Savings Related Share Option Scheme: An Overview of ShareSave

The Savings Related Share Option Scheme, often referred to as ShareSave, is a financial incentive program established by employers to benefit their executives and other employees. Governed by the regulations of HM Customs and Revenue (HMRC), it provides participants with options to buy shares at a fixed price after a set savings period.

Types

• Qualified Share Option Schemes: These schemes comply with HMRC rules and offer tax benefits.
• Non-Qualified Share Option Schemes: These do not conform to HMRC rules and are subject to different tax implications.

Detailed Explanation

In a typical ShareSave scheme:

• Savings Contract: Employees enter a savings contract, agreeing to save a fixed monthly amount over a period (3, 5, or 7 years).
• Option Grant: Employees are granted an option to buy shares at a price set at the beginning of the savings period.
• Maturity: At the end of the savings period, employees can use the saved amount plus interest/bonus to buy shares at the pre-determined price.

Importance

• Employee Incentivization: Encourages employees to save and invest in their company’s future.
• Tax Efficiency: Offers favorable tax treatment for both income tax and capital gains tax.
• Employee Engagement: Promotes a sense of ownership and loyalty towards the company.

Related Terms

• Employee Share Ownership Plan (ESOP): A program that provides a company’s workforce with an ownership interest in the company.
• Employee Share Ownership Trust (ESOT): A trust established to hold shares on behalf of employees.
• Save-As-You-Earn (SAYE): Another term for Savings Related Share Option Scheme.
• Share Incentive Scheme (SIS): A broader category of employee share schemes, including ShareSave and others.

FAQs