125604,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[553,552,594],"tags":[554,685,690,699,702],"class_list":["post-125603","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-employee-share-stock-plans-ie","category-editors-pick-ie","category-finance-ie","tag-see-all-ie","tag-emi-ie","tag-esop-ie","tag-saye-ie","tag-sip-ie"],"acf":[],"_links":{"self":[{"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/posts\/125603","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/comments?post=125603"}],"version-history":[{"count":0,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/posts\/125603\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/media\/125604"}],"wp:attachment":[{"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/media?parent=125603"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/categories?post=125603"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.jpmorganworkplacesolutions.com\/ie\/wp-json\/wp\/v2\/tags?post=125603"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\u2013\u00a0Grant<\/strong>:\u00a0No tax
\u2013\u00a0Exercise<\/strong>:\u00a0No income tax if purchase price is equal or greater than AMV at grant
\u2013\u00a0Sale:<\/strong>\u00a0CGT is taxed on the difference between the share value at sale and the cost used to exercise option. CGT of only 10%* will be due if at least 24 months have passed from the date of grant.
\u2013\u00a0Corporation tax relief:<\/strong>\u00a0The option gain (the difference between the initial share offering and the final price at vesting) and the scheme setup & administration costs<\/p>\n2. Company Share Option Plan (CSOP)\u200b<\/h3>\n
\u2013\u00a0Grant:\u00a0<\/strong>No tax
\u2013\u00a0Exercise<\/strong>: No income tax if shares held 3 years from grant date
\u2013\u00a0Sale:<\/strong>\u00a0CGT is taxed on the difference between the share value at sale and the cost used to exercise option
\u2013\u00a0Corporation tax relief<\/strong>: The spread (the difference between the market value of the option shares on the date of exercise and the exercise price), and the scheme setup & administration costs<\/p>\n3. Save as you Earn (Sharesave)<\/h3>\n
\u2013\u00a0Grant:\u00a0<\/strong>No tax
\u2013\u00a0Exercise<\/strong>: No income tax if shares held for 3 years from grant date
\u2013\u00a0Sale:<\/strong>\u00a0CGT is taxed on the difference between the share value at sale and the savings amount invested into the plan
\u2013\u00a0Corporation tax relief:<\/strong>\u00a0The cost of setting up and administering the scheme.<\/p>\n4. Share Incentive Plan (SIP)\u200b<\/h3>\n
\u2013\u00a0Free share<\/strong>: employers can give each employee shares worth up to \u00a33,600
\u2013\u00a0Partnership share<\/strong>: employees can use up to \u00a31,800 to buy shares
\u2013\u00a0Matching share<\/strong>: employers can give employees further shares at a ratio of up to 2:1 for each partnership share acquired<\/p>\n
\u2013\u00a0Grant<\/strong>: No tax
\u2013\u00a0Withdrawal<\/strong>: No income tax if shares held for 5 years. It\u2019s possible to withdraw earlier and income tax will be chargeable. Learn more>>
\u2013\u00a0Sale:\u00a0<\/strong>CGT is taxed on the difference between the share value at sale and the value at the time of withdrawal
\u2013\u00a0Corporation tax relief:\u00a0<\/strong>The cost of setting up and administering the scheme.<\/p>\nEmployee share scheme benefits for employers<\/b><\/h2>\n
When it comes to employee share plans, most of the tax breaks for companies are offsetting the cost of setting them up, smoothing that initial leap, and also covering any movements in the market during the period the share plan is running. These tax benefits limit, but do not entirely remove, the risk of employee ownership and market movements.<\/p>\n
These types of schemes help a company retain, recruit and incentivise employees by providing employees with financial incentives in addition to base salary and bonus.<\/p>\n
Employee owners generally have lower turnover and absenteeism, more company pride and loyalty and greater willingness to work hard, and make more suggestions to improve performance.<\/p>\nEmployee share scheme benefits for employees<\/b><\/h2>\n
Issuing shares to employees helps improve financial wellbeing by providing lucrative financial incentives for their retirement. Or, they can be used to reach shorter-term goals, such as buying a car\/home or paying for college.
Employees close to retirement and working at a company with an employer ownership plan had more than 10 times the median savings of employees nationally (Source: Rutgers study)<\/p>\n
Participating in tax-advantaged share schemes can reduce your tax burden because:
\u2013 No tax at grant
\u2013 No income tax at exercise if you meet the requirements
\u2013 Capital Gains Tax (CGT) can be avoided by transferring to an ISA or pension<\/p>\nEmployee share scheme administration<\/b><\/h2>\n
What is employee share scheme administration?\u200b<\/h3>\n
How can you do it?\u200b<\/h3>\n
How we can help \u200b<\/h3>\n
\n\t\t\t
\n\t\t\t\t\t\t\t\t\tRequest a Demo
\n\t\t\t<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"