Remuneration

5. Using Shares and Options

Share schemes and share option plans allow you to link long-term incentives to long-term goals. They give employees a stake in the company's growth, making them hard to poach.

5.1 Shares and options granted under HMRC-approved employee share schemes are free of income tax and NI, as long as they are held for the specified period.

• You may be able to offset the costs of setting up and funding such schemes against corporation tax.
• Approved schemes include Share Incentive Plans (formerly All-Employee Share Ownership Plans) and Enterprise Management Incentive schemes.

5.2 Shares held by employees in the companies they work for now count as business assets for capital gains tax (CGT) purposes.

5.3 Unapproved schemes bring fewer tax breaks, but can be set up on a larger scale.

5.4 One brake on the progress of share plans in smaller companies is often the original owners' concern about diluting their equity.

• You also have to negotiate a market value of the shares with HMRC.