Employee Share Schemes

David Craddock’s specialist consultancy skills cover all aspects of scheme design, share capital restructuring, tax-efficiency, legal compliance, implementation, administration, communication and the on-going maintenance of the schemes.  Significant success has been achieved with client companies – quoted and unquoted – in developing innovative strategies based on bespoke tax-efficient solutions in employee share ownership programmes and the design of schemes to achieve optimum response from participants at all levels in terms of performance and motivation.  David is renowned for his innovative approach to finding solutions and assisting the client in effective implementation.

David Craddock Consultancy Services works with the client to develop the most appropriate scheme structure or, indeed, the most appropriate configuration of schemes if that is considered appropriate. It is sometimes the case that the scheme(s) work best when linked to an employee share trust. This is particularly relevant when succession planning or management buy-out arrangements are envisaged and it enables the sale of shares by existing shareholders under the capital gains tax regime.

 

 

Below is a list of reasons why companies and their advisers should consider the introduction of an employee share scheme arrangement.

Please note that none of these reasons are mutually exclusive of each other. The company can choose to operate an employee share scheme for all, or any combination, of these reasons

 

To provide a basis for employee motivation and incentive.

To enable the company to meet its recruitment requirements.

To act as a retention tool for quality employees.

To expand the basis on which employees are rewarded for their work.

To encourage consensus between shareholders, management and employees.

To enable employees to think like shareholders.

To encourage interest in the business from within the workforce.

To assist in succession planning where a proprietor is planning to retire.

To facilitate a management buy-out.

To secure tax efficiencies for the purchase or sale of shares.

 

Below is a list of reasons why companies and their advisers should consider the introduction of an employee share trust arrangement.

Please note that none of these reasons are mutually exclusive of each other. The company can choose to operate an employee share trust for all, or any combination of these reasons.

 

To create a market for the shares in the absence of a recognised stock exchange.

To support the operation of employee share scheme arrangements.

To avoid dilution by recycling existing shares for employee share schemes.

To secure the capital gains tax treatment on the sale of the shares.

To enable shareholders to diversify their investment portfolio.

To hedge on the purchase of shares when share prices are low.

To warehouse shares in a secure and safe environment.

To budget for the cost of share purchases for employee share schemes.

To cap the initial outlay required to fund phantom liabilities.

To support long-term incentive arrangements.

To create a market for subsidiary company shares.

To facilitate a management buy-out.

To assist in succession planning where a proprietor is planning to retire.

To buy-out dissident shareholders.

To enable outside investors to withdraw their investment.

To enable the personal representative of an estate to dispose of shares.

To allow flexibility in share pricing for sales.

To operate a share market offshore with a view to achieving tax-efficiencies.

To operate a share scheme as part of a pension arrangement.

To give employees security that their scheme shares are ring-fenced for employees

Employee share schemes offer employees the opportunity to buy shares in the business they work for. Owning part of a business offers a great incentive for employees to contribute to the success of the business and remain loyal to the business. There are ‘approved’ employee share schemes and ‘unapproved’ employee share schemes, this references HRMC’s view of an employee share scheme and whether or not it comes with tax advantages as a result.

Employee shares schemes differ greatly between those suitable for small and large companies.  Small businesses looking to set up an employee share scheme are most likely considering an enterprise management incentive scheme because EMI schemes enjoy tax advantages and as a business owner you can choose who is eligible to join the scheme and when.

Larger businesses might chose a SAYE or SIP because these must be open to all employees, which type of employee share scheme is most advantageous for a business and its employees will depend on a number of variables.

 

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