Share Schemes

Employee share schemes allow companies to reward employees with a stake in the business, fostering loyalty, retaining valued staff, and attracting new talent.

Finerva offers specialised and experienced advice on choosing the most suitable scheme, submitting the necessary applications and managing the Scheme going forward.

The Share Schemes below are some of the most popular among UK start-ups and scale-ups.

Enterprise Management Incentives (EMI)

The Enterprise Management Incentives (EMI) is a UK Government initiative for eligible companies to offer tax-efficient share options to employees. No other equity incentives scheme is as tax-efficient as EMI Share Options. The benefits of EMI include:

• No income tax or National Insurance Contributions (NIC) on granting or exercising EMI options under certain conditions.
• Capital Gains Tax at 10% on share disposal under certain conditions.
• Corporation tax relief on the difference between the market value of shares at granting and exercising.

Companies must meet specific trade and establishment criteria to be eligible, including but not limited to:

• Maximum share options value of £250,000 being granted in 3 years;
• Eligible employees must employed for least 25 hours each week, or devote 75% of their total weekly working time to the company;
• Notifying HMRC and submitting annual returns by specific deadlines.

Company Share Option Plan (CSOP)

The Company Share Option Plan (CSOP) allows companies to grant options to employees or directors. This scheme has similar advantages as the EMI Share Options Scheme, but is suitable for larger or listed companies. Under certain conditions, you will have no income tax or NIC on granting, exercising, or selling shares and obtain Corporate tax relief (10% or 20%) on the difference in market value of shares between granting and exercising.

However, a CSOP is more restrictive than the EMI as:

• Options must be granted at market value or higher, with a £60,000 limit per individual employee (£30,000 before 6 April 2023).
• Any gain made by the individual is only exempt from income tax if the options are held for at least three years.

Just like with EMI scheme, you will be required to submit your annual returns by 6 July.

Non-Tax Advantaged Options

If your business doesn’t qualify for tax-advantaged share schemes, you might want to look at these schemes which are part of remuneration packages, with fewer regulations.

The benefits of using Non-Tax Advantaged Options are:

• No income tax is incurred upon granting options.
• Income tax, and possibly NIC, can be incurred upon exercising options.
• Capital gains tax of 10% or 20% upon the sale of shares, under certain conditions.
• Open to any individual in your company.

Growth Share Schemes

Growth shares can be a very effective incentive for both employees and non-employees. Differently from EMI Share Options or otherwise unapproved share options, growth shares allow recipients (employees or not) to become shareholders immediately.

The flexibility of this kind of shares allows you to apply ‘conditionality’ to protect the interests of the business, or to make sure that certain goals are met, but they do not require particular conditions per se in order to be issued.

In order to correctly set a hurdle rate—which is normally the company’s value at the time when the shares are granted—you will need to ask your accountant to produce a valuation of your business. Finerva can support you with calculating your exact company valuation using reliable accounting methods such as the Black–Scholes model, minimising the risk of HMRC questioning the initial share pricing.

How we work

You will be introduced to our Tax expert. In our initial call, we will learn more about your company’s background and will help you to identify suitable schemes as well as support with relevant documentation and application.

When looking for suitable share options, consulting directly with tax experts and legal advisors is necessary. Finerva is part of a trusted network of financial and legal advisors who will be able to seamlessly assist you with every step of setting up your share schemes.