inside FEATURES


Reap the benefits of giving staff a slice of the pie T


here’s not a successful company in our area that wouldn’t put recruiting and retaining top talent near the top of its business challenges. Extending share ownership to employees can bring


many potential benefits: • Greater identification with corporate objectives • Stronger commitment to grow the business • A sense of common purpose • Greater incentive to stay


But unless the company provides shares in an HMRC approved scheme, your employees could be caught for an income tax charge on not only the current value of shares given to them, but future growth too. Therefore it’s crucial to take tax advice at the outset.


Approved share options Rather than provide shares as such to employees, many employers provide share options. A share option can seem quite complex but essentially it is a contract to buy shares in the future at a specified price. If that price is set at today’s value an employee can exercise their option to acquire the shares when their value has grown, and thereby receive the growth in value tax free. The right to acquire the shares is often restricted to


the sale of the business, giving employees the right to a share of the proceeds on sale.


Enterprise management incentive


scheme The most prevalent form of share option schemes is the EMI scheme. Provided certain conditions are met, selected employees can acquire share options without any tax consequences and pay only 10% tax on the profit they make when they come to sell the shares.


24 insight JANUARY/FEBRUARY 2017


By EDWARD CORRIGAN, founder partner of Corrigan Associates


Other share schemes There are a number of other HM Revenue and Customs approved schemes offering employees the ability to acquire shares with built-in tax breaks. Broadly these are more expensive to set up and are suitable for larger companies. It is worth noting that one scheme allows companies


to give away shares to the value of £3,600 each year tax free.


The future There are definite indications that younger members of the workforce are developing much more collaborative working styles with less hierarchy between business owners and workers. Widening share ownership is a useful strategy for engaging people in a modernised workforce.


‘Provided certain conditions are met, selected employees can acquire share options without any tax consequences’


ACCOUNTANCY SERVICES


Page 1  |  Page 2  |  Page 3  |  Page 4  |  Page 5  |  Page 6  |  Page 7  |  Page 8  |  Page 9  |  Page 10  |  Page 11  |  Page 12  |  Page 13  |  Page 14  |  Page 15  |  Page 16  |  Page 17  |  Page 18  |  Page 19  |  Page 20  |  Page 21  |  Page 22  |  Page 23  |  Page 24  |  Page 25  |  Page 26  |  Page 27  |  Page 28  |  Page 29  |  Page 30  |  Page 31  |  Page 32