Other Discretionary Share Plans

The following types of Share Plan are designed mainly to give employees the opportunity to have their gains subject to capital gains tax (CGT), currently at 20% for higher and additional rate taxpayers, as opposed to income tax at 40% or 45% and national insurance contributions (NICs).

There is usually a small income tax charge when the shares are first acquired, even though the employee will get no benefit if the share price falls.  These arrangements are therefore more attractive if there is potential for considerable future growth in the share price.  To the extent that the gain is subject to CGT, the employing company will not normally be able to benefit from a corporation tax deduction.

Companies should also consider granting CSOP or EMI options, where this is possible.

Joint Share Ownership Plan (JSOP)

Employees are awarded part ownership of shares.  Typically an Employee Benefit Trust owns an interest in the shares equivalent to their value at the award date plus a hurdle rate of return (say 5% per year).  The employee will be entitled to any increase in the value of the shares above the hurdle when the shares are sold.

Growth Shares (or Flowering Shares)

Employees are awarded a special class of shares whose value is based only on future increases in the value of the company.

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