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Giving Shares to Employees
Newsletter issue - July 2010
There are a number of approved share schemes that a company can use to provide its employees with shares in the company they work for, or options to buy those shares at a favourable price. The scheme designed for small companies to use is the Enterprise Management Investment scheme (EMI).
If the company chooses not to use one of the approved share or share option schemes and issues shares or options to its employees, there can be some very serious tax consequences, such as:
- The employee is taxed on the value of the shares he receives as if that value was part of his salary.
- The company must pay the employer's class 1 NICs on the value of the shares issued.
- The company must also fund the employee's class 1 NIC and the tax that should have been deducted under PAYE from the value of the shares provided to the employee.
- If the employee leaves shortly after acquiring the shares, the employer may not be able to recover the PAYE and NIC paid in respect of the value of those shares.
- If the Taxman views the giving of the shares as part of a tax avoidance scheme, the employee may be subject to tax and NICs on any dividends he receives from those shares, as if those dividends were salary payments.
If you want to provide your employees with shares please talk to us about what you want to achieve, so we can advise on how to do it the most tax efficient manner.
What our clients say about us...
"Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."
ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT
"I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."
Neil Price - Managing Director at Work Relief Charity Recruitment
"Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"
Lee Westrap MBCS - Director - Bulldog IT Services
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