Budget 2008

Approved Employee Share Schemes

Enterprise management incentive (EMI)

• No formal approval required (advance assurance available).
• Maximum value of shares over which unexercised options exist not to exceed £3 million per company at any time, based on grant price.
  
• Available to qualifying trading companies with gross assets of not more than £30 million at time of grant.
  
• Company must have fewer than 250 employees.
• Maximum market value on grant of unexercised qualifying options in one company or group £120,000 (£100,000 2007/2008) per eligible employee (includes existing company share option plan (CSOP) options).
  
• Option must be capable of exercise within 10 years from grant, tax charges can arise if exercised after this period.
• No tax orNIC payable at time of grant.
• No tax orNIC on exercise if exercise price is at least market value at date of grant subject to disqualifying event provisions.
• Sale of shares subject to capital gains tax.
• Shares qualify for taper relief from date options granted for disposals pre 6 April 2008.

Share Incentive Plan (SIP)

• Shares must be non-redeemable, fully paid, ordinary shares, but can be of a special class.
• Must be available to all employees satisfying eligibility requirements.
• Dividends can be reinvested tax free into further shares (dividend shares).
• Free, matching or partnership shares can be awarded.
• Income tax free award if qualifying conditions met.

Free Shares

• Maximum of £3,000 worth of shares per tax year can be given per employee.
• Minimum holding period must be at least 3 years but may be up to 5 years at the option of the company.
• Must be held for 5 years to benefit from full income tax relief.
• Allocation may be conditional on achievement of performance targets.

Partnership Shares

• Deduction made from employees’ salaries to purchase shares.
• Full tax relief on purchased shares.
• Maximum £1,500 per tax year subject to overall maximum of 10% of salary.
• Minimum specified salary deduction must not be greater than £10 per month.
• Company may specify the maximum number of shares in an award.
• Must be held for 5 years to benefit from full tax relief.

Matching shares

• Employers can give up to 2 matching shares for each partnership share.
  
• Must be of same class and carry same rights as partnership shares.
• Subject to same minimum holding period and tax relief as free shares.

Dividend shares

• Maximum of £1,500 per person per tax year.
  
• Amounts not reinvested can be carried forward for up to 3 years.
• Minimum holding period of 3 years.

Save As You Earn (SAYE) Option Scheme

• Must be available to all eligible employees.
• Monthly contributions must not exceed £250.
• Minimum specified contribution must not be greater than £10 per month.
• Savings contracts of either 3, 5 or 7 years term.
• May grant at up to 20%discount on market value.
• Gain and/or bonus on exercise at end of term is tax free.

Company Share Option Plans (CSOP)

• Maximum value of shares under options £30,000 per employee at date of any grant.
• Exercise price must be not manifestly less than market value of shares at time of grant.
• No tax on grant or exercise if option exercised within 3 to 10 years after grant.
• Taper relief from date of exercise for diposals pre 6 April 2008.

Corporation Tax Relief

• Available for most employee share awards in the employer or parent company.
• A deduction is typically available on the difference between the market value of shares at the time of exercise and the amount the
  employee actually pays.