What are unapproved share option schemes and when might they be useful?
The “unapproved” label makes it seem as if there is something illegitimate about these schemes, but they are simply additional share option schemes that allow companies to grant options beyond the limits permitted for an EMI scheme. Unapproved schemes may also be used if the company or an employee cannot satisfy the eligibility criteria for an EMI scheme. As the name suggests, there is no need to seek HMRC approval to run these schemes and as a result unapproved schemes are not subject to the same thresholds or limits that an EMI scheme is subject to.
Whilst unapproved schemes are very flexible, they are not very tax efficient, with income tax, capital gains tax and sometimes National Insurance Contributions all payable on any gains made when the option is exercised. However, in some cases the employer can claim a corporation tax deduction for the full amount of any financial gain made by employees exercising their options.
Barnes & Scott can help your company to create unapproved schemes as a means of helping to incentivise and retain employees; and can help tailor the scheme to meet your specific requirements and circumstances.