Employee Share Schemes

1. Introduction

Employee share schemes are designed to encourage employees to become shareholders in their employer company. These schemes can take a variety of forms. Most involve share options but with some schemes employees are awarded actual shares. A basic distinction is between schemes with special tax advantages and those without. 'Phantom' schemes only involve cash payments but aim to replicate the effect of a share scheme.

2. Tax Advantaged Schemes

2.1 Enterprise management Incentives ('EMI')

This is a highly flexible arrangement with substantial tax advantages, under which employees are granted options in the employing company:

• Participants do not suffer a charge to UK income tax or NIC on grant of an EMI option