On Employee Ownership Day on 23 June 2023, many businesses who have offered their employees a stake in their business will be celebrating the positive impact that employee ownership has had on their business.

Successive governments have recognised the benefits of incentivising employees by giving them some form of a stake in their business. To encourage business owners to pass control to employees, tax incentives are available to employers for the implementation of employee ownership trusts and share acquisition plans for UK based employees. A variety of arrangements are available to a wide range of companies from small scale start-ups to large listed businesses.

The current focus on simplifying and widening access to such schemes is welcome. These changes include recent simplifications of the Enterprise Management Incentive (EMI) scheme and to Company Share Option Schemes (CSOP), improving the attractiveness of Save As You Earn (SAYE) scheme by the re-introduction of a tax-free bonus on SAYE savings and a government consultation recently announced looking at what further improvements can be made to the non-discretionary all-employee SAYE and Share Incentive Plans (SIP).

The breadth of arrangements and plans available can be confusing, but the wide range offers companies the flexibility to choose an arrangement best suited to their business and aspirations. There is no "one size fits all" solution so before embarking on choosing the best arrangement, business owners should consider what they are aiming to achieve with the plan:

  • Is it to pass control of the company into the hands of employees to preserve the business and its ethos?
  • Is it to reward for past performance or incentivise for future performance?
  • is it to tie employees in so they are motivated to stay and if so until when? A future event such as an exit?
  • Should all employees participate or is it tailored to those making the biggest impact?
  • Would you expect participants to be entitled to benefit from dividends in future or only capital growth?
  • Are the shareholders all aligned on the need for a plan?
  • Is there a desire to avoid dealing with minority employee shareholders until there is a realisation event for other shareholders?

It's important to make sure that your plan is well considered and tailored to best fit your particular needs at the outset, as it can be difficult (and potentially tax inefficient) to change course after awards have already been granted to employees. Having a clear strategy in relation to employee ownership also makes its communication to participants more straightforward which is key in making sure that the arrangement is successful in encouraging the right behaviours and acting as a real incentive to drive the business forward.

How Brodies can help

Please contact a member of the Corporate Tax & Incentives team if you would like more information or specific advice on choosing the right employee share incentive scheme for your business.


Armando Goncalves

Senior Solicitor

Charlotte Mackenzie

Trainee Tax Solicitor