Which on balance is better for a private company, an EMI or a CSOP?
The Company Share Option Plan or CSOP offers generous tax reliefs, but then so can an Enterprise Management Incentive Scheme if your company qualifies, so which is better? We take a look at the key features of both to help you decide which might be right for your company.
| CSOP | EMI | |
| Employee eligibility | An employee (with no working time requirement), or full-time director working 25 hours or more per week. | Working 25+ hours a week, or 75% of their working time if less than 25hrs per week |
| Company restrictions | None. | Company must have gross assets of less than £30m at time of award to qualify to grant EMI options. Company must not be conducting an EMI excluded activity e.g. banking, property development, legal services etc. |
| Value of options | Maximum of £60,000 per employee can be held at any one time. | Maximum of £250,000 options per employee can be held at any one time (this includes the value of any outstanding CSOP options). |
| Performance conditions & exercise price | Any performance conditions. Market Value exercise price | Any performance conditions. Company can get a valuation agreed with HMRC. Any exercise price (discounted options would create an income tax/NI liability at exercise, on the value of the discount). |
| Immediate exercise after granting | Yes – but would loose favourable tax treatment which kicks in 3yrs after date of grant. | Yes |
| Taxation | No Income tax or NI on grant or if exercised after 3yrs from date of grant. CGT on the sale of any shares. Business Asset Disposal Relief (BADR) available (only if holding is greater than 5% or share capital) | No Income tax or NI on grant or exercise if options granted at market value. CGT on the sale of any shares. Business Asset Disposal Relief (BADR) available Corp tax relief on difference between market value of shares at exercise & exercise price paid. |
| Administration | Annual Share Plan return to HMRC. | Options to be registered with HMRC within 92 days of being granted. Annual Share Plan return to HMRC thereafter. |
In broad terms if your Company and employees qualify for EMI options these have more flexibility for the Company and you can agree a valuation for the options with HMRC. However, don’t discount using the CSOP if you are a company that doesn’t qualify for the EMI as the CSOP still holds valuable tax saving incentives.
RM2 can help you implement either shareplan and as we offer a full administration service we can ensure that the options you grant are appropriately registered with HMRC, with the on-going annual administration taken care of. Contact us now to set up a call to discuss your requirements enquiries@rm2.co.uk or for further information on either share plan download our handy factsheets.