Share Scheme Manual - SSM7.3

Formal share schemes

(Previously SE2877)

A formal share scheme will normally have a written set of scheme rules under which employees acquire shares or share options in one or more years. It will be clear from whatever documents are used that the shares or options are being received by reason of the employment.

Consequently under a formal scheme it is not necessary to consider the capacity in which the employee acquires shares or options. It is only necessary to consider whether the particular scheme leads to Schedule E consequences for participants and if so the values to be included in returns.

If many of the company's employees or directors have acquired shares or share options this has probably been done under a formal employee share scheme. But a company may set up a formal scheme for the benefit of a single employee or director.

If the scheme is not an approved scheme (see SSM2.1 onwards)the employer's district should obtain a copy of the scheme rules or other documents to enable the tax treatment to be agreed. The rules may already be held in the accounts district or with the ESSU's records for the scheme.