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EMI share schemes benefit from favourable tax treatment and can be a useful tax planning device where a company is being groomed for sale
Share Schemes can be useful in start up situations where cash is limited but employees are willing to shoulder some of that additional corporate risk in exchange for a capital share in that business. Employees can receive options over shares and, subject to conditions, no income tax or NIC liability arises on either the grant or exercise of the option, subject to an overall cap on the value of the shares.
The company may also benefit from a corporation tax deduction when the option is exercised.
In addition, on a sale of shares acquired under a qualifying option scheme an individual may benefit from Business Asset Disposal Relief (formerly Entrepreneurs’ Relief) at the relevant rate at the time.
There are other types of share schemes available which fall into two main categories, HMRC approved schemes and unapproved schemes
Approved share option schemes have tax advantages attached but use of these is subject to stringent requirements. Unapproved share option schemes offer a much broader participation and greater flexibility; but tax advantages are minimal, however there can be crucial commercial advantages gained through their operation.
The trade off is always between cash outlay for remuneration, or other traditional staff costs and dilution of equity ownership for the existing shareholders. The varying types of option schemes available that allow that trade off to be managed and controlled include:
PartnerView David's profile
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David is an International Corporate Tax specialist. He has over 30 years’ experience in providing commercially focused tax advice and support to a wide range of clients, from technology start-ups to large inward investing corporates.
A qualified Chartered Accountant, David went on to qualify as a Chartered Tax Adviser and prior to joining Alliotts as a partner in 2014 he held the position of tax partner in Grant Thornton and subsequently in PwC.
David focuses on providing strategic tax advice to entrepreneurs and privately owned businesses. By investing time in understanding clients and their businesses he is able to provide advice which is practical and appropriate to clients’ circumstances in order to keep taxes to a sensible minimum. He advises on a wide range of taxes including transaction planning, UK outbound and inbound structuring, corporate tax, technology tax reliefs, investor and shareholder planning, capital gains tax and LLPs. David advises both UK and overseas business owners on international tax planning.
David also specialises in advising individuals and businesses in the media sector on UK film tax credits, video games tax reliefs and other creative sector tax incentives. He also advises on EIS and SEIS.
Clair’s experience has been generated over almost 20 years in practice. Over this time Clair has worked closely with clients operating in corporate and not for profit environments. Clair enjoys the technical aspect of the application of tax legislation to make sure clients are compliant, and the practical application to make sure that they are tax efficient. Tax is integral to each structure and to every transaction, Clair specialises in advising on the vital areas of corporate tax, tax reliefs and international VAT. The true value of Clair’s advice is that it is designed to provide solutions and is delivered in terms clients understand. Leading and mentoring a talented team of advisors Clair is driving Alliotts tax offering to ensure that it not only meets, but anticipates the needs of ambitious businesses in a global market.
Dipali has over 20 years experience in practice and working with a wide variety of clients. Having gained her experience by working in different departments within Alliotts over the years, Dipali has established an all-round experience and is great for offering business strategy advisory which is not only commercially focussed, but is relevant to a business owner’s objectives.