What are the different type of employee share schemes a company can have? [UK]

  • Growth shares grant the holder a share of value increase above a Hurdle Rate. The value is normally some market value plus 10 to 20% as a hurdle
    • No Income Tax, NI for either employee or employer on issue
    • requires a company valuation when issued.  HMRC doesn't approve this, but on sale can investigate the hurdle rate valuation if they want
    • there is CGT on disposal, on the amount above the hurdle.  Shares are held in escrow until excise
  • Unapproved Schemes 
    • the holder will pay income tax and potentially NI on excise as well as full CGT where capital gain is realised
    • company can offset the Gains value of PAYE scheme holders on their Corporation Tax.  ie only those on UK payroll who achieve a profit on excise of their options
  • EMI Options are the most tax efficient way to grant options to UK employees
    • company must have less than 250 employees and £30m gross assets
    • the company can't be a subsidairy of another company
    • If another company owns > 50% or can otherwise direct, then you also won't qualify

Here's a way to think about this, pictorially: