Fake News - Share Incentive Plan myths busted
We recently published a blog on the Share Incentive Plan (SIP) – a fantastically tax efficient share plan for all employees.
We’ve had a number of enquiries about the SIP as a consequence, and a lot of the questions we get arise out of some common misunderstandings about the plan. Here are some of the main questions we get asked:
The assumptions |
FACT OR FAKE? |
The SIP is only for listed companies |
FAKE. We advise and run many SIP's for private companies. In fact, the SIP can be really useful in a private company because they can provide a market for shares, especially when employees leave. They can also help in succession planning for Founders. |
The SIP is only for big companies |
FAKE. We run SIP's for some companies with only around 40 employees – you don’t need to have hundreds of employees for it to work. |
You can’t value private company shares |
FAKE. You can agree a valuation with HMRC for SIP in advance of making awards under a SIP. You can send in the letter to HRMC yourself, or your accountant or another adviser can do it. |
I’ll need to give the same number of shares to all my employees |
FAKE. You can make a Free Share award based on salary, hours worked and length of service. |
If I give away shares I’ll lose control of my business |
FAKE. The directors get to choose when they make awards, and how many shares they’re going to use. You can even use non voting shares in a SIP. |
The SIP Trustees will make more awards without my knowing |
FAKE. The SIP Trustees must always act in the interests of the employees, but they’ll only make awards if directed to by the Company. |
It’s really expensive |
FAKE. Unsurprisingly, the more complex the plan, and the more participants, the more expensive it gets. But if you simply offer free shares to your employees, either on a one off basis, or annually, you can really keep the costs down. --- In any case, balance this against the potential tax savings and you may find you’re onto a winner. |
RM2 is running a webinar on the Share Incentive Plan at 11:30am on Wednesday 5th June– click here to sign up. Alternatively, for a quick informal chat about this most tax efficient employee share plan, get in touch by calling us on 0208 949 5522 or email us at enquiries@rm2.co.uk.