Chapter 17 - Company Share Option Plans

Question 1

Introduction

Answer 1

Gives employee right to buy shares in the co at a fixed price within a specified time span. No discount is allowed on the grant. No shares are given, it is just the right to buy shares.

Question 2

Conditions

Answer 2

Must register scheme with HMRC. Must be ordinary shares. Employer can invite or exclude whoever they want from participating.
People with a material interest - holding more than 30% of share capital - can’t participate.
Maximum value of £30,000 can be held.

Question 3

Tax Implications

Answer 3

No IT or NIC at grant of option.
No IT or NIC if exercised between 3-10 years of grant
If exercised before 3 years or after 10 years, an IT charge arises of MV @ exercise less option price. NIC applies if readily convertible

Question 4

Tax Implications Cont.

Answer 4

No IT or NIC if exercised within 3 years of grant if individual ceases being a full time director or qualifying employee. Must exercise within 6 months.
If they die, must exercise option within 12 months

Question 5

CGT

Answer 5

CGT charged on proceeds less purchase cost where no IT charge. If IT charge, deduct that to get the base cost.

Question 6

Mistake

Answer 6

If a mistake on valuing the shares at grant occurred, a charge will arise on grant equal to the discount given