Chapter 33 - Company Share Option Plans

Question 1

Define a company share option plan (CSOP)

Answer 1

A CSOP is a flexible way of rewarding specified employees & involves granting options over employer company shares

Question 2

True or false

Employees with more than 50% of shares in a close company cannot participate

Answer 2

False

Employees with more than 30% cannot participate

Question 3

What are the main conditions of CSOP?

Answer 3

• No discount can be given (the option price cannot be less than the market value)
• The maximum value of shares (at date of grant) over which options can be held is £60k

Question 4

What are the income tax & NIC implications on the exercise of company share options if the exercise is made between 3 & 5 years?

Answer 4

There are none

Question 5

True or false

The employee will only have a capital gain equal to the different between cost & sales proceeds

Answer 5

True

Question 6

How do you calculate the charge to employment income where the exercise is made outside of 3 to 10 years from the date of grant?

Answer 6

Market value at date of exercise
LESS: Option price

Question 7

When will NICs be charged?

Answer 7

If the shares are readily convertible assets

Question 8

How do you calculate the capital gain?

Answer 8

Sales proceeds
LESS: Cost
LESS: Amount charged to income tax