Share incentive schemes Flashcards
What are the main reason for companies using share incentive schemes
Remuneration for services
Performance incentive
Rentention of staff
Explain a share option vs excercising an option
Share option - rigth to acquire shares at some point in the fututre
Excercise option - takes up the right to aquire shares
Difference between readily convertable asset and non readily convertable assets
Readily convertable can easily be converted into cash, shares in a listed company, or shares in an unlisted company where there is an arrangement for resale
Treated as earning therefore subject to PAYE and NIC for EE and ER
Company must notify HMRC by 6th July after the tax year
Non readily convertable - not treated as earnings. IT due through self assesement
When will unlisted shares with no arrangement for resale be treated as readily convertable assets
When the company is not eligble for a CT deduction on the shares ..
A CT deduction is available when:
The shares are awarded under a tax advantage sheme
The shares are ordinary shares with no special rights in either:
A listed company (or subsidiary of listed company)
A company which is not under the control of another company
NO CT deduction - treated as readily convetable.
Planning: Award shares in parent company
Rules on deducting PAYE
The employer is required to pay the PAYE (IT and NI) to HMRC by the 19th/ 22nd following the month. If this results in a negative net pay the employee owes the company
This must be paid back by the employee no later than 90 days following the end of the tax year 5th July or else it is treated as earning
Alternative is to enter into an employee loan.
