If you’re a company owner and are seeking a tax-efficient way to incentivize and retain your employees, you should consider one of the HMRC approved share plans. Typically targeted at selected employees with unique or scarce skills, a HMRC approved share plan can be an excellent tool to both incentivize and retain employees you really can’t do without. We’ve spoken to accountants North Wales about how you can take advantage of one of these excellent boosts to your workforce.

These plans allow shares to be awarded to employees tax efficiently and are highly useful for companies who have key employees with in-demand skills. There are a few different types of share plan, and we detail them as below.

Enterprise Management Incentive

This scheme is a share-based tax incentive targeted at independent trading companies with a gross asset base of £30 million or less. The scheme is designed to enable them to attract, retain and incentivize employees within said independent trading companies.

The Enterprise Management Incentive is an option to purchase a stated number of shares in a company. Employees are granted these options under separate agreements, the market value of the share at the time of the grant must not be in excess of £120,000 per employee.

There is one limit to the number of employees that can be granted Enterprise Management Incentive options, however, the total aggregate value of shares over which options can be granted under the scheme options must not exceed £3 million for the company.

Benefits

The Enterprise Management Incentive has many benefits.

•    Improves recruitment, motivation, and retention of high caliber personnel.

•    Shares granted under the option can be ‘restricted non-voting shares’.

•    Can help improve the efficiency of workers.

•    Can be used as an effective recruitment tool.

Company Share Option Plan

This plan is similar to the Enterprise Management Incentive, but the qualifying conditions are not as stringent. The Company Share Option Plan may be an ideal alternative for companies who do not qualify to operate the Enterprise Management Incentive. The maximum option value at grant must not be excess of £30,000 for each employee.

Benefits

•    Helps bring employees interest in line with the shareholders, helping stimulate performance.

•    Can be used as an effective recruitment tool.

Save as You Earn (SAYE)

This is a novel scheme that allows employees to save any amount up to £500 per month, for a set period of three or five years depending on their preference. Should an employee complete the saving plan, they are able to earn a tax-free bonus, helping the employer retain crucial staff.

Importantly, the bonus and the interest accrued on the total at the end of the period is entirely tax-free, making it an appealing option for the employee as well. Income tax or national insurance does not have to be paid on the difference between what was paid for the shares and what they are worth either.

Enterprise Management Schemes

It is possible to grant options worth up to £250,000. Income Tax and National Insurance on these shares do not have to be paid. Please keep in mind that Capital Gains Tax will have to be paid should the shares be sold.

These are only some of the options available to employers when it comes to granting incentives to staff which cannot afford to be lost. For a full and comprehensive list, as well as good advice, we recommend that you speak to your local Chartered Accountant in North Wales to best advise you on your specific needs.