Employee share schemes under review

The Government is running a call for evidence on how to simplify and widen accessibility to employee share schemes.

The Treasury is inviting comments on ‘save as you earn' (SAYE), the company share option plan (CSOP) and the share incentive plan (SIP) until 25 August 2023.

Through the call for evidence, ministers aim to improve the schemes and make them easier for businesses to set up.

Businesses and representatives can answer questions to help the Government improve the schemes by submitting their responses online.

Employee share schemes give companies ways to incentivise employees by helping them to offer employees a direct stake in the company, together with a more generous tax treatment.

A Government survey found that a third (31%) of businesses find the schemes too complicated to set up, however, describing them as "time-consuming and costly".

The evaluation also showed that more than half (55%) of companies did not know whether they had registered for SAYE, CSOP or SIP in the last ten years.

Meanwhile, 38% of these "unaware claimant companies" said they did not offer employee share schemes because of " corporate governance, financing and structure.

And yet, 81% of respondents said share schemes help boost their business, with almost three-quarters saying it helps them retain and recruit staff.

In June 2022, 1,030 employee-owned businesses were running in the UK, costing the Government over £300 million a year in tax relief.

Victoria Atkins, financial secretary to the Treasury, said:

"Employee share schemes are an effective way to boost motivation in workforces by giving people an extra stake in what they do - and they offer a boost for business.

"Growing the economy is a priority for this government, and one way to make this happen is by making these schemes as easy as possible to set up."

The schemes in question

Three of the four current tax-advantaged employee share schemes have been part of the Government's review process, with the main focus of the new consultation resting on the SAYE and SIP schemes.

Save as you earn (SAYE)

SAYE gives employees the chance to buy discounted shares in their company if they save up to £500 a month for three to five years.

The saved money and earned interest are both tax-free but
shares may incur capital gains tax if they are sold or disposed of.

The number of companies using SAYE fell by over 7% in the last eight years, according to the Government.

Share incentive plan (SIP)

SIP allows companies to help their employees purchase shares directly in their company or offer them as tax-free rewards.

Companies can give employees up to £3,600 of free shares each tax year.

Employees can also purchase shares out of their salaries of up to £1,800 in value or 10% of their income, whichever is lower.

Company share option plan (CSOP)

CSOP allows employees to buy up to £60,000 worth of the company's shares at a fixed price.

Employees do not pay income tax or national insurance contributions on the difference between what they pay for the shares and what they're actually worth.

Talk to us about your employee share scheme.

 

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