PLC - Joint share ownership plans: the new kid on the block?

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Joint share ownership plans: the new kid on the block?
Resource type: Articles: know-how Status: Published on 21-Aug-2009

There is a relatively new, tax-efficient employee share scheme on the scene, generally called a joint share ownership plan. These can provide returns similar to tax-favoured share options for all companies without any individual or other limit. Nicholas Stretch and Isabel Pooley, CMS Cameron McKenna LLP There is a relatively new, tax-efficient employee share scheme on the scene. Although there is no set name or format for these arrangements (as they are not granted in reliance on any particular part of the tax legislation), they are generally called joint share ownership plans (JSOPs). Companies (and their employees) are instinctively attracted to favourably taxed HM Revenue & Customs (HMRC) approved arrangements but these are not available to all companies and, even where they are, the individual participation limits or other HMRC rules can be restrictive. This is the gap that a JSOP can fill. JSOPs can provide returns similar to tax-favoured share options for all companies without any individual or other limit.

Establishing a JSOP
JSOPs operate in tandem with an employee benefit trust (EBT). The employee, jointly with the EBT, acquires an interest in the relevant number of shares on joining the JSOP. The EBT pays close to the market value of the shares (through funding procured by the company) to acquire its interest, with the employee paying the (normally very small) balance. The EBT holds the legal title to the shares for administrative reasons, but the employee and the EBT both have a beneficial, although unequal, interest in the shares. The employee’s interest gives him the right to receive the future growth in value of those shares. The EBT’s interest gives it the right to receive the original value of the shares at the date of the award. Normally,