Share Schemes

Question 1

What are the 3 stages of share schemes

Answer 1

1. Grant - option to buy the shares at a future date is granted to the employee
2. Exercise - when the employee actually buys the shares
3. Sale

Question 2

Non-tax advantaged share schemes

Answer 2

Grant - no tax
Exercise - taxed as employment income, MV on exercise less cost = taxable amount
Disposal - capital gain on the increase in the value of the shares since the exercise date,
Proceeds less cost less amount charged to income tax on exercise = gain

Question 3

Tax advantaged share schemes - 4 types

Answer 3

CSOP - company share option plan
EMI - enterprise management incentives
SAYE - save as you earn
SIP - share incentive plan

Question 4

Discuss the SIP

Answer 4

Complex share plan arrangements. Up to 4 different ways of providing shares (as opposed to share options) to employees.
Shares are held in the plan in trust for the employees, rather than owned personally by each e’ee.
Employers may use one, some or all of the following ways of issuing shares to reward their e’ees:

1. Free shares
2. Partnership shares
3. Matching shares
4. Dividend shares

Question 5

SIP > 1. free shares

Answer 5

up to £3,600 per tax year
holding period of at least 3 years from award
no tax on award
tax on removal of shares from plan within 3 years of award = on market value when taken out
tax on removal between 3 and 5 years of award = on lower of: *value at award *value on removal
no tax on removal after 5 years
no CGT on removal
CGT base cost = MV at removal

Question 6

CSOP details

Answer 6

may restrict qualifying employees to key e’ees only (owning <30%)
max total value at grant per e’ee = £30k
no discount at grant