Many employers seek to offer employees tax efficient incentives in addition to their basic salaries. Allowing employees to take an equity stake in the company they work for can be very attractive – it will help the company to recruit and retain key staff.
Using one of the tax advantaged company share option schemes can be appropriate for many companies.
The Enterprise Management Incentive (‘EMI’) share option scheme is a very valuable tool for medium-sized companies.
We have extensive experience of creating and implementing many EMI schemes for our clients.
An EMI share option is very tax efficient for the employee. The rules provide the company setting up the scheme with great flexibility in the creation of a bespoke scheme which suits the company and its employees.
The main features of an EMI scheme are as follows:
- Available for companies with no more than 250 employees and gross assets less than £30 million;
- The company must be an independent company not controlled by another company;
- The company must carry on a qualifying activity;
- The individual employee receiving the option must work full time for the company;
- An individual cannot have more than 30% of the share capital or votes;
- The exercise price for the option will be the market value of the share at the date it is granted – minority discounts will be applied when ascertaining the value;
- The only tax charge for the employees will be when they ultimately sell the shares they gain on the exercise of the option;
- The tax charge above will be at a rate of 10% and not income tax rates;
- The scheme does not have to be ‘agreed’ by HMRC but it must comply with certain laid down conditions; and
- Planning is important to ensure that all issues are addressed.
Partner and Head of Tax
GSA Techsource is a leading provider of specialist recruitment solutions to the IT, Project Management and Healthcare Informatics markets. Based in Staffordshire, the company has been established over 25 years.
GSA has been a client of Friend for 4 years.
GSA’s directors are Jayne Morris and Neil Jones. They explain more about the firm and its relationship with Friend:
“We have been a client of Friend for four years. We appointed them as advisers to the company and its owners when Simon Littlejohns joined the firm. Simon was instrumental in creating the group structure which we have today.
Simon advised the current management team as part of the Management Buy Out which enabled the majority shareholder to exit the business in a highly tax efficient manner.
“The transition for us from employees to business owners has been challenging and not without its problems. Simon has helped us deal with these issues with practical and commercial advice at all stages.”
Simon has helped GSA with a range of matters, including: devising and implementing an employee share scheme, assisting with senior employee changes, putting in place appropriate personal tax planning arrangements and generally being on hand for the ‘sounding board’ moments when new business ideas arise.
“Our annual audit is always conducted efficiently and with little drama and it gives the directors confidence in knowing that the figures have been subject to independent scrutiny.”
“GSA has risen to, and dealt with, the challenges over the past few years. With the help and support of Friend we are now looking forward to the future with great optimism.”
Find out more at www.gsatechsource.com