A CSOP gives employees options to acquire shares at a fixed price in a time window at some point in the future. Following the introduction of EMI and with no increase in the £30,000 limit in over a decade, CSOPs have become less fashionable. However, they are still useful both as low-cost all employee schemes and selective top-up schemes where companies qualify for EMI.
The advantages
- no income tax or NIC
- simple to operate and understand
- the company can choose which employees it wishes to reward and to what extent
- share values are agreed with HM Revenue and Customs in advance
- no hidden surprises for employee or employer
- no expensive commitments for employees
- options will usually lapse on termination of employment
- the employing company may get corporation tax relief at the time that options are exercised
- unlike EMI, there is no qualifying trade condition, no gross assets condition and no employee number limit.
Qualifying conditions
- the company must be independent i.e. not a subsidiary of another company
- the options cannot be granted with an exercise price manifestly below the market value at the time of grant
- there is a minimum exercise period of three years and a maximum of ten years.
Limits on employees
- employees can only be offered options by their employer worth up to £30,000 each
- employees must be full-time working directors or other full or part time employees
- options cannot be offered to those with a material interest in the company (25% or more of the company’s shares – including share they could acquire through the option - if it is a close company).
CSOP schemes are relatively straightforward to put into place and our experience will help to ensure that the process is quick and painless.
For further information please click here to contact us.
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