Employee Share Plans in Europe and the USA - Sorainen

More documents

Recommendations

Info

Employee Share Plans in Europe and the USAThe United Kingdom5.2.2 Social security contributions: There is a charge to employer’s socialsecurity contributions if social security contributions are charged onexercise of an option (as set out in paragraph 5.1.3 above). Employersocial security contributions are charged at a rate of 12.8% for the taxyear 2010-2011 and no earnings caps apply.5.3 Favourable tax regimes5.3.1 CSOP 11 : The tax approved company share option plan (CSOP) offerstax benefits if a number of conditions are met. The most importantconditions are that the plan must only be open to employees and fulltimedirectors, the option exercise price cannot be less than the marketvalue of the shares at the time the option is granted and no individualemployee may hold options under the plan with a total option exerciseprice of more than £30,000.No tax or social security contributions will be chargeable on exercise ofan option granted under a tax approved CSOP, provided that the optionis exercised between 3 and 10 years from its grant date (or earlier in thecase of specified "good leavers").The CSOP is flexible as the company has discretion to select whichdirectors and employees will be granted options under the plan and todecide the number of shares to which the option relates. As a result ofthe £30,000 individual limit, it is common for companies to use aseparate plan to permit the grant of "unapproved" options in excess of11The main features of the CSOP, sometimes known as an approved executive share option plan, are asfollows:• a CSOP is open only to employees and full-time directors. “Full-time” is defined as working 25hours a week;• unlike sharesave plans and SIPs, the CSOP is a discretionary plan. The board of the companywhich establishes the CSOP has discretion to choose which employees may participate and thenumber of shares to be made available to each of them;• employees are granted options to acquire shares at an option exercise price which must not be lessthan the market value of the shares at the time the option is granted. No individual employee canhold options with a total option exercise price of more than £30,000; and• no tax is charged on the grant of the option nor on its exercise, provided it is exercised between 3and 10 years after the grant date. If the option is exercised at any other time, the employee issubject to an income tax charge (and social security contributions if the shares are RCAs) as if theoption were not granted under an "approved" plan (see 5.1.2 above). Exceptionally, certain "goodleavers" (e.g. employees made redundant) may be able to exercise their options within 3 years ofgrant without triggering a tax or social security contributions liability.UK/1729295/03 195 September 2010
Employee Share Plans in Europe and the USAThe United Kingdomthe £30,000 limit. Unapproved options are taxed as described inparagraphs 5.1 and 5.2.The statutory corporation tax deduction referred to at paragraph 5.2.1 isavailable even if the employee does not in fact pay income tax on theexercise of an option because the option is granted under an approvedplan and is exercised in circumstances where the employee is notsubject to income tax on exercise.5.3.2 Sharesave plan: 12 The tax approved sharesave plan is an all-employeeshare option plan under which employees are granted options to acquireshares on condition that they agree to make savings into a specialsavings account, with the savings being used to pay the exercise priceat the end of the savings period. The most important conditions forapproval of a sharesave plan are that all UK employees and full timedirectors must be offered the opportunity to participate in the plan(although the company may impose a qualifying period of service of upto 5 years), the option exercise price must not be less than 80% of themarket value of the shares and the savings contract must last either 3 or5 years.No tax will usually be chargeable on the exercise of an option grantedunder a tax approved sharesave plan. Social security contributions are12The main features of the sharesave plan are the following:• all UK tax-ordinarily resident employees (full-time or part-time) with 5 or more years service must beinvited to take part in the plan. In practice, most companies choose a much shorter eligibility period(e.g. 6 to 12 months);• employees who wish to participate must enter into a 3 or 5 year savings contract with a bank orbuilding society. The employee must agree to save between £10 and £250 a month for 3 or 5years. After 3 or 5 years the savings contract comes to an end and the employee becomes entitledto receive his savings plus interest, where applicable (currently no interest is payable in respect of 3year contracts entered into from 14 May 2010). The amount of interest is fixed at the start of thesavings contract so the amount due at the end of the savings contract is already known;• when the savings contract is entered into, the company grants the employee an option to acquireshares. The option exercise price cannot be less than 80% of the market value of the shares at thetime the option is granted. The number of shares comprised in the option is calculated by referenceto the savings and interest due at the end of the savings contract, divided by the exercise price.When the savings contract ends, the employee will be entitled to the savings and interest which hecan use to exercise the option if he wishes. Alternatively, he may retain the savings and interest;and• there is no tax charge on the grant of the option, nor (except in limited circumstances) on itsexercise, nor is there any tax charge on the interest acquired under the savings contract. The onlytax liability arises when the employee later sells the shares.UK/1729295/03 196 September 2010
Page 1 and 2:
Employee Share Plansin Europe and t
Page 3 and 4:
Employee Share Plans in Europe and
Page 5 and 6:
Page 7 and 8:
Page 9 and 10:
Page 11 and 12:
Page 13 and 14:
Page 15 and 16:
Page 17 and 18:
Page 19:
Page 22 and 23:
Page 24 and 25:
Page 26 and 27:
Page 28 and 29:
Page 30 and 31:
Page 32 and 33:
Page 34 and 35:
Page 36 and 37:
Page 39 and 40:
Page 41 and 42:
Page 43 and 44:
Page 45 and 46:
Page 47 and 48:
Page 49 and 50:
Page 51 and 52:
Page 53 and 54:
Page 55 and 56:
Page 57 and 58:
Page 59 and 60:
Page 61 and 62:
Page 63 and 64:
Page 65 and 66:
Page 67 and 68:
Page 69 and 70:
Page 71 and 72:
Page 73 and 74:
Page 75 and 76:
Page 77 and 78:
Page 79 and 80:
Page 81 and 82:
Page 83 and 84:
Page 85 and 86:
Page 87 and 88:
Page 89 and 90:
Page 91 and 92:
Page 93 and 94:
Page 95 and 96:
Page 97 and 98:
Page 99 and 100:
Page 101 and 102:
Page 103 and 104:
Page 105 and 106:
Page 107 and 108:
Page 109 and 110:
Page 111 and 112:
Page 113 and 114:
Page 115 and 116:
Page 117 and 118:
Page 119 and 120:
Page 121 and 122:
Page 123 and 124:
Page 125 and 126:
Page 127 and 128:
Page 129 and 130:
Page 131 and 132:
Page 133 and 134:
Page 135 and 136:
Page 137 and 138:
Page 139 and 140:
Page 141 and 142:
Page 143 and 144:
Page 145 and 146:
Page 147 and 148:
Page 149 and 150:
Page 151 and 152: Employee Share Plans in Europe and
Page 201: Employee Share Plans in Europe and
show all

Employee Share Plans in Europe and the USA - Sorainen

You also want an ePaper? Increase the reach of your titles

Delete template?

Save as template?