Fake News - Share Incentive Plan myths busted

Posted by RM2 at 08:16 on 3 May 2019

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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.