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 options worth up to £120,000 at the date of grant for each selected employee and up to £3 million for all employees. Eligible employees must work a minimum of 25 hours a week or must be employed by the business for at least 75 per cent of their full working time. HMRC approval is not required although "advance Assurance" is often recommended and the business must also notify HMRC within 92 days of granting the options. Corporation tax relief is also available for the cost of providing the shares to employees.

To qualify for an EMI scheme a business must, at the date on which an option is granted:

• Trade mainly in the UK;
• Have fewer than 250 full-time equivalent employees;
• Not belong to one of a number of excluded business sectors; and
• Be an independent trading company or trading group with less than £30 million in gross assets.

There is no income tax or NICs to pay when options are granted or when they are exercised if the option price is at least the market value of the shares when the options were granted. Options must also be exercised within ten years.

For employers seeking to consider broader "all employee" arrangements, it is usual to consider a Share Incentive Plan (SIP) or Save as You Earn (SAYE or Sharesave) in the first instance.

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