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Share option schemes: enterprise management incentive

In the Budget the Chancellor proposed a new share incentive scheme aimed at key persons working in small and medium sized unquoted companies. The apparent aim of the new scheme is to help such companies attract quality management from larger companies. The Revenue has issued a technical note for consultation.

The Note proposes

* No tax would be due on the acquisition of shares by the employee (however the shares are accrued ie by exercise of option or by grant). Thus an employee receives free shares from the employer there will be no tax charge on the value of those shares. However, on sale of the shares it would seem that a charge to capital gains tax is anticipated. So this looks to be very much like a tax deferment proposal.

* The value of shares that could be given to an executive could be capped at £100,000. Alternatively, the limit could be left to shareholders of the company to decide.

* Only a limited number of executives in a company would be allowed to benefit. These would be those which the Note calls &#34high quality managers&#34. The Note sets the limit at 6. Therefore, it is not intended that the scheme should be as widely available as the executive share option scheme was.

* The Note asks whether the acquisition of shares should be based on performance targets – though the Note is silent on how these should be structured if introduced.

* The type of company that would benefit would be, as stated above, small and medium sized unquoted companies. It appears that the final definition will not be as loose as this, and may try to focus on specific types of companies.


For any adviser or business serious about providing employee benefits an awareness of what is developing is essential to maintain any credibility in communication with clients/potential clients.


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