PT38 Intro to Share Schemes

Question 1

There are four main types of tax-advantaged share schemes which have tax and NICs advantages. They are:

Answer 1

• Share Incentive Plans (SIPs);
• Save As You Earn (SAYE) Share Option Schemes;
• Company Share Option Plans (CSOPs); and
• Enterprise Management Incentives (EMIs).

It is also possible to have other schemes which do not benefit from the tax and NICs advantages.

Question 2

Share incentive and share option schemes are used to:

Answer 2

• reward employees for work done;
• incentivise employees to work hard to increase the value of the company; and
• retain employees.

Question 3

How are gifts of shares treated?

Answer 3

If shares are given to an employee, this will simply be taxable earnings. The award of shares is reported to HMRC online.

Question 4

How are gifts of shares taxed?

Answer 4

If the shares are readily convertible assets, eg listed shares, PAYE and Class 1 NICs will be due.
PAYE will be deducted from cash pay and the usual 50% restriction on the amount of PAYE collected in this way does not apply.

Awards of shares which are not readily convertible assets do not attract PAYE nor Class 1 or 1A NICs, but they will be subject to tax on the value of the shares through the self assessment system.