More companies using tax-advantaged employee share schemes: HMRC publishes latest share scheme statistics

HM Revenue & Customs recently published statistics on the use of employee share schemes (“ESS”) by companies during the 2017/18 tax year (the “Report”).

ESS are used by companies in order to incentivise a workforce by awarding employees with shares or options to purchase shares. We set out the various ESS approved by HMRC in our Insight piece published last year.  These are:

• company share option plans (“CSOPs”);
• share incentive plans (“SIPs”);
• save as you earn plans (“SAYE”); and
• enterprise management incentive schemes (“EMI”).

Key 2017/18 stats

Income tax and National Insurance Contribution (“NIC”) relief

• Employees have received an estimated total of £805 million in income tax and NIC relief across the four tax-advantaged schemes.
• Of those £805 million, £500 million related to income tax relief and the remaining £305 million related to the NIC relief.
• The figures are lower than the previous tax year which is primarily due to a 24% decrease in relief for SIPs.
• The average relievable gain or value per employee in each scheme shows that whilst SIPs have the highest total value, the average per employee is considerably higher for EMI schemes compared to any other scheme.

Companies operating ESS

• 13,330 companies operated tax-advantaged ESS in the UK during the 2017/18 tax year.
• There was a 12% increase compared to the 2016/17 tax year and a 48% increase compared to the 2007-08 tax year.
• The long-term increase since 2007/08 in all tax-advantaged schemes is because of companies offering EMI. The scheme was introduced in 2000 and now 84% of companies operating a scheme only offer EMI.
• The increase over time in EMI schemes probably reflects the fact that under this type of scheme companies can offer total share options up to the value of £250,000 in a three-year period, which is higher than other schemes.
• The number of companies offering other non-EMI schemes has declined by 9% since 2007/08, with much of the decline attributable to the decrease in the number of CSOPs.
• SIP numbers have remained relatively constant.

 Combination of schemes

• 12,910 companies (97% of all companies offering ESS) only operate one type of scheme, with a much smaller number of them running two or three schemes and fewer than ten running all four schemes.
• During the 2017-18 tax year, 98% of EMI companies did not operate any other tax-advantaged schemes.

Comparisons between schemes

• SAYE schemes have the highest total value of options granted during the 2017/18 tax year (approx. £1.8bn).
• However, SAYE schemes do not have the highest average value per employee (£5,200). SAYE schemes have a higher rate of participation than other schemes.
• The average per-person value of SIP shares is low and stands at £160, despite the total value of SIP share awards being greater than the value of EMI and CSOP options granted combined.
• The average amount awarded per employee as regards EMI schemes and CSOPs is higher than for SIP and SAYE schemes.

Number of companies granting and exercising options

• The total number of companies where employees have been granted options or been awarded shares has generally been rising since 2009/10. The total increase is driven by the large rise in the number of companies granting EMI option schemes.

Conclusions

The Report confirms that HMRC approved share plans continue to be extremely popular amongst UK corporates.

It is noteworthy that EMI share schemes have been the driving force behind the increased adoption of HMRC approved share schemes by companies. UK corporates have widely adopted EMI share schemes as a reliable method of incentivising their respective workforces.

It will be very interesting to see whether the growth trend will continue for a third consecutive year during the 2018/19 tax year.

For further information on how you to set up a tax-advantaged share scheme, and advice on share options generally, please contact enquiries@humphreys.law.

This piece was researched and prepared by Amir Kursun with input from Nick Westoll and Jeremy Glover.