RM2 review: HMRC employee share plan statistics
HMRC recently published statistics on employee share plans in operation between 2013 and 2014.
The total value of shares and options awarded to employees in this period increased by around 21% from the previous year, although HMRC’s report suggests that this increase is largely due to certain changes in larger Share Incentive Plans (SIP) rather than any persistent changes.
Of particular interest to us was the continued rise in the number of Enterprise Management Incentive (EMI)schemes in operation – now above the previous peak in 2007/08 before the recession hit. Compare this to the ongoing decrease of Company Share Option Plan (CSOP) schemes, and you can clearly see the influence and advantages of an EMI scheme. SIP schemes had a miniature uprising in the early 2000’s but now appears to be of a consistent popularity among employers whereas Save-As-You-Earn (SAYE) schemes are dwindling.
EMI schemes tend to be highly beneficial for entrepreneurial organisations and, despite the economic downturn, the statistics may suggest that employers sought out EMI schemes to inspire their employees to help drive them through the economically turbulent times.
CSOPs continue to fall in popularity. Realistically, and in particular in comparison to EMI, the limit on the value of shares available to recipients is probably simply perceived as too low. Capped at just £30,000 per recipient, CSOP plans are a long way off EMI plans; where awards can be up to a value of £250,000 per person which, of course, is much more enticing for participants.
The number of companies with SIP schemes rose significantly throughout the early 2000’s with a slight downturn midway through the decade but are now at a consistent level.
Perhaps the most interesting figure in the whole of the report is that the total cost of Income Tax and National Insurance relief in 2013-14 for all 4 types of tax-advantaged share schemes was a staggering £1,060m, 26% higher than in the previous year. Again, HMRC put this down largely to SIP usage. Of course, the more schemes, the bigger the potential tax savings and so, as share schemes regain popularity after a recent dip, the question is, are the benefits of share schemes worth the tax breaks?
You can read more here.