Share Option Schemes

If your company is looking to offer a long term incentive to employees, you should consider EMI options. These are tax efficient ways for employees to purchase shares in the company at a future date as they will likely be charged capital gains tax not income tax on any future gain made on a sale of the share, and may also qualify for the lower 10% rate. For the company, you should be able to make a corporation tax deduction when the option is exercised if you satisfy the relevant criteria.

It is possible to attach conditions to the exercise of options, for example that they are exercisable only immediately prior to a sale of the company or on an asset sale and also to make them contingent on employee performance.

Setting up an EMI scheme in these market conditions may mean a lower per share value can be agreed with HMRC than before the lockdown. This will reduce the amount the employee has to pay to acquire their shares on exercise.

If you would like to find out more about EMI options, please contact David Judah.

The contents of this email are intended for general information only and does not constitute legal advice. Wallace LLP cannot accept responsibility for any loss arising from the use of the content in this email. This information was prepared on 6 May 2020.