Growth shares and nil/partly paid shares

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In addition to the traditional statutory tax-advantaged employee share plans (being, company share option plans, enterprise management incentives, share incentive plans and save as you earn schemes), there are a number of alternative structures which are nevertheless designed to deliver employee share awards in a tax-efficient way.

Growth shares and nil paid/partly paid share arrangements are not prescribed by statute. However, when structured and implemented correctly, they can allow the growth in value of the relevant shares after they have been acquired by an employee to be taxed under the capital gains tax (CGT) regime only, rather than being subject to income tax and National Insurance contributions (NICs). They are particularly useful where:

  1. •

    the relevant company is unable to qualify to operate a statutory tax-advantaged plan

  2. •

    the value that participants are intended to receive under the incentive is greater than the statutory limits that apply to tax-advantaged plans, and/or

  3. •

    statutory tax-advantaged plans do not offer the company sufficient flexibility in order to achieve its commercial aims when incentivising its employees

Growth shares may in certain cases also be combined with

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