An employee share scheme is a common method of providing employees with an incentive to help improve a business and its performance.

Employers can grant employees options on up to £30,000 worth of shares each. The share price, fixed on the day the option is granted, must not be lower than the share's market value on that day. The employee can exercise their options after a specified period. If they do so, it is at the fixed price, not the market price at that time.

If they sell the shares at a profit, no income tax or National Insurance contributions (NICs) are due on the gains if certain conditions are met. However, Capital Gains Tax may be payable if gains exceed the employee's annual tax-free allowance.

The business can get corporation tax relief for the costs of establishing and administering the CSOP and for the cost of providing shares under the scheme although before granting options, you must obtain HM Revenue & Customs' (HMRC's) approval.

For further information please contact the Cobia team on 0845 226 0580 or email info@cobia-uk.com