Equity incentive schemes as employee benefits
Equity incentives schemes are a cost-effective tool offered as part of remuneration packages to recruit, retain and reward employees.
Giving employees an opportunity to acquire an equity stake in the company leads to increased loyalty, motivation and engagement. Creating aligned interests between employees and other shareholders helps drive business growth and ultimately the value of the company.
Types of share schemes
Shares schemes can take many forms including:
- HMRC-approved share schemes, e.g. EMI
- Unapproved share schemes
- Direct share awards
- Share options
Which scheme to adopt depends on the employees’ needs and the business’s objectives.
The most attractive and popular form of share incentive scheme is the Enterprise Management Incentive (EMI) scheme, an HMRC approved scheme that offers significant tax incentives. However, an EMI scheme is not suitable for all companies due to certain qualifying conditions that need to be met.
Alternative bespoke schemes are available, such as growth shares or Joint Share Ownership plans (JSOP). These allow employees to participate in the future growth in value of the business in a tax-efficient way and with a low upfront cost for the employee.
Our equity incentives team has a wealth of experience supporting clients with designing and implementing appropriate equity incentive schemes for their employees and advising on associated tax implications.
Our equity incentives services include:
- Designing and implementing equity incentive schemes.
- Assessing eligibility for HMRC-approved share schemes.
- Income tax and NIC implications for employer and employee (including internationally mobile staff).
- Assessing the corporation tax relief position.
- Tax compliance filings (eg EMI grant notifications) and Employment Related Securities (ERS) annual return.
- Advising ons431 tax elections.
- Agreeing NIC elections with HMRC.
- Share option gain calculations.
- Processing equity incentive payments through payroll.
If you have any questions or need advice on equity incentive schemes, please get in touch with our equity incentive team.