Every founder and business has a different view on how they would like to set up share schemes for their teams. In this area fintech businesses generally are no different to other fast-growth firms.
The most popular of the share schemes to set-up for employees is the Enterprise Management Incentive (EMI) share scheme. Many fintech’s introduce an EMI in the early stages of growth as a tax efficient way to incentivise key team members and retain their top talent.Key tax benefits of an EMI scheme include:
1. Generally, no income tax or national insurance contributions on grant or exercise if share options are issued at market value.
2. Capital gains tax payable on sale of the shares, potentially at a reduced rate of 10% if Entrepreneur’s Relief applies.
3. Corporation tax deduction on exercise based on market value of the shares at exercise less exercise price.
Fast-growth fintechs often out-grow EMI relatively quickly however, as the rules specify that there must be fewer than 250 full time equivalent employees and gross assets must be £30m or less.
If your fintech does not qualify under the EMI scheme, then we recommend considering the Company Share Option Plan (CSOP). This is another tax-advantaged HMRC approved share option scheme, but with no limit on company size or number of employees, meaning that larger businesses can benefit.
More well-established fintechs also often use bespoke share schemes to incentivise or retain talent, for example growth or flowering shares.
We advise businesses on all types of share scheme, including design, set-up and ongoing compliance.