Share schemes Flashcards
SIP vs CSOP vs EMI vs SAYE - who can be in the plan
SIP - must be available to all
CSOP - can choose (own <30%, full time directors or full/part time employees)
EMI - can choose (own <30%, work for a substantial amount of time for company >25 hours a week or >75% of working time)
SAYE - must be available to all
SIP vs CSOP vs EMI vs SAYE - nr of shares that can be acquired by each member
SIP - £3600 each year (must offer same terms to all however they can include amounts based on length of service/targets met)
CSOP - offer share options, max value of £30k per employee (diff amounts to diff employees)
EMI - £250k total options in issue by company =up to £3m
SAYE - employee saves £500 per month from net income
SAYE description
Save proportion of net income over 3 or 5 years. At end can either be used to purchase shares in company or taken together with the tax-free bonus
SIP vs CSOP vs EMI vs SAYE - exercise period
SIP - 5 years
CSOP - 3-10 years from date of grant
EMI - within 10 years of grant
SAYE - 3 or 5 years
SIP vs CSOP - acquisition income tax and CGT implications
SIP - no income tax or CGT on acquisition
CSOP - no income tax or CGT on grant or exercise
SIP vs CSOP - selling income tax and CGT implications
if sold immediately no CGT as same price for SIP
CSOP - proceeds less exercise price
Income tax and NIC >5 years
no tax at withdrawal date
Income tax and NIC 3-5 years
for free, partnership and matching shares
lower of;
-MV at withdrawal date
-MV at grant (i.e. initial value of shares
for dividends shares;
no IT or NIC payable if removed from the plan after 3 years
Income tax and NIC <3 years
for free, partnership and matching shares
-MV at withdrawal date
for dividends shares;
the original dividend = taxable instead
4 types of SIP
free shares - £3,600 each year
partnership shares - entitled to buy partnership shares out of pre-tax remuneration. Allowable deduction against employment income
lower of:
£1,800
10% of salary
matching shares - employee may choose to issue further free shares on 2:1 basis
dividends shares - can use divs rec’d from plan shares to reinvest in further plan shares (which makes it tax free)
non tax adv vs tax adv - grant
no tax on both
non tax adv vs tax adv - exercise
non tax;
income tax charge
MV @ exercise date
less: cost
=Employment income
NIC charge if shares readily convertible into cash - class 1 NICs if quoted. If unquoted = no NICs
tax - not normally taxable
non tax adv vs tax adv - sale
non tax;
capital gain arises
sale process
less: MV @ exercise
=Gain
tax:
capital gain arises
sale process
less: Cost
=Gain
Cost =
cost of shares plus cost paid for the options (if any)
