People matter. They are the life blood of businesses and as a business leader you need confidence that you can retain and grow the people who make a difference to your business today and in the future. Providing share incentives to employees is a great way to encourage them to stay with you and to develop your business, particularly when cashflow may inhibit the ability to pay top rate salaries or bonuses to retain people.
However, any transaction in shares that involves a director or employee has the potential to create tax risk for the individual or the employer. So it is crucial to get this right first time to protect against unexpected costs. How do we avoid any potential snares? Our specialists take the time to understand the plans and desires of both the company and the selected employees, to ensure that our proposed solution meets your common goals.
Share scheme planning
Share scheme compliance
Global share structures
Valuations
Tax relief
Added support
Share scheme planning
Even a single award of shares to an individual employee makes up a share scheme. When considering such an award, there are several ways to make this happen. Our specialist team has significant experience in the alternative routes.
EMI scheme – the gold standard of approved UK share schemes that give significant tax benefits to UK employers and their employees when EMI share options are granted to staff.
CSOP and SIP schemes – these are less well known and used HMRC approved structures that also give tax advantages.
’Vanilla’ share or option awards – As the term suggests, these are basic and straightforward mechanisms to give shares to employees, and are recommended if the tax- advantaged routes are not possible, the values are low, or the employee is paying for their shares.
Alternative structures – more complex structures such as Employee Trusts or Growth shares may be appropriate for private equity scenarios or listed businesses, where the more traditional routes are not practical. However, they are by nature more complex and require significant time investment to ensure that they do not create tax risks.
Share scheme compliance
All share awards for UK employees need to be reported to HMRC annually, and penalties for not reporting (or reporting incorrectly) can be high. In addition, the EMI scheme requires real time notification to be valid. We can ensure that you meet your deadlines by helping with your reporting.
Global share structures
We assist UK employers of international groups ensuring that any share schemes run by an overseas parent comply with UK legislation. Where a UK company offers shares to non-UK based employees or internationally mobile individuals, our tax and global mobility experts in the UK, and in PKF offices around the world, ensure that they cover the tax aspects in all jurisdictions.
Valuations
Valuations are fundamental to considering the tax exposures on any share transaction or the award of tax-advantaged share options. Where benchmarks are not available (such as in a non-listed group) our tax and valuations specialists work together to inform our clients’ decisions.
Tax relief
Most times, Corporation Tax relief will be available to UK employers issuing shares to employees at a discount. We can assist to ensure employers claim the full and correct relief.
Added support
Our team provides added support regarding employee share schemes:
We can also recommend a range of legal advisors to assist in the documentation of share scheme rules, shareholders agreements and option documentation, as required to put any scheme in place.
- Helping employees to understand their share award, and the tax consequences. Where an award gives rise to a personal Income Tax or Capital Gains Tax liability, our Private Client compliance team can assist with their Self Assessment tax return.
- On the sale of the business, our Private Client team can also assist them in understanding the tax consequences of their disposal.
- We can also recommend a range of legal advisors to assist in the documentation of share scheme rules, shareholders agreements and option documentation, as required to put any scheme in place.
