CSOPS ― qualifying conditions for employees

Produced by Tolley in association with

Employment Tax

Guidance

The qualifying conditions that permit employees to benefit from company share option plans (CSOPs) are not difficult to satisfy. ITEPA 2003, Sch 4, Part 3, para 8 establishes the employment requirement for individuals to participate in a Sch 4 CSOP scheme.

Employees or full-time directors

Anyone wishing to benefit from a CSOP must actually work for either the company over whose shares the options are granted, or one of its subsidiary companies, known as a ‘constituent company’ within the CSOP legislation.

The rules require that an individual be either a qualifying employee of the company (or a constituent company), or alternatively, a full-time director.

Full-time is not specifically defined in the legislation but HMRC guidance states that it means working for not less than 25 hours per week excluding meal breaks, which aligns with the definition within the enterprise management incentives (EMI) legislation.

HMRC accepts that where employees and full-time directors, furloughed because of coronavirus (COVID-19), have been granted options before the pandemic, those options will remain qualifying

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Helen Wood

Founder, HLN WD TX , Employment Tax

Helen Wood is the founder of HLN WD TX, a share schemes and employee incentives advisory business.She qualified as a CA with ICAS in 2009 and has worked as a specialist reward and incentives advisor for 17 years, spending 13 of those at KPMG followed by 3 ½ years as an Associate Director at RSM. Helen has worked with businesses ranging from start-ups to fully listed companies, spanning owner-managed businesses, private equity portfolio companies, and AIM listed businesses.She advises on a wide range of employee share schemes and employment related securities matters including the design and implementation of effective management and employee incentives; tax valuation of employment related securities, buy and sell side transaction support, HMRC compliance, tax due diligence and employee ownership trust transactions.

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