What do HMRC’s published statistics tell us about current trends for employee share schemes?

Posted on: August 6th, 2018

In July 2018, HMRC released their annual report for employee share schemes. The report showed some interesting trends.

Employee share schemes are used by businesses to award shares directly to their employees or to grant employees options to buy shares in the future. There are currently four HMRC approved tax advantaged share schemes:-

  • Company Share Option Plan (CSOP)
  • Enterprise Management Incentives (EMI)
  • Save As You Earn (SAYE)
  • Share Incentive Plan (SIP)

The report confirms that over the last year, the preferred scheme with employers are EMI schemes, which now make up 83% of all tax advantaged schemes. EMI schemes allow business owners to offer their employees a much higher value of share options compared to other schemes which is likely to be a key reason for their popularity, especially among small and medium sized businesses. When used successfully, they can be used as a key tool to support growth and the future success of a company.

The report goes on to confirm that EMI schemes are also more popular amongst UK businesses now than ever. The number of businesses that have introduced new EMI schemes has grown from 2,860 in 2015/2016 to 3,500 in 2016/2017 and in fact, more businesses have introduced EMI schemes this year than in any other year since their introduction under the Finance Act 2000.

Whilst EMI schemes are more popular than ever, the report highlights that the other three tax approved schemes, CSOPs, SAYEs and SIPs, are decreasing in popularity with less new schemes compared to the previous year for all three, a trend that has steadily continued over the last several years.

EMI schemes it seems are also now benefiting more employees than at any time since the last financial crisis. The report highlights that around 27,000 employees were granted EMI options last year, the most in any year since 2006/2007.

Finally, the report reveals that the tax relief from Income Tax and NIC under all four tax approved schemes totalled £920 million last year. This is slightly lower than in recent years, due in part to the diminishing popularity of the other three schemes, SAYEs in particular. The extent of the potential tax reliefs still available however demonstrates that the government continues to see the benefit in employee share ownership and are willing to offer sizeable tax reliefs for both employers and employees to encourage it.

HMRC’s report mirrors what Coffin Mew has seen over the last 12 months. We have advised on the implementation of a number of employee shareholder schemes in the last year, especially EMI schemes. If you want to discuss the benefits of any employee shareholder scheme, please contact us.