Why use a company share option plan (CSOP)?

Produced by Tolley in association with

Employment Tax

Guidance

Background

Until the mid-1990s, most larger companies were keen to take advantage of the benefits of what were originally known as Executive Share Option Schemes. The tax treatment was highly favourable, the scheme was relatively simple to understand and operate, and the limits were very generous. An employee was able to receive options to acquire shares in their employing company or the holding company of their employing group worth the higher of £100,000 or four times their salary.

Current limits

Under current legislation in ITEPA 2003, Sch 4, CSOPs are restricted with the maximum value of shares that can be put under option for any employee now limited to £60,000. (£30,000 before 6 April 2023).

With lower permitted share values, CSOPs may be regarded as of more marginal benefit for senior executives and even for middle managers. CSOPs compare unfavourably with EMI where the limit is now £250,000, and also with non tax-advantaged alternatives where there is no limit, although the tax treatment is naturally less favourable.

However, while the

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Ken Moody

Tax Consultant at KM Tax Consultant

Ken Moody CTA (Fellow), ATT has worked in tax for over 40 years. He qualified as an Associate of the Chartered Institute of Taxation (CIOT) while working for a local firm of Chartered Accountants in his home town Sheffield. Ken then joined a top 30 London firm, managing the tax affairs of a SE-quoted group of companies. As lead tax adviser, this involved complex technical negotiations with HMRC, briefing and meeting with Tax Counsel, group tax planning and advice on corporate transactions. Following a takeover, Ken took on a similar role in Saffery Champness' London office. Since 1995, Ken has worked for firms in the North of England and Scotland, in mainly advisory roles, focussing on the holistic tax affairs of owner-managed businesses (OMBs) and their proprietors. Ken now works as an independent tax consultant advising a number of professional firms of accountants around the North West, where he is based, but also offering nationwide support. Still with an OMB focus, Ken advises across a broad range of UK direct tax issues. Ken's writing career began with articles in Taxation and Tax Journal from about 2000 onwards and in writing in-house tax publications for DTE in Bury, as part of his role as Senior Tax Manager. He has since written numerous articles for professional magazines and other publications. Ken was awarded the Fellowship of the CIOT in 2011 for his work "Employment-Related Securities and Unlisted Companies".

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