Taxation – Share options tax break call

A city lobby group wants to give companies greater freedom to reward their directors via share option schemes, despite a report backed by the English ICA which suggests lucrative share deals for directors are not linked with company performance.

Cisco, the City group representing smaller quoted companies, is pushing for tax breaks for share option schemes. Katie Morris, Cisco’s chief executive, said: ‘Share schemes are good for a smaller business. They don’t have the ability to pay the sort of salary larger companies can offer, and share options are a way of getting high-calibre directors on board.’

But Morris says there should also be checks and balances to make sure schemes are not abused: ‘They should be linked to how well the company and the director performs. If you hand out shares like confetti the whole process is negated.’

The English ICA’s report says most companies do not systematically disclose whether their schemes are subject to performance criteria, but only 10% of FTSE 100 and 2% of FTSE 250 firms surveyed said share options were related to performance of individual directors.

Cisco suggested ending the three-year rule for company share option plans, abolishing national insurance contributions on unapproved options and allowing tax payable on the exercise of unapproved options to be spread over five years until the shares are sold.

Management consultant David Tankel, of New Bridge House Consultants, supported the idea: ‘Share option schemes mean the director does well when the shareholders do well.’

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