Chapter 30 - Introduction to Share Schemes

Question 1

What are the four main types of tax-advantaged share schemes?

Answer 1

• Share Incentive Plans
• Save as you Earn
• Company Share Option Plans
• Enterprise Management Incentives

Question 2

Define a ‘share option’

Answer 2

The right to acquire shares in a given time window

Question 3

What are some reasons for setting up a share scheme?

Answer 3

• To reward employees
• To incentivise employees for hard work
• To retain employees

Question 4

True or false

Gifts of shares do no constitute as taxable earnings

Answer 4

False

Question 5

In what circumstance will shares be subject to Class 1 NIC?

Answer 5

Where they are readily convertible assets

Question 6

Where awards of shares are not readily convertible assets, how are they treated?

Answer 6

They are subject to income tax on the value of the shares

Question 7

True or false

There is always an income tax charge on exercise

Answer 7

True

Question 8

How do you calculate the amount charged to income tax on exercise?

Answer 8

Market value at exercise
Less: amount paid for shares

Question 9

True or false

A capital gain will arise if the shares are sold for proceeds in excess of the market value of the shares

Answer 9

True

Question 10

How do you calculate the capital gain?

Answer 10

Sale proceeds
LESS: amount paid for shares
LESS: Amount charged to income tax on exercise