ERSM20010 - Employment-related Securities and Options

Overview

Shares in companies are commonly used by employers to reward, incentivise and retain employees. The most common forms of employment-related securities are share options and share awards. These may be provided to employees under a formal “scheme”, which will usually have a written set of scheme rules, as informal “one-off” awards of shares, or grants of options.

Because the term “scheme” can have derogatory overtones, it is becoming more common to refer to “share plans”.

However, the legislation covers the acquisition of securities even where they are not received under a formal scheme or plan.

All shares and securities acquired in connection with an employment come within the scope of the employment-related securities regime, including shares acquired by directors or employees on the formation of a company. The rules also extend to rights or opportunities to acquire securities, and to benefits in connection with shares and securities that are not otherwise chargeable to tax. They cover cases where the securities, or opportunities or rights to acquire the securities, are provided by a person other than the employer, and where the securities are not directly received by the employee.