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Share schemes for the terrified

27 July 2006
Issue: 4068 / Categories: Comment & Analysis , Capital Gains
STEPHEN WOODHOUSE and THOMAS DALBY explain that employee share schemes can be favourable rather than frightening.

THERE ARE MANY reasons for providing shares to employees: in established companies the objective tends to be to align employees' financial interests with the success of the business; in newer cash-poor businesses shares can be a way to attract talented employees without haemorrhaging essential cash from the business. Employee shares are an established feature on the corporate landscape and as practitioners we are likely to encounter them whether we deal primarily with business or personal taxation.

Many practitioners feel a sense of dread resignation at the mention of share schemes an impenetrable thicket of acronyms hedged about by a maze of legislation of Byzantine complexity but the principles that underpin the taxation of employees' shares are straightforward: any difference between the amount paid for shares and the value that the employee receives is taxable income unless this is delivered through an approved or qualifying plan. As...

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