Company Share Option Plan (CSOP)
Special Note: We feel it is best advice at present to wait until we have the Chancellor’s Autumn Statement announcements (5th December and draft Finance Bill 2013 publication on 11th) on the future of CSOP before recommending the implementation of this plan. All the current indicators are that there will be a material change announced. If you would like to speak to an advisor on this point please call us on 0208 949 5522.
An Approved Company Share Option Plan ("CSOP") offers a tax efficient and flexible way to reward selected employees and directors, subject to detailed regulations.
Each employee can receive options to buy company shares worth up to £30,000 at grant. This scheme may be worth considering if a company does not qualify for the Enterprise Management Incentive.
Company Share Option performance conditions
The exercise of options under an Employee Share Option Plan can be linked to performance conditions at the discretion of the employer. The value of the shares acquired through exercise will also reflect company performance. If an employee leaves before the options can be exercised, they will normally lapse.
Option grant at fair value
Options granted under a Company Share Option Plan options must be awarded with an exercise price equal to fair market value. In the case of a private company this value agreed at the date of grant with HM Revenue & Customs. There is no tax on the grant of the share option agreement and provided exercise takes place more than 3 years after grant, gains will be subject to capital gains tax only at the rate of 18 per cent. or less. This compares favourably with top rate income tax (and probably NICs) payable on unapproved options.
Private companies can establish an internal market for shares acquired through exercise of options in Share Option Plans.
A Company Share Option Plan (CSOP) can be linked to a savings scheme to provide an alternative to the savings ralated Share Option Scheme (SAYE). The CSOP will normally be cheaper because savings institutions usually charge substantial fees for establishing a conventional SAYE arrangement. However the CSOP scheme lacks certain advantages of the savings related scheme: see our free SAYE factsheet for details.