Undertaking an employment-related securities due diligence exercise

Produced by Tolley in association with

Employment Tax

Guidance

Introduction

The overall goal of the due diligence (DD) exercise is to assess what employment-related securities (ERS) and share schemes activity has occurred within the company (or corporate group), any resultant company liabilities, and where appropriate, quantify those risks and recommend mitigation appropriate to the client.

For example, a review of an EMI scheme could uncover an employee who has exceeded the £250,000 limit, and so some options will be treated as non-tax-advantaged, and an option granted to another employee at a discount to market value, meaning some of the eventual option gain is likely to be subject to income tax via PAYE, with NIC also applying.

For further example, a review of ERS shows shares acquired by a company director are restricted securities and no section 431 election has been entered into. A proportion of the disposal proceeds may therefore be subject to income tax via PAYE, with NIC also applying.

The DD project will generally be referred to verbally and in correspondence by an agreed project

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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.

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