From April – when the scheme will be introduced – companies will be allowed a £3m limit on the total value of shares under EMI option, with no restriction on employee numbers.
Debate surrounding shares and motivating staff has rumbled on since Profit Related Pay – payments received by employees to recognise their contribution in creating profit for their company – was abolished in November 1996.
Following consultation, the limit announced today is double the rate set out in last year’s Pre-Budget report when the government announced a £1.5m, 15-employee cap.
Since the announcement, companies had become reluctant to enter the scheme as it was viewed as too complicated. Business focus groups including accountants and lawyers also lobbied the government.
Alastair Kendrick, Ernst & Young tax director, said: ‘The scheme was in danger of becoming a white elephant, but the government has listened to business and responded to their needs. As a result there is sure to be more support for it going forward.’
A spokesman for the Federation of Small Businesses, added: ‘We welcome the move and believe this may prevent many businesses from failing at the bottom end. Gordon Brown has been generous.’
Meanwhile Gordon Brown has reiterated his message from the last Pre-Budget Report to limit the amount of National Insurance Contributions payable on options granted to employees. The employer will be able to limit the liability to the gain attributable to the growth in company share price up to 7 November.
Royal Ascent on NICs is expected this week.
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