EMI is the most flexible and tax-efficient option for most growing businesses, and the scheme of choice for many of our clients across Shropshire, Cheshire, and Wales. It allows qualifying companies to grant share options to selected employees over shares worth up to £250,000, with significant Capital Gains Tax and Income Tax advantages if the scheme is set up correctly. Options need to be granted at market value, which must be agreed with HMRC in advance, and the company must meet specific qualifying conditions.
CSOP allows companies that don’t qualify for EMI, or that want to complement an existing EMI scheme, to grant options over shares worth up to £60,000 per employee. The tax treatment is broadly similar to EMI: no Income Tax or National Insurance on exercise, provided the options are held for at least three years.
SAYE schemes are typically used by larger businesses and allow employees to save a monthly amount over three or five years, then use those savings to buy shares at a fixed price set at the start of the scheme. If the share price has risen, employees benefit from the increase. If it hasn’t, they can simply take their savings back. The scheme must be offered to all eligible employees on the same terms.
A SIP allows companies to give employees free shares, let them buy shares from pre-tax salary, or offer matching shares alongside employee purchases. Shares held in the plan for five years are free of Income Tax and National Insurance on withdrawal. Like SAYE, SIPs must be made available to all eligible employees.
Where HMRC-approved schemes aren’t suitable, it’s still possible to grant share options or issue growth shares outside of a formal scheme. These arrangements don’t carry the same tax advantages, but they can offer greater flexibility, particularly for businesses that don’t meet the qualifying conditions for EMI or CSOP. The tax treatment needs to be carefully managed.
The administrative and legal requirements around employee share schemes are more involved than many business owners expect. EMI options, for example, need to be documented in a formal option agreement, the agreed valuation needs to be in place before options are granted, and the grant must be notified to HMRC via an Employment Related Securities return.
Beyond the initial setup, there are ongoing reporting obligations. Most share schemes require an annual Employment Related Securities return to be filed with HMRC, and any changes to the scheme, or to the company’s own structure, may need to be reviewed to ensure the scheme remains compliant and the tax treatment is preserved.
We work with businesses at every stage: helping them choose the most appropriate scheme, agreeing valuations with HMRC’s Shares and Assets Valuations team, drafting the necessary documentation, and managing the ongoing reporting requirements so nothing gets missed.
One of the main reasons businesses put share schemes in place is to ensure that key employees benefit meaningfully when the business is eventually sold. Getting to that point in good shape, with options properly exercised, valuations documented, and the correct tax reliefs claimed, requires planning well before any transaction begins.
For EMI options in particular, the tax position on exit can be significantly better than for other forms of remuneration, but only if the scheme has been maintained correctly throughout its life. We make sure our clients aren’t caught out at the point where it matters most.
If you’re thinking about introducing a share scheme, or you have an existing scheme you’d like reviewed, get in touch with our expert tax team to see how we can help.
We love meeting new, exciting businesses. Get in touch with our team to see how we could enhance and protect your financial position.
Or if you’d prefer to speak to someone directly just give us a call on: 08000 664 664 or email: hello@wrpartners.co.uk.
"*" indicates required fields
