Employee Share Schemes

American Stock Options

United Kingdom tax relief on stock option gains can be obtained by creating an approved H M Revenue & Customs arrangement ("Sub-Plan") that will attach UK tax-favoured status to options granted by a US company to either its employees or employees of its UK subsidiary.

Tax relief is available in respect of options with an aggregate fair market value of £30,000 determined at the date of grant of the option. The gains attached to options granted outside the approved arrangements are subject to UK income tax and (in appropriate cases) National Insurance Contributions ("NICs") where appropriate. However, employers NICs can be transferred to the optionee by a joint election or an agreement with the optionee. The optionee will normally receive tax relief for any employers NICs paid.  


  • The shares must satisfy the statutory conditions.
  • The option must be exercised either:
(i) on or after the third, and not later than the tenth, anniversary of the date of grant of the option; or (ii) where the rules permit, before the third anniversary of the date of grant and within 6 months after cessation of the optionees employment with the group by reason of injury, disability, redundancy or retirement.

Tax Treatment

  • Any gain that arises on the exercise of the option is not subject to income tax or NICs liability.
  • Favourable capital gains tax treatment.
  • Cost of establishment and administration of the Sub-Plan is deductible for corporation tax purposes.


  • Both listed and private companies may establish the approved arrangements.
  • Approved arrangements can be set up for almost all international plans.
  • There is no amendment to either the US Plan or the way the US Plan is administered.
  • The approved arrangement is only applicable to options to which it is expressed to apply at the date of grant.
  • Consequential flexibility in granting H M Revenue & Customs approved and unapproved options.
  • Adoption is usually by the Administrator or Compensation Committee of the US Plan.
  • In addition to the tax relief, UK employees can participate on broadly the same basis as employees worldwide

For further information please complete the enquiries form.

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.

ESS Consultants is a trading name of Elman Wall Limited, company number 3261197, registered in England and Wales. Elman Wall Limited is registered to carry on audit work and regulated for a range of investment activities by the Institute of Chartered Accountants in England and Wales.