An important area in the higher-level tax exams is the tax-advantaged share schemes.
Many start-ups need to attract skilled individuals to work long hours but cannot afford high salaries or overtime payments.
Instead, they offer options to buy shares in the company at a fixed price in the future. These companies do not have lots of assets so the option price can be set at a relatively low price.
This means that if the company is taken over or a public offering takes place (IPO), the employee can acquire the shares at the lower option price instead of the market value.
Under the enterprise management incentive (EMI) scheme, unquoted trading companies with assets of less than £30M and less than 250 employees can offer employees options to buy shares worth up to £250,000 per employee.
The options must be exercised within 10 years.
When the employees acquire the shares at a discounted price, there is no taxable benefit.
If you are planning on doing Tax or Advanced Tax in June, I recommend you learn the 4 share schemes.
Why not memorize the memory-joggers in my condensed notes and then start smashing through exam questions?
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