| Financial Benefits to Encourage Employee Participation |
5 |
shares (maximum £3,000 p.a.), partnership shares (bought by the employee up to £1,500 p.a.) and matching shares (given on a 2 for 1 basis by the employer to match the partnership shares. These involve the issue of shares. Chapter 9 (sections 527–541) §16A.9 deals with Enterprise Management Incentives, also dating from FA 2000. This is a very generous share option scheme which available only to a relatively few employees ITEPA part 7 chapter 9 (see §chapter 10 sections 542–548 with priority share allocations and is outlined in §16A.1.4.2. |
Because these rules are often complex and restrictive, it is still common for employers to offer employees (usually only key employees) benefit schemes which fall outside the rules. Unapproved share option schemes became more popular after 1996 when the then approved schemes were limited to £30,000, but suffer from the rules also introduced in 1996 which make them subject not only to income tax but also National Insurance Contributions (NICs) and PAYE.3 Any discount on the grant of non–approved options is subject to NICs. |
‘Phantom schemes’ exist under which a tax bonus is tied to the company’s share price. Neither actual shares nor options are involved here. Other, intermediate schemes can be set up in which the company buys shares for an employee but holds them in trust. |
16A.1.2 Older Schemes |
Various older schemes have either ceased to exist altogether or to be brought into existence. For this reason they do not feature in the pages on ITEPA. |
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