Share awards and long-term incentive plans

Produced by Tolley in association with

Employment Tax

Guidance

In some cases, a company may wish to make outright share awards to its employees rather than granting options.

Long-term incentive plans

One common example is the award of shares under a long-term incentive plan (LTIP) or performance share plan. Under these plans, employees receive contingent awards of shares ― either via a share option or a restricted share award ― and where demanding performance targets are met, often after a three-year measurement period, the shares are awarded at no cost to the employee. This type of arrangement is commonly used by listed companies but may be used by any company.

However, for an unlisted company, consideration should be given to how the income tax and NIC costs will be funded by the employee if there is no market for the shares. This is known as a ‘dry tax charge’, see Simon’s Taxes C1.311 and C6.119 for discussion of ‘dry tax charges’ generally.

There are two significant issues in making a share award at nil cost:

Continue reading the full document

To gain access to additional expert tax guidance, workflow tools, generative tax AI, and tax research, register for a free trial of Tolley+™

TAKE A FREE TRIAL NOW

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.

Popular Articles

Owner-Managed Businesses

Wholly and exclusively

Wholly and exclusivelyFor both income tax and corporation tax purposes, one of the fundamental conditions that must be satisfied for an item of expenditure to be deductible, is that it must incurred ‘wholly and exclusively’ for the purposes of the trade, profession or vocation. References to CTA

14 Jul 2020 14:00 | Produced by Tolley Read more

Employment Tax

Long service awards

Long service awardsEmployee recognition by an employer can be an important motivational tool, as well as having a positive effect on retention. Most employer awards made to an employee are treated as taxable earnings under ITEPA 2003, s 62 or as a benefit under ITEPA 2003, s 201 because they are

14 Jul 2020 12:11 | Produced by Tolley Read more

Value Added Tax

Exemption ― overview ― items exempt from VAT in the UK

Exemption ― overview ― items exempt from VAT in the UKVAT exemption: list of supplies exempt from UK VATThe goods or services that are exempt from VAT are listed under various group headings within VATA 1994, Sch 9, Pt II.It is important to remember that not all supplies that come within a heading

14 Jul 2020 12:45 | Produced by Tolley Read more

��Ƶ