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Using Profit/Surplus Revenue: Company share option plans (CSOPs)

Company share option plans (CSOPs)

This is a popular arrangement under which an employee acquires an option to subscribe for shares at a later date linked to a savings contract. Employers can grant employees options on up to £30,000 worth of shares each. The share price is fixed on the day the option is granted and must not be lower than the share's market value on that day. The employee can exercise their options after a specified period at the fixed price specified in the contract, not the market price at that time. If the employee sells the shares at a profit, no income tax or National Insurance Contributions (NICs) are due on the gain provided certain conditions are met. However, Capital Gains Tax may be payable if the gain exceeds the employee's annual allowance.

Your company can get corporation tax relief for the costs of establishing and administering the CSOP and for the cost of providing shares under the scheme.  Before granting options, HMRC approval must be obtained.

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