| Financial Benefits to Encourage Employee Participation |
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employee must pay income tax on the sums used to buy the shares or the value when removed.136 Charges may also arise if share money is paid over to the employee or on cancellation payments to E.137 Sums set aside by the employee in this way are tax free yet are not deductible from salary in computing relevant earnings for pensions limits. |
Dividend shares may arise under a partnership share scheme. The rules are the same as for free shares above. |
16A.6.6 Matching (Partnership) Shares |
These allow employers to match ‘partnership’ shares by giving employees up to two free shares for each partnership share they buy. They must be on the same terms and carry the same rights as the partnership shares; they must be appropriated at the same time,138 and to all employees on the same basis. There are rules about giving employees information. The holding period rules are the same as for free shares; further rules allow the company to require forfeiture of the shares when the employee leaves employment.139 |
Income tax and CGT rules are the same as for free shares. The rules for dividend shares apply here also. |
16A.6.7 Miscellaneous (Table) |
Employers may deduct the costs of setting up and running the plan and for the market value of any free and matching shares used in the plan.140 The trustees are given a power to borrow money to buy the shares or subscribe for rights issues.141 |