Share plans and Incentives

• Effective design of incentive schemes overall remuneration packages
• Drafting of scheme documentation
• Employee guides and assistance with employee communication
• Compliance with corporate withholding and reporting obligations
• Global share plan advice using the BDO network in over 160 countries
• Assess impact of corporate actions (IPOs, restructuring and M&A) on equity incentives and management shareholders
• Holistic understanding of impact of incentives delivered through collaboration with expatriate, employment, corporate and international tax teams
• Financial modelling of the impact of the incentive arrangements
• Accounting advice

This is a long list of issues and resources that you may find useful if you are responsible for share plans and other incentives:

• Incentive plans for unlisted companies
• Incentive plans for listed companies
• HMRC "tax advantaged" share plans
  • Enterprise Management Incentive plans (EMI)
  • Company Share Option plans (CSOP)
  • Save As You Earn (SAYE) share option plans
  • Share Incentive Plans (SIP)
• Non tax advantaged share options
  • Long term incentive plans / management incentive plans
  • Growth shares and Flowering shares
  • Joint Share Ownership plans
  • Partly paid and nil paid share plans
• Employee ownership trusts - selling your company to your employees
• Annual and long-term cash bonus plans (UK and global)
• Global share plans and incentives
• Accounting for share plans
• Share Plan Compliance review
• Share Valuation
• Creating a Market to give liquidity for employee share schemes
• Share plan annual reporting
• Rewarding employees with crypto-assets

A management team must seek their own tax advice whenever they are involved in a transaction so that they can achieve a tax-efficient outcome. This is true whether the transaction is a trade sale, listing, management buy-out or sale to private equity.

We work with management teams to ensure that they consider;

• Deferring tax on proceeds re-invested
• Proceeds being taxed as capital gains or as dividend distributions
• Risks of employment tax applying in relation to the shareholding
• Maximising the availability of entrepreneurs’ relief

We are a market-leading advisor to companies being sold to Employee Ownership Trusts (EOT). EOTs are a specific vehicle established to acquire companies for the benefit of their employees. EOTs can be beneficial to both exiting owners and remaining staff.

The selling shareholders are able to sell their shares in a trading company for full market value and receive their disposal proceeds from a mixture of up-front consideration and deferred consideration funded from future post-tax profits of the trading company. The selling shareholders may be able to claim a UK capital gain tax exemption such that all of their disposal proceeds are received free of capital gains tax.

The EOT will hold shares in the trading company for the long term thereby aligning the incentives of each employee with the profitability of the business. Companies owned by EOTs are able to pay their employees tax-free cash bonuses of up to £3,600 per tax year and operate other statutory tax-efficient share plans to incentivise and lock-in their employees.

Read our full explanation of Employee Ownership Trusts.

Private companies can allow shareholders to trade their shares by creating an internal market where there would otherwise be no liquidity. The internal market will normally involve the establishment of an Employee Benefit Trust (EBT) which will buy and sell shares and act as a market maker/warehouse.

We advise clients on how to create and operate an effective internal market, ensuring where possible that no adverse tax liabilities arise and that the tax treatment for the employees, the company and the trustees are understood. We will also help ensure that any reporting and/or withholding obligations are complied with.

Where a company with employee share schemes undergoes a transaction, careful consideration needs to be given to the way share schemes are dealt with as well as their tax. The process for dealing with the share schemes also needs to be factored into the various other steps that are taking place as part of the wider-transaction.

The areas of focus will vary depending on the nature of the transaction but are likely to include:

1. whether outstanding awards granted under the scheme would ‘roll over’ after the transaction or crystallise into cash for the participants
2. how the employee is taxed
3. the tax position and compliance obligations for the company.

We use our experience and knowledge to ensure that employer share schemes are fully addressed as part of the wider transaction.