Unlike EMI, there are no trades that are excluded from operating a company share option plans.
Company share option plans can provide significant savings for the employee. No tax will arise on the grant of the option and no price is payable for the grant of the option itself. Employees can therefore be given their potential interest “for free” at that stage.
Provided that the company share option plans are exercised in certain circumstances, no income tax or National Insurance contributions (“NIC”) will arise exercise of the options. In broad terms these circumstances cover exercises after three years from grant and certain other corporate/good leaver circumstances (either before, on or after three years from grant).
Importantly, employees can also benefit from capital gains tax treatment (“CGT”) on the disposal of the shares at the lower rates that apply (somewhere between 0%-20%).
In terms of the employer company, it also benefits from NIC savings. There is no employer’s NIC due on the grant of company share option plans or exercise of the options in a qualifying circumstances.
Provided certain conditions have been satisfied the employer will be able to claim corporation tax deductions for the gain on the shares (i.e. the growth in value between grant of the option and exercise).