JSOP: Joint Share Ownership Plan
The JSOP is a share purchase plan that can help key employees or directors buy shares in their company at a low price, and share in the increased value, subject to hitting particular growth targets. Gains will usually be subject to capital gains tax rather than income tax.
JSOP: About the Joint Share Ownership Plan
Participants will buy shares jointly with a trustee, usually the trustee of an Employee Benefit Trust.
At the start the EBT has the right to most of the initial value of the shares. The participant, by contrast, only has the right to most of the increase in value, i.e. the 'hope value', which will usually be subject to specific targets (sometimes known as “hurdles”). This means the EBT pays the majority of the initial cost. The participant will therefore pay the fair market value (as agreed with HMRC) for their part of the shares, which will have a comparatively low value.
JSOPs are best used in companies where significant growth is likely or possible – because employees will not see any increase in share value if there is no growth.
JSOP: Benefits of a Joint Share Ownership Plan
The JSOP is not a formal “tax-advantaged” plan recognised by the government, but its structure ensures that capital gains tax treatment on the increase in value. This means that a JSOP is ideal for a company which may not qualify for tax-advantaged arrangements such as EMI or CSOP.
Consultants and non-executive directors (NEDs) can be participants but they must always pay for their benefits. Employees or former employees could be given their interest by the trustee.
Particular benefits of the JSOP therefore are as follows:
- Tax advantages without the limitations of government recognised plans
- Can be offered to non-employees
- Motivate participants to work towards significant growth in value
- Reward participants on a tax-advantaged basis (Entrepreneurs’ Relief may also be available if participants meet certain conditions)
- Promote long-term retention of key employees
- Attract top candidates to companies
- Minimal financial risk for participants
For more detailed information on the benefits of JSOP, please download our fact sheet, or call 020 8949 5522 to speak with one of the team.
JSOP: How we can help
At RM2, we believe in taking a consultative approach to building share plans and finding out precisely what our clients are looking to achieve. This approach helps us to deliver a professional and effective service, helping clients meet their goals and plan for the future. Our highly experienced team is well positioned to guide your company through every stage of the share scheme process, including:
- Strategic review
- Plan design
- Shareholder resolutions
- Articles of association
- Share valuations
- Employee communications
- Plan administration
- Option expensing
- Ongoing support
We have successfully designed, implemented and administered over 700 share plans across a range of sectors, so you can rest assured your plan will be in the best possible hands!
If you would like to find out more about how a JSOP can help your business, why not call a member of our team directly on 0208 949 5522, request a callback using the button located at the top of the page, download our fact sheet or send an email to email@example.com!