• Fri. Mar 1st, 2024

North East Connected

Hopping Across The North East From Hub To Hub

Could share schemes improve business performance and talent retention in the North East?


Jul 10, 2017 #Business, #Finance

Richard Urron, tax partner at RSM in Newcastle

HMRC has published its latest batch of share scheme statistics, which showed that UK employees enjoyed estimated tax relief of over £1bn from tax-advantaged share schemes in the year to April 2016.

This year’s figures showed particularly strong growth in the use of Enterprise Management Incentives (known as EMI options), with the value of shares under EMI options granted in the year increasing by 23 per cent from the last set of statistics published two years ago. EMI options offer companies the opportunity to give employees a chance to share in the growth and success of a business, with any gains made on the sale of the EMI shares generally only subject to 10 per cent tax, which compares favourably to cash bonuses or ‘unapproved’ share options which are taxed at rates of up to 47 per cent for the employee and 13.8 per cent for the employer.

Although HMRC does not provide a regional breakdown of the statistics, there has been huge demand from North East businesses for share schemes over the past couple of years. Not least for EMI schemes where employers want to provide a real incentive to key employees to drive business performance, increase shareholder value, and give those individuals a stake and sense of ownership of the business.

The North East is a hot bed of entrepreneurial businesses and high-growth companies, and this could explain the increase in demand as leaders of ambitious businesses increasingly recognise that performance can be substantially improved where employees have a stake in the company they work for. The fact that this can be done in such a tax-efficient way, enabled by the government’s desire to encourage the small and medium-sized businesses, makes the use of arrangements, such as EMI options, a no-brainer for many companies to improve performance and retain key talent. This is not only great news for the ambitious North East businesses that implement the schemes, but encouraging growth and harnessing talent could be pivotal for the wider North East economy.

By Emily