Many business owners would like to reward and incentivise their employees by giving them shares in the business. However, the cost and complexity of doing this, in particular the tax issues, puts many business owners off.
Calculating The Best Options For You And Your Employees
Getting professional advice on the share option schemes available is paramount, as there are many tax efficient share option schemes to consider. Making the wrong decisions can mean losing out on tax advantages for the business and its employees. At Cameron Cunningham we have experienced and knowledgeable staff who can advise you on the best option for you and your employees.
A straight issue or transfer of shares in the company to an employee would be classed as an Employment Related Security (ERS), upon which Income Tax and National Insurance Contributions (NICs) are sufferable where the issue/transfer occurs at less than market value for those shares. This could be a significant tax burden on the employee, as well as creating reporting liabilities for the company of which it is unaware and has no notice.
Alternatively, there are a few HMRC-approved share option schemes available, each with their own advantages and disadvantages. We are most frequently requested to assist with the implementation of Enterprise Management Incentive (EMI) schemes, as these are considered to be the most flexible of the tax-advantaged share schemes available.