Employment and pensions

Company share option plans | Improvements from 6 April 2023

Published on 31st Jan 2023

Upcoming changes likely to increase the popularity of CSOP as an employee incentive arrangement

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As announced in autumn 2022, improvements to the tax-advantaged company share option plan (CSOP) will take effect from Spring 2023. 

What's changing?

From 6 April 2023, the individual limit on the market value of shares which may be placed under CSOP option will be increased to £60,000 (double the current £30,000 limit which has been in place for many years).

The current share class restrictions will also be removed. Broadly, these require that (where a company has more than one class of shares) the shares must be either employee-controlled or open-market shares. The removal of these restrictions will mean that some companies which previously did not qualify (in particular some private equity backed companies) may become eligible for CSOP from 6 April 2023.

CSOPs are likely to become more popular as an employee incentive arrangement, particularly for companies which do not qualify to grant (or cease to qualify for) enterprise management incentive options.

CSOP qualification and documentation

HMRC has confirmed that the CSOP changes will take effect automatically from 6 April 2023 and that companies do not need to revise the rules of existing plans. Although it is helpful to have this confirmation, companies currently operating CSOPs may wish to review and update their plan rules to refer to the new limit after it comes into force (or to update the limit the next time the rules are amended).

Companies exploring new incentive arrangements may wish to look into whether they qualify for CSOP under the amended legislation from 6 April 2023. Any new plan rules adopted on or after 6 April 2023 should refer to the new £60,000 limit (or such other limit as may be in place from time to time, to provide maximum flexibility for the future). 

In addition to undertaking due diligence to check that the company and proposed option holders qualify for CSOP, it is necessary to agree the market value of the shares with HMRC and for the company to complete the important HMRC registration, annual return and certification requirements. 

Please get in touch with your usual Osborne Clarke contact or one of the experts below if you have any queries about CSOP or would like to discuss further.


* This article is current as of the date of its publication and does not necessarily reflect the present state of the law or relevant regulation.

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