Employer consequences of share schemes

Produced by Tolley in association with

Employment Tax

Guidance

There are a number of different consequences that can arise for employers as a result of introducing and operating employee share incentive arrangements, some beneficial and some costly.

There may be an opportunity to obtain corporation tax relief on payments in the form of shares. This relief might also extend to the cost of implementing and running share schemes.

Companies are also obliged to account for PAYE in respect of employee share awards in certain circumstances and on certain ‘chargeable events’ in relation to employment-related shares.

Finally, companies that employ individuals who benefit from share schemes must budget for any employer’s NIC liability that might arise. This represents a real cost though in some circumstances it may be passed on to the employee.

This guidance note does not consider the implications of the disguised remuneration legislation since this is looked at in detail elsewhere (see the Disguised remuneration ― overview guidance note) and is only peripheral to employee share arrangements.

Corporation tax relief

In order for shares to qualify for corporation tax relief,

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Stephen Diosi

Head of Employee Incentives, Mishcon de Reya LLP , Employment Tax

Stephen leads the Employee Incentives team at Mishcon de Reya. He has significant experience advising on the strategy, design, implementation and compliance of UK and global employee incentive arrangements, including long term incentive plans, all-employee share plans, HM Revenue and Customs tax-advantaged plans, management incentive plans and growth share and joint ownership plans. Stephen also advises on all related corporate, tax and trusts aspects, corporate governance issues, disclosure of directors' remuneration and share dealing regulations.In addition, Stephen works with companies on the impact that corporate actions have on their incentive arrangements and has acted on many public takeovers, mergers and acquisition, public to private transactions, initial public offerings, capital raising activities and private equity deals.Stephen also advises on contractual disputes and tax investigations relevant to incentives arrangements.Stephen works with a wide range of businesses across several industry sectors, including financial services, natural resources, entertainment, aerospace and transport and for companies that are listed on the London Stock Exchange, AIM and overseas exchanges, together with private equity houses, private companies and owner-managed businesses.

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Employer consequences of share schemes