Company Share Option Plan

The Inland Revenue approved Company Share Option Plan ("the CSOP") was originally conceived to provide a beneficial fiscal platform for the motivation of company executives. A company can grant tax advantaged options to its employee subject to a maximum value of £30,000.

Requirements

• Participant company must be independent or under the control of a listed company that is not a close company for taxation purposes.

• Shares used under the CSOP must satisfy certain statutory conditions.

• Option price should not be less than the market value of the share at the date of grant.

• Employees granted options must not have a material interest of more than a 25% shareholding in the company.

• Directors granted options must work for a minimum of 25 hours a week

Tax Treatment

• Generally, no liability to income tax and National Insurance Contributions (NICs) arises on the grant of the option.

• No income tax and NICs are charged on the exercise of the option if the statutory and contractual conditions are fulfilled.

• Subject to the annual allowance and Business taper relief, capital gains tax may be chargeable on the gain.

• The company can obtain a corporation tax deduction for the cost of establishing and administering the CSOP.

Benefits

• Aligns employees interest with that of shareholders and therefore stimulates performance.

• Can be used as an effective staff recruitment and retention tool.

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This briefing has been prepared for general guidance only and should not be acted upon without specific advice. Please contact us if you need further information.

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