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Amazing experience
After placing an enquiry, I received a call 20 minutes later, and then 2 hours later, I had a solicitor assigned to me. They were absolutely incredible right from the word go - amazing and very prompt with replies, answering all my questions and keeping the process moving. We finally completed today and I am so unbelievably happy. I wouldn’t hesitate to use Lawhive again in the future if needed.
Lily
First class service
I initially made an online enquiry about a tricky conveyancing matter and received an immediate call back. They understood straight away what was needed and gave me a quote that was very reasonable. It was such a pleasure to find someone who was cheerful, professional and completely reassuring as I’d been getting quite anxious about the sale of my house. The service Lawhive has provided is absolutely first class and I cannot recommend them enough.
Charles
Empathetic, professional and efficient
I am an executor, selling my mother's home. I found the assistance I received from Lawhive first rate - empathetic, professional and efficient.
Mark
Great service from Lawhive
We used Lawhive for our conveyancing needs and our solicitor was very helpful, patient and informative. She helped us with our needs with prompt responses and provided a very efficient service.
Kelvin
Great service when you need clarity and calm
Our solicitor was warm, friendly and provided crystal clear communication. A lot of conveyancers assume customers know everything about the process already, so it was really appreciated to hear each stage included in the price given.
Em
Quick and efficient
We used Lawhive for a transfer of property and conveyancing. Our solicitor was so helpful and thorough with the whole process. He responded quickly and efficiently to any questions or requests that we had and explained some of the more complicated issues regarding the process clearly.
Geri
Fantastic service and experience with Lawhive
I had the pleasure of working with Lawhive doing a transfer of equity on a property. Our solicitor’s service was amazing, she responded quickly to any questions or concerns and kept me updated throughout the process. I can strongly recommend her for any conveyancing work that you may need. Fantastic service all round.
Jane
Amazing experience
After placing an enquiry, I received a call 20 minutes later, and then 2 hours later, I had a solicitor assigned to me. They were absolutely incredible right from the word go - amazing and very prompt with replies, answering all my questions and keeping the process moving. We finally completed today and I am so unbelievably happy. I wouldn’t hesitate to use Lawhive again in the future if needed.
Lily
First class service
I initially made an online enquiry about a tricky conveyancing matter and received an immediate call back. They understood straight away what was needed and gave me a quote that was very reasonable. It was such a pleasure to find someone who was cheerful, professional and completely reassuring as I’d been getting quite anxious about the sale of my house. The service Lawhive has provided is absolutely first class and I cannot recommend them enough.
Charles
Empathetic, professional and efficient
I am an executor, selling my mother's home. I found the assistance I received from Lawhive first rate - empathetic, professional and efficient.
Mark
Great service from Lawhive
We used Lawhive for our conveyancing needs and our solicitor was very helpful, patient and informative. She helped us with our needs with prompt responses and provided a very efficient service.
Kelvin
Great service when you need clarity and calm
Our solicitor was warm, friendly and provided crystal clear communication. A lot of conveyancers assume customers know everything about the process already, so it was really appreciated to hear each stage included in the price given.
Em
Quick and efficient
We used Lawhive for a transfer of property and conveyancing. Our solicitor was so helpful and thorough with the whole process. He responded quickly and efficiently to any questions or requests that we had and explained some of the more complicated issues regarding the process clearly.
Geri
Fantastic service and experience with Lawhive
I had the pleasure of working with Lawhive doing a transfer of equity on a property. Our solicitor’s service was amazing, she responded quickly to any questions or concerns and kept me updated throughout the process. I can strongly recommend her for any conveyancing work that you may need. Fantastic service all round.
Jane
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01 overview
Starting an employee share scheme means giving your employees a stake in your business. Usually, these schemes are set up to motivate employees, improve retention, and attract new talent.
Employee Share Option Schemes can also help business owners pass ownership to those working. By using such a scheme, owners can slowly sell the company - and maybe enjoy some tax breaks along the way depending on the share scheme setup.
Deciding on the most suitable scheme for your requirements can be difficult as there are lots of different ways to distribute equity. At Lawhive, our network of corporate lawyers is on hand to provide advice on various employee share schemes, including Company Share Option Plans and Enterprise Management Incentive Schemes.
Contact our legal assessment team today to get your free quote for solicitor services and advice.
An employee share scheme is a way of distributing company ownership among employers.
Through an employee share scheme, businesses can reward some or all employees with equity in the company. They can also extend this opportunity to external shareholders, like consultants and advisors.
Employee share schemes primarily operate through two mechanisms: shares and options. Each offers various scheme types with distinct characteristics.
Shares represent actual ownership stakes in a company and can be granted immediately. There are two types:
Options grant the right to purchase shares at a later date, typically at a predetermined price. These options can be exercised in the future, either on reaching a certain milestone or at the time of an exit event, such as an acquisition or IPO.
The main difference between shares and options is the timing and nature of ownership. Shares represent actual ownership in the company and can be granted immediately, while options grant the right to purchase shares at a later date.
It’s important to understand the difference between shares and options because they impact the timing of ownership, tax implications, and the ability to participate in the company’s growth.
There are three main types of share schemes
Share award schemes involve giving employees shares. The value of these shares is considered part of their income and is taxed accordingly unless the plan has been approved by HMRC as ‘tax-advantaged.’
In Share Option Schemes, employees get the right to buy a set number of company shares at a fixed price sometime in the future. Usually, employees can’t exercise these options (buy the shares) until after a certain period, known as the vesting period.
You can also tie the granting and exercising of options to meeting certain goals, like hitting sales targets or creating a prototype.
Share Purchase Schemes allow employees to buy shares outright, save money over time to buy shares, or put down a small deposit and pay the rest later to buy shares.
HMRC-approved schemes, like the Company Share Option Plan and the Enterprise Management Incentives scheme, offer tax and National Insurance contribution advantages. On the other hand, unapproved schemes don’t provide these benefits.
However, unapproved schemes are sometimes more flexible because they don’t have to meet the qualifying conditions set for approved schemes.
Phantom share options are where employees receive rights to cash payments. These payments are worked out on the value of the company’s shares. Instead of actual ownership of the shares, employees get cash based on how well the company performs.
A Company Share Option Plan (SCOP) is a scheme where employers can offer employees the opportunity to buy company shares at a fixed price.
In a CSOP, employers can grant employees options on shares worth up to £30,000 each. The share price is set when the option is granted and must be at least as high as the share’s market value on that day.
Employees can exercise their options after a specific period, buying shares at the fixed price, not the current market value.
If employees go on to see the shares for a profit, they may not have to pay income tax or National Insurance contributions on the gains, under certain circumstances. However, they might be liable for Capital Gains Tax if their profits exceed their annual allowance.
Businesses can receive tax relief on the costs associated with establishing and managing the CSOP, as well as on providing shares through the scheme.
An Enterprise Management Incentive scheme lets qualifying companies offer employees options to buy shares worth up to £120,000 per employee (up to a total of £3 million) at a set price.
To qualify, the company’s gross assets must be under £30 million, and it must have less than 250 employees. Certain types of companies, like those in property development or financial activities, don’t qualify. Furthermore, participants in the scheme must be employees working at least 25 hours a week or 75% of their working time. Those owning 30% or more of the company’s shares don’t qualify.
EMI schemes are a popular employee share scheme for private companies.
No. In the UK, all shareholders are subject to Capital Gains Tax on any gains from shares. Generally, tax can be due on award, exercise, or sale of shares, with Capital Gains Tax applying to gains in share value and Income Tax being levied at the recipient’s current tax rate.
However, certain schemes offer tax advantages, with recipients benefiting from a lawyer rate on gains over the agreed value set by HMRC at the time of sale, provided it’s at least 24 months after the grant of options.
Further, EMI schemes, for example, can also be cost-effective for employers, offering offsets against Corporation Tax liability. However, it’s important for businesses to fully understand the different tax implications of each scheme.
There are several good reasons to consider setting up an Employee Share Scheme, particularly for start-ups and growing companies. Core benefits include:
ESS can be a valuable addition to a company’s benefits package, especially when funds are limited in growing companies. As part of a comprehensive benefits package, an employee share scheme can be a good alternative to using higher salaries as a way to attract and retain new talent.
Some research suggests that the presence of an employee share scheme can positively impact company performance as a whole, as well as individual productivity.
Similar to the above, when employees own shares in a company, they feel more connected to the business and invested in its success. This can lead to enhanced employee engagement, loyalty, morale, and increased focus on the company’s success.
Employees might enjoy tax perks, like avoiding income tax or National Insurance on their worth in specific schemes, including Share Incentive Plans, Save As You Earn (SAYE), Company Share Option Plans, and Enterprise Management Incentives.
Shares offered outside of these approved schemes don’t have the same tax benefits.
Employee shareholders may also enjoy some tax reliefs depending on the value of their shares.
Setting up an employee share scheme involves some careful planning. Then, once set up, there are ongoing administration and compliance tasks to take into account. While this does involve some expense for the company, including time and resources, the benefits they enjoy as outlined above are significant, providing a tangible return on investment.
There are lots of different options when it comes to employee share schemes, including HMRC tax advantaged schemes, Non-HMRC tax advantaged schemes and non-tax advantaged schemes.
It’s important to understand what you are trying to achieve by establishing an employee share scheme in the first instance, however, it’s also worth noting that certain schemes may not be suitable for your company if you don’t meet the eligibility criteria.
Let’s break them down:
An HMRC tax-advantage scheme is an employee share scheme approved by HMRC that offers tax benefits to both employees and employers. These schemes encourage employee share ownership and can include:
Startups, scaleups, and SMEs favour EMI option schemes because of their tax benefits, while Share Incentive Plans and Save As You Earn schemes require company-wide participation, making them suitable for larger companies with more employees. Unlike EMI and CSOP schemes, which can be selective, these schemes typically extend eligibility to all employees.
You can establish share ownership schemes for employees that still provide tax advantages while not being HMRC-approved. These arrangements involve the acquisition of shares or share rights and allow the company or shareholders to safeguard voiding rights, and dividend rights, and better handle situations involving good leavers or bad leavers as needed.
In a Share Subscription Arrangement, employees purchase shares directly from the company, usually at their market value. Any increase in the value of the shares is typically treated as a ‘capital gain’ for the employee. This means that they may be subject to Capital Gains Tax when they sell the shares in the future.
Share Subscription Arrangements can be structured in various ways to suit the needs of the company and its employees, including determining the subscription price, the number of shares available for subscription, and any conditions attached.
Growth/Hurdle Share Arrangements involve creating a new class of shares with no value until specific milestones are reached.
These arrangements aim to manage the acquisition cost of shares by initially assigning them a low or nominal value. Employees can then subscribe for these shares at market value, and any increase in value is treated as a capital gain when the shares are sold.
Joint Share Ownership Arrangements involve employees acquiring a share interest through a trust. The trustee holds the current value of the shares, while employees pay market value for their share interest. When the shares are sold, any increase in value is considered a capital gain.
Non-tax-advantaged schemes are employee-share ownership arrangements that do not qualify for specific tax benefits. These include:
Setting up an employee share scheme can cost anywhere between £5,000 and £30,000 depending on the size of the scheme.
When setting up a scheme, it’s important to seek assistance from a lawyer. The average cost for a licensed solicitor to help with an Employee Share Option Scheme (ESOS) can range from £188-£250, but in some cases, it could cost as much as £313.
It’s not a legal requirement to hire a solicitor to set up an employee share scheme, however, the support and advice of an employee share scheme solicitor can go a long way to make sure the scheme aligns with your business goals and maximises tax efficiencies.
What’s more, a solicitor can advise on how you may go about future-proofing your employee share option scheme to make sure your company and its shareholders are protected.
Our expert network of lawyers offers support to businesses in designing employee share option plans tailored to your company and its stakeholders.
They can help with:
For more information and a free fixed-fee quote, contact our legal assessment team.
With straightforward pricing - so you know exactly what to expect at every step.
