Phantom Share Schemes
You may also know them by the name Shadow Share Schemes.
This is one of many services we offer here at Neathouse Partners. We are also proud to provide the full spectrum of HR and employment law services to business owners across the UK. Reach out today for additional details and to learn more.
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What are Phantom Share Schemes?
It’s important to know what phantom share schemes are so you can decide if you want to offer them at your business. What they are is a cash bonus arrangement in which case the amount of cash bonus paid is measured by reference to the value (or the increase in value of real shares).
You should keep in mind that no actual share options or shares are awarded. Your employees benefit by receiving the right to receive cash based on set conditions. If you’re familiar with cash-settled Share Appreciation Rights (SARs) then you should know that they are very similar and often the terms are used interchangeably.
How Phantom Share Schemes Can Benefit Your Business
There are several advantages that phantom share schemes have to offer your business. Most importantly, they are extremely flexible schemes that can be appropriately tailored to meet your company’s and your particular requirements and goals. If you are a company owner who wishes not to offer employees shares or you’re worried about having minority shareholders then this is a great option for you.
You can also choose to separate your investments that are from the trading business as well. Not only that but the setup process is easy and they are simple to administer. You are not required to file a share scheme annual return with HMRC
tax status of Phantom share schemes
You may also be wondering about the tax status of phantom share schemes. It’s handled the exact same as a normal cash bonus. Whereas, there is no tax payable on the grant of a phantom option, any payouts that are made under this scheme will be subject to income tax through PAYE and national insurance contributions (NICs).
If you know about or are currently offering Enterprise Management Incentives (EMIs) at your business, then know this is the opposite of what occurs with this type of tax-advantaged share scheme. In this case, if and when certain conditions are met then an employee can usually choose an option that doesn’t include liability to Income Tax or NICs.
Get in touch
If you believe this is a good option and incentive to offer at your business then be glad to know we can help.
Our team is highly skilled and knowledgeable in the areas of HR, and employment law, including phantom share schemes. We encourage you to get in touch to discuss this option further and have all your questions answered.
We look forward to speaking to you and working with you soon.