Let’s look at the schemes covered in the report…
What are the four tax-advantaged share schemes?
HMRC’s tax-advantaged share schemes were designed to support businesses with retaining key staff, attracting skilled workers, and motivating employees toward growing the business. The four schemes are:
Enterprise Management Incentives (EMI) – the scheme that we find to be most popular, this is a discretionary scheme that can be offered to select employees and directors. It’s effectively an option to acquire shares at a future date for a specified price. The future date (which is referred to as an ‘exit event’) can range from certain time periods passing or to an exit event like the business being sold. There are restrictions on the size and trade of the companies that can implement this scheme.
Company Share Option Plan (CSOP) – this is similar to the EMI scheme in terms of the tax implications and the plan being a discretionary one, but CSOP’s do not have the same restrictions on the size or trade of the business, making it a viable alternative to EMI schemes. Whereas the market value of options under the EMI scheme cannot exceed £250,000, for CSOPs, this cannot exceed £30,000 at the date of grant.
Save As You Earn (SAYE) - unlike the EMI & CSOP schemes, all employees have the option to participate in SAYE schemes. This is a savings-related share scheme that allows employees to save up to £500 a month under the scheme for share options at a fixed price. After either 3 or 5 years, they then have the option to either exercise the option or take the cash (dependent on whether the market value of the shares has increased or decreased).
Share Incentive Plans (SIP) - like with the SAYE, this is an all-employee scheme. However, unlike the other schemes, SIP’s award shares rather than share options. Through a combination of free shares, partnership shares (that can be purchased via an employee’s salary pre-tax), and matching shares, an employee could receive up to £9,000 in shares per year.
For a more detailed overview of the schemes including the tax implications and restrictions, please visit our long-term incentive plan guide here.
What are the headline statistics?
The report itself covers the options granted, exercised, and income tax & NIC tax relief received across the four schemes for the tax year ending in 2021. In general it shows an upward trend in the number of companies utilising these schemes. The headline points were:
• In total, 16,330 companies were operating employee share schemes in the tax year ending 16,330. This is an increase of 6% from the previous year (and 88% since the tax year ending in 2010). The main driver of this trend is the increase in the number of EMI schemes.
• Total value of options granted over the four schemes exceeded £4bn.
• For these schemes, employees received an estimated:
o £480 million in Income Tax relief.
o £280 million in National Insurance contributions relief.
What’s the comparison between schemes?
The below graph shows how this was broken down across the four schemes:
Figure 1:
The SIP and SAYE schemes have the largest value in total options granted, which can partly be explained by them being all-employee schemes (i.e. options are available to all employees as opposed to the EMI & CSOP schemes where the select employees that are granted options are at the discretion of the employer).
However, the EMI scheme had the highest relievable gain (£750m) and income tax & NIC relief (£400m). This can be explained by the table below, which shows that whilst the SIP & SAYE schemes have a much higher value of total options granted, the EMI scheme in particular has a much higher average option granted and average gain per employee.
*For SIP’s, this is the option awarded rather than granted.
For added background, the EMI scheme has a maximum value of options that can be granted of £250,000 per employee over a three-year period (where key employees and directors can be selected). If you compare this to SIP’s, which excluding dividend shares, allowed for a maximum of £9,000 in shares per employee per year.
To conclude, this report reflects how EMI schemes continue to be an attractive way to offer a high level of remuneration for employees. The increase in the number of companies utilising them mirrors the popularity that we see with many of the businesses we work with. To see the full details of the report, click here.
The next step
At UHY (East), we’ve helped many businesses retain, motivate and attract key staff through the use of the tax-advantaged schemes discussed above or other schemes such as Growth Shares or Phantom Shares. For more information, please see our guide or please contact James Foster on j.foster@uhy-uk.com or your usual UHY adviser.
