The distribution of shares is becoming an increasingly popular incentive which companies are regularly using to recruit or retain staff. It offers an attractive alternative to cash bonuses and according to new research in the UK and USA, it can also increase the productivity of your staff.
Employees can obtain shares in their company without necessarily suffering a large tax bill through two routes. The first being Share Incentive Plans but the most popular form of share ownership for employees comes in the form of Enterprise Management Incentives (EMI). The latter allows selected employees to be given the opportunity to acquire a significant number of shares in their employer through the issue of options.
Employees gain a stake in their company which results in increased staff retention and motivation.
There is no direct cost to the employer in comparison with wage increases or cash bonuses.
Usually there are no NIC charges for the employer when the employee sells their shares.
How we can help
We can help you decide whether EMI is appropriate for your business and whether the business will qualify.
We are also able to help you with the necessary documentation required to establish and operate EMI and advise on the costs so please do contact us.
Following HMRC rules and regulations remains imperative to understand where employee benefits should be taxed and by how much?
All business earnings are taxable but unless the benefit can be converted into cash there is no taxable benefit. Whilst this is a general rule, variants and a lot of small print occur therefore specialist advice should be consulted.
Policies are detailed and can be subject to change as they have done in the recent budget for 2013. The Independent (2013); ‘Companies will benefit from the further trimming of corporation tax on all businesses – large and small – to 20 per cent in 2015.’ The complicated specifics of taxing should be reported properly to ensure no penalties are incurred. A P11D must be completed annually by employers, presenting HMRC with the benefits compensated to employees and directors. Please contact King and Taylor for further information on reports needed to be submitted by your business.
Understanding which payments do not involve a tax liability is important. Dispensations can be granted by the HMRC, allowing the employee not to report certain expenses, an example being travel costs. National Insurance is required however this is not due on certain benefits, except vouchers, stock or shares. The majority of benefits are subject to Class 1A NIC payable by the employer.
Which benefits will be taxed?
The following benefits are taxable on all employees:
• any living accommodation provided, unless job related
• credit tokens
Important benefits which are not taxable:
• retirement benefits which are paid by an employer into a registered pension scheme
• meals provided in a staff canteen
• drinks and light refreshments at work
• parking provided at or near an employee’s place of work
• workplace nursery places provided for the children of employees