HMRC’s Annual Share Scheme report: Interesting reading if you own or manage an SME.
When it comes to finding ways to incentivise employees, the options which are both cost effective, efficient and attractive are fairly limited and increasingly so.
Share schemes however are well worth considering as an option because they tick all of those boxes. Not only are share schemes being widely used by private companies to attract and retain talent, it has also been clearly demonstrated that over time they can increase employee engagement.
Every year HMRC publishes data about the take-up and operation of tax-advantaged share schemes.
On 30 June 2017, HMRC published its data for the tax year 2015-16 together with an enlightening commentary on the statistics. You can read HMRC’s annual report in full here.
Some of the key findings which caught our attention are:
- The grant date value of shares subject to enterprise management incentive (EMI) options increased by 23% between 2013-14 and 2015-16;
- The value of gains on exercised EMI options has increased by 85% since 2013-14; and
- The estimated annual cost of providing income and NIC reliefs for share incentive plans, company share option plans and EMI options is around £520m.
These increases are partially explained, according to the report, by the increase in the number of companies where employees exercised options in 2015-16. This could be due to share prices being high in 2015-16 for private company shares, incentivising the high number of individuals granted options in 2005-06 and 2007-08 (EMI options must be exercised within ten years to benefit from their tax-advantaged status).
What is clear from the annual report, as with every previous year (except for last year, when technical problems prevent the release of data), is that tax-advantaged share options and schemes remain very popular for private companies. They work and in their simplest form, a stand-alone share option, need not be either complicated or expensive to implement.