Commentary: Staff share schemes need help

BUDGET DAY is coming, yet many companies are holding back from announcing new all-employee share incentive schemes, instead waiting to see if Gordon Brown will make any innovative proposals.

In particular they are looking for help with the transition from existing PRP schemes, which are being phased out. In his pre-Budget statement last November, the Chancellor announced his intention to double the number of companies operating employee share option schemes across the whole of their workforce.

The subsequent consultation paper issued by the Treasury has produced 170 submissions from industry and analysts. However, this high level of interest will only help the Chancellor reach his target if he comes up with the goods in the Budget. He must address the reasons why smaller quoted companies are not using all-employee share schemes with the enthusiasm of the FSTE 100 companies.

There are two approaches the Chancellor might take. The easiest would be to address the problems with the existing share incentive schemes which benefit from Government tax breaks. There are two main types of scheme that might be simplified. The first is the Save-As-You-Earn share option scheme (usually called SAYE or Sharesave schemes), under which all employees can save on a monthly basis in a tax-free account and later use the savings to buy shares in their employing companies at a discount.

The other type, called a profit sharing scheme, gives tax-free shares to all employees on condition that they are retained by the employees for a minimum two or three year period. Both types of scheme are highly regulated by the Inland Revenue, making them very expensive to put in place and operate, and hitting smaller companies disproportionately. As the rules stand, for example, virtually every communication with employees relating to an approved scheme requires specific Inland Revenue approval.

Companies can obtain a corporation tax deduction for the profit made by their employees exercising SAYE options, and big companies can save millions. However, the procedure required for this tax saving is complex, and can outweigh the benefits for small firms. This could be avoided by a simple rule change. The Chancellor could also give tax breaks to new schemes, such as one in which employees can buy shares on a regular basis at a discount to their market value.

Lawrence Green is Employee Share Incentive Specialist at the national law firm Eversheds.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

A timely reminder of the bloody anniversary we all forgot

A timely reminder of the bloody anniversary we all forgot

Who remembers that this week we enter the 150th anniversary year of the end of the American Civil War, asks Robert Fisk
Downfall of Dustin 'Screech' Diamond, the 'Saved By The Bell' star charged with bar stabbing

Scarred by the bell

The downfall of the TV star charged with bar stabbing
Why 2014 was a year of technological let-downs

Why 2014 was a year of technological let-downs

Security breaches and overhyped start-ups dominated a year in which very little changed (save the size of your phone)
Cuba's golf revolution: But will the revolutionary nation take 'bourgeois' game to its heart?

Will revolutionary Cuba take 'bourgeois' golf to its heart?

Fidel Castro ridiculed the game – but now investment in leisure resort projects is welcome
Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Ed Richards: Parting view of Ofcom chief. . . we hate jokes on the disabled

Bad language once got TV viewers irate, inciting calls to broadcasting switchboards. But now there is a worse offender, says retiring head of the media watchdog
War with Isis: The West needs more than a White Knight

The West needs more than a White Knight

Despite billions spent on weapons, the US has not been able to counter Isis's gruesome tactics, says Patrick Cockburn
Return to Helmand: Private Davey Graham recalls the day he was shot by the Taliban

'The day I was shot by the Taliban'

Private Davey Graham was shot five times during an ambush in 2007 - it was the first, controversial photograph to show the dangers our soldiers faced in Helmand province
Revealed: the best and worst airlines for delays

Revealed: the best and worst airlines for delays

Many flyers are failing to claim compensation to which they are entitled, a new survey has found
The stories that defined 2014: From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions

The stories that defined 2014

From the Scottish independence referendum to the Ice Bucket Challenge, our writers voice their opinions
Stoke-on-Trent becomes first British city to be classified as 'disaster resilient' by the United Nations

Disaster looming? Now you know where to head...

Which British city has become the first to be awarded special 'resilience' status by the UN?
Finally, a diet that works: Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced

Finally, a diet that works

Californian pastor's wildly popular Daniel Plan has seen his congregation greatly reduced
Say it with... lyrics: The power of song was never greater, according to our internet searches

Say it with... lyrics

The power of song was never greater, according to our internet searches
Professor Danielle George: On a mission to bring back the art of 'thinkering'

The joys of 'thinkering'

Professor Danielle George on why we have to nurture tomorrow's scientists today
Monique Roffey: The author on father figures, the nation's narcissism and New Year reflections

Monique Roffey interview

The author on father figures, the nation's narcissism and New Year reflections
Introducing my anti-heroes of 2014

Introducing my anti-heroes of 2014

Their outrageousness and originality makes the world a bit more interesting, says Ellen E Jones