CH 30 - Company Share Options (CSOPs)

Question 1

Who can benefit from ‘Company Share Option Plans (CSOPs)’?

Answer 1

• specified employees and involves granting options over employer company shares;
• does not have to be available to all employees;
• employees with more than 30% of the shares in a close company cannot participate.

Cannot participate:
- part-time directors working less than 25hrs per week)

The rules dealing with tax charges and PAYE deductions on CSOP shares are contained in ITEPA 2003, ss.521–526. The rules regarding the operation and administration of a CSOP are given in ITEPA 2003, Sch 4.

Question 2

What are conditions for CSOPs?

Answer 2

The main conditions are as follows:

• No discount can be given, ie the option price cannot be less than the market value at the date of grant.
• The maximum value of shares (valued at the date of grant) over which options can be held is £60,000 (£30,000 prior to 6 April 2023).
• shares must be fully paid up, irredeemable and not subject to restrictions
• shares must be listed on a recognised stock exchange (or be shares in a company which is not controlled by anther company)
• company must be self-certified to confirm that it meets the legislative requirements

Question 3

What taxes are applicable on CSOPs exercised between 3-10 years from the date of the grant?

Answer 3

• no income tax or NICs implications on the exercise of company share options
• CGT gain applies is due on the difference between cost and sales proceeds.

The rules dealing with tax charges and PAYE deductions on CSOP shares are contained in ITEPA 2003, ss.521–526. The rules regarding the operation and administration of a CSOP are given in ITEPA 2003, Sch 4.

Question 4

What taxes are applicable on CSOPs exercised over 10 years from the date of the grant?

Answer 4

• Employment income arises at the date of exercise on diference of;
• • MV of shares at date of exercise
• • Less: Option Price
• • = Employment income chargable to income tax
• NIC’s will be charged if the shares are readily convertible assets
• CGT gain applies is due on the difference between cost and sales proceeds less amount charged to income tax.

The rules dealing with tax charges and PAYE deductions on CSOP shares are contained in ITEPA 2003, ss.521–526. The rules regarding the operation and administration of a CSOP are given in ITEPA 2003, Sch 4.

Question 5

When 3 year min. rulle dissaplies for CSOPS?
(rulle of tax advantage 3-7)

Answer 5

On takeover given that;
* employee receives cash for the shares acquired under option
* options are exercised within 6mts from takeover date