Phantom share schemes ― an overview

Produced by Tolley in association with

Employment Tax

Guidance

Phantom share schemes are employee bonus arrangements where the calculation of the reward is typically aligned with the growth in value of the business over the performance period being measured.

Whilst not technically a share scheme, these are often designed and implemented by the same employee incentives advisors who devise share schemes. In addition, employers may use phantom schemes where an actual share scheme would not otherwise meet their incentive requirements, or for individuals who do not qualify for the company’s actual share schemes. They should therefore be considered as part of an overall project to decide on the best ways of incentivising employees based on company share performance.

It is also worth noting that phantom share schemes must be considered for accounting purposes as a share-based payment under IFRS2 or FRS 102. See ICAEW IFRS2 and Financial Reporting Council FRS 102.

Operation

Phantom share schemes operate as a type of shadow share acquisition or share option arrangement. The key difference from a standard share scheme is that phantom

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Helen Wood

Founder, HLN WD TX , Employment Tax

Helen Wood is the founder of HLN WD TX, a share schemes and employee incentives advisory business.She qualified as a CA with ICAS in 2009 and has worked as a specialist reward and incentives advisor for 17 years, spending 13 of those at KPMG followed by 3 ½ years as an Associate Director at RSM. Helen has worked with businesses ranging from start-ups to fully listed companies, spanning owner-managed businesses, private equity portfolio companies, and AIM listed businesses.She advises on a wide range of employee share schemes and employment related securities matters including the design and implementation of effective management and employee incentives; tax valuation of employment related securities, buy and sell side transaction support, HMRC compliance, tax due diligence and employee ownership trust transactions.

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