13 reasons to talk about the Share Incentive Plan

Posted by RM2 at 11:58 on 12 Oct 2018

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In businesses the best incentives create behaviours which benefit the company. Would you like to enhance performance, productivity and personnel development whilst by achieving your Company’s strategic plan? Employee ownership across all employees which is implemented correctly and communicated strongly, can really make a difference.

We believe if a company is looking to offer wider employee ownership, which can provide a potential zero tax rate, then the Share Incentive Plan (“SIP”) used effectively is one of the best incentives around. Here are the reasons why:

  • Employees may acquire up to £9,000 worth of shares each year;
  • Flexibility on how shares can be offered
  • The plan is available to all employees (subject to a qualifying period);
  • Long-term retention is rewarded. After 5 years the entire value of the shares, including gains, is free of tax - no Income Tax, no National Insurance Contributions and no Capital Gains Tax;
  • Shares can be gifted free, (Free Shares), bought for out of pre-tax salary (Partnership Shares) with the potential to gain a further 2 shares for each Partnership Share bought (Matching Shares);
  • Government approved, which allows an HMRC valuation to be agreed if the company is not listed on a market.
  • Dividends can be reinvested into shares if required;
  • Shares are held in a trust on behalf of employees;
  • For a private company, the trust can operate as an internal market;
  • Corporation tax deductions for the company – and an upfront deduction in certain circumstances if the trust acquires 10% of the share capital from an individual;
  • Leavers can be required to sell shares back;
  • Shares can be non-voting;

The SIP can be operated alongside other discretionary schemes such as an Enterprise Management Incentive ("EMI"), or Unapproved Share Option ("USOP")

fact sheet on the Share Incentive Plan for more details, register for our Webinar "An introduction to the Share Incentive Plan" or contact us on 0208 949 5522 / enquiries@rm2.co.uk