A Company Share Option Plan (CSOP) allows a company to grant HMRC-approved and tax-favoured employee share options. Unlike a Share Incentive Plan, a CSOP is discretionary which means that you can choose who to incentivise. Often this will be the employees and executive directors who are key to the running of your business and its successful future growth. It may be for new employees who you are taking on in order to push the business to the next level.

A CSOP can be a useful alternative for you if your company does not qualify for the Enterprise Management Incentive Scheme (EMI Scheme). Each of your employees can, however, only hold up to £30,000 worth of options at any one time which is significantly less than the individual EMI options limit of £250,000

As with EMI Options, a CSOP operates through the grant of options (or rights) to purchase a certain number of shares in the employing company at a certain point in the future and at an agreed price. This will be the HMRC-agreed market value of the shares at the time the option is granted or a figure which exceeds this. Options cannot be granted at a discount under a CSOP. Please visit our share valuations page for information on how we can help you agree a valuation with HMRC.

The tax benefits of CSOP options generally mirror those of EMI options, although in order to receive the CSOP benefits, the employee cannot exercise the option during the first three years following the grant (unless perhaps a “good leaver” or because of death). There are also certain statutory conditions that both the company and the employees/directors must satisfy in order to be awarded approved CSOP options.