Rm2 Workshop Presentation Revised 25 05 11
- 1. Mastering Employee Share Schemes Thursday 25th May 2011
- 2. benefits methods about RM2
- 3. Benefits boosts share values by aligning interests of participant and company striking tax advantages succession planning opportunities linkage to wealth management
- 4. Boosting share values share price performance productivity gross value added qualitative evidence
- 5. Tax advantages default tax on all benefits = income tax but ... approved share options = CGT only deferred share purchase = CGT only approved share incentive plans = reduced IT or no tax at all
- 6. Concerns complexity technical pitfalls needs quoted stock dilutive costly reduced control ABI guidelines accounting standards real real no choice value & savings choice usually choice choice
- 7. Methods: Types of Schemes The medium Share Purchase: DSPP, JSOP Share Gift: The Share Incentive Plan The message no risk, CGT, no dividends or votes some risk, low or no tax, dividends, appreciation of past service some financial commitment, CGT, dividends Share Option: EMI, CSOP, SAYE, USOP
- 8. Enterprise Management Incentives UK’s most favoured share scheme Flexible individual options Share value agreed in advance Limit of £120,000 / £3 million Qualifying criteria : - company : trade, < 250 employees < £30m gross assets, group structure - employee : working time 25hrs / 75% no material interest (30%)
- 9. EMI tax treatment No tax on grant Any discount to MV is IT on exercise Otherwise CGT Beware : Entrepreneurs’ Relief : Disqualifying events
- 10. Share Incentive Plan – 0% tax…
- 11. How much to offer? inclusive or selective? looking forward or back? timescale too little – wastes equity too much – wastes equity Dilution versus growth Can be managed using a trust Care re Entrepreneur’s Relief ABI Guidelines Typical dilution levels: all-employee schemes: 5-10 per cent. targeted schemes: 5-15 per cent. effective incentives change behaviours
- 12. Succession Planning shareholder can sell shares into trust up to 100 per cent. of equity can be transferred CGT for shareholder, not dividend tax tax efficient incentives for employees corporation tax relief for employer entrepreneurs’ concession now £10m at 10 per cent – are you using yours?
- 13. Plan Administrators – Why? ensure an audit trail of all actions, timely completion and ongoing compliance; generate comprehensive reports of plan benefits by company and employee; validate all awards and exercise events; track all leavers and joiners; manage document production; calculate taxable amounts in relation to transactions, ready for submission to the company’s internal or external PAYE facility; generate plan returns, trustee self-assessment returns and trust accounts where applicable. employees and employers are able to access data and make plan choices on the system via a bespoke plan website.
- 14. Considerations: Complexity Corporate strategy/ethos Company law Employment law Trust law Tax law Company finance Exit strategy Valuation Accounting Issues Communications and PR Solution: comprehensive advice and support
- 15. complete solutions scheme design documentation trustee services share capital structure valuation resolutions and minutes employee presentations administration, compliance
- 16. About RM2 the most comprehensive employee share scheme consultancy in the UK largest dedicated share scheme team more than 500 successful schemes from SMEs to large listed companies, every sector
- 17. The RM2 Partnership Ltd www.rm2.co.uk 0800 043 8150 0208 949 5522
- 18. Questions?