Savings - related share option schemes

Sometimes known as SAYE schemes or Sharesave.

Features of Sharesave Schemes:

  • These are all-employee schemes. All qualifying employees and directors must be eligible to participate on similar terms.
  • The company can specify a qualifying period of up to 5 years employment for employees to be eligible to participate.
  • The company grants employees options to buy the company's shares in 3, 5 or 7 years time at today's price or at a discount of up to 20% of that price.
  • Participants must enter into a special savings contract to buy the shares at the end of a fixed term.

Some guidelines

  • The company can operate a scheme only if it has been approved by HMRC.
  • The role of the Employee Shares and Securities Unit is to ensure that the rules of schemes which are adopted satisfy the relevant legislation.

Some of the more important points in the legislation are:

  • The monthly savings must be between £5 and £250.
  • Payments under the savings contract must be made on a weekly or monthly basis from salary or wages.
  • The minimum number of monthly contributions is 36. The maximum is 60.

Tax relief

  • Income tax is not chargeable when an option is granted.
  • Participants will not normally be taxed when the proceeds of the savings contract are used to buy shares. An income tax liability does arise where the option is exercised within three years because of a take-over or because the business in which they work has been sold.
  • The cost for capital gains tax purposes is normally the price paid for the shares.

How do I go about setting up a SAYE Share Option Scheme?