What are Share Incentives and how do they affect Employers? Hubu Accountants in Wales explains.
As we look ahead to next months' Accounting jobs, and get our clients prepared for deadlines; Hubu Accountants noticed a little known subject on the list that is over 20 years old...
What is a Tax and Employee Share Scheme?
The Tax and Employee Share Scheme was put in place by HMRC back in the year 2000, and has only changed slightly since then, in 2020. So what does the scheme involve? Well, in a nutshell it allows employees the opportunity to become shareholders of the Company they work for, in several different ways (listed below). For Businesses, it gives you the chance to offer a more flexible benefit plan to your employees, rewarding loyal workers whilst benefiting from certain tax reliefs.
1 - Share Incentive Plans (SIPs)
2 - Save As You Earn (SAYE)
3 - Company Share Option Plans
4 - Enterprise Management Incentives (EMIs)
There are limits that apply to the Tax and Employee Share Schemes, such as how many shares an employee can be given in any given year or in one bulk amount (or buy as part of the Partnership Shares Plan), how much they can save monthly under the SAYE plan and if you are offering an EMI your Company cannot own assets of more than £30 million, amongst other limitations.
There are also exclusions that apply if you are a Company that works within the ‘excluded activities’ sectors. These excluded activities include Businesses within the following sectors:
- Ship building
- Provision of legal services
- Property Development
If you are already offering SIP's to your Employees; please be aware that the deadline for Employers to report their Company Share Incentives for the 2021/22 tax year is 6th July 2022.
The Benefits of SIP's for Employers
1 - This HMRC employee plan allows Companies to be flexible when it comes to creating an Employee Benefit Plan that suits the individual Businesses' needs.
2 - Corporation tax relief; there are several initial costs and maintenance costs involved with setting up an SIP scheme (which Hubu Accountants can advise you on), and the Tax Allowances associated with these costs will of course be a welcome sight for Business Owners.
3 - Employees have a more vested interest in the success of the Company and are therefore more motivated to work. According to the 1998 Hewitts Associates report on Employee Share Ownership, the research suggested that employees that were satisfied and incentivised were more productive than those that weren't.