Policy paper

Reform of Company Share Option Plan

Published 15 March 2023

Who is likely to be affected

UK companies and their employees.

General description of the measure

This measure makes three changes to the Company Share Option Plan (CSOP), a tax-advantaged employee share scheme available to all UK companies and their employees:

1. The employee share options limit will be doubled from £30,000 to £60,000.

2. The ‘worth having’ condition, which limits which types of shares are eligible for inclusion within a CSOP scheme, will be removed.

3. Changes to the share options limit will now be achievable through secondary rather than primary legislation.

Policy objective

This measure supports companies to attract talent and ultimately grow and succeed, by expanding the availability and generosity of CSOP. This will allow companies to offer their employees a greater stake in the company, so employees can share in their employer’s success.

The changes will help companies that have grown beyond the scope of the Enterprise Management Incentives (EMI) scheme to offer more attractive share-based remuneration, supporting these businesses to recruit and retain key talent.

Background to the measure

At Budget 2021, the government published a call for evidence to seek views on whether the EMI scheme should be expanded. At Spring Statement 2022, the government announced that EMI remains effective and appropriately targeted. However, it also signalled its intention to expand the scope of the review to consider if CSOP, the other discretionary tax-advantaged share scheme, could support companies as they grow beyond the scope of EMI.

Following the review, this measure was announced on 23 September 2022. At Spring Budget 2023, the government have also announced a number of changes to the administration of EMI alongside publishing a response to the 2021 call for evidence.

Detailed proposal

Operative date

These changes will have effect for share options granted under CSOP schemes on or after 6 April 2023. Existing CSOP options granted before 6 April 2023 will also benefit from these changes.

Current law

Current law is included in Schedule 4 to Income Tax Earnings and Pensions Act (ITEPA) 2003.

Proposed revisions

Legislation will be introduced in Spring Finance Bill 2023 to modify Schedule 4 to ITEPA 2003 in the following ways:

• Paragraph 6(1) will be amended to increase the share options limit from £30,000 to £60,000.
• A new provision will be introduced at paragraph 6(5) to allow the Treasury to change the share options limit by regulations.
• Paragraph 20 will be omitted. This will remove the requirement for eligible shares to be either employee-control shares or open market shares unless the eligible shares are shares in a company whose ordinary share capital consists of shares of one class only (the ‘worth having’ condition). Consequential amendments will also be made to the relevant sections of Schedule 4 ITEPA 2003 to account for this change.

Summary of impacts

Exchequer impact (£m)

2022 to 2023	2023 to 2024	2024 to 2025	2025 to 2026	2026 to 2027	2027 to 2028
—	-10	-15	-20	-85	-125

These figures are set out in Table 5.1 of Autumn Statement 2022 and have been certified by the Office for Budgetary Responsibility. More details can be found in the policy costings document published alongside Autumn Statement 2022.

Updated estimates consistent with Spring Budget 2023 forecasts can be found in Table 4.2 of Spring Budget 2023.

Economic impact

This measure is not expected to have any significant macroeconomic impacts.

Impact on individuals, households and families

This measure is expected to have a positive impact on employees who receive options as a result of the broader access to the schemes for companies and the increased share options limit. Individuals will not be required to do anything differently to benefit from the changes.

The measure is not expected to impact on family formation, stability or breakdown.

There is no expected impact on individuals’ experience of dealing with HMRC as CSOP schemes are administered by the employer.

Equalities impacts

It is not expected that there will be adverse effects on any group sharing protected characteristics.

Impact on business including civil society organisations

This measure is expected to have a negligible impact on the small number of companies which use CSOP. The required changes to guidance and the online returns employers and their advisers submit to HMRC will be minor. One-off costs could include familiarisation and upskilling staff. There are not expected to be any continuing costs associated with this measure.

Customer experience is expected to remain broadly the same as the changes do not materially affect how companies interact with HMRC.

This measure is not expected to impact civil society organisations.

Operational impact (£m) (HMRC or other)

A small IT change expected to cost less than £5,000 will be required to support delivery of this measure. Due to the relaxation and increased generosity of the CSOP rules, HMRC will undertake increased compliance activity to ensure CSOP is being used appropriately. Additional resource will be dedicated to compliance work to support the effective delivery and implementation of this measure. This resource is expected to cost a total of £570,000.

Other impacts

Other impacts have been considered and none have been identified.

Monitoring and evaluation

The measure will be monitored through information required to be returned to HMRC, and will be kept under review through communication with the HMRC led Share Schemes Forum.

Further advice

If you have any questions about this change, please email: shareschemes@hmrc.gov.uk