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Share scheme increasing in popularity; AESOP: Employee Share Ownership Plan.

Byline: ANDREW LEONARD

THE All Employee Share Ownership Plan (AESOP) which was launched last year has been described as the most tax advantageous employee share scheme to be introduced in the UK and is becoming increasingly popular with small companies.

Whilst producing for employers a significant savings in National Insurance contributions, an AESOP can also help not only to lock in staff, thus reducing staff turnover levels, but also to assist with staff motivation through the monitoring of performance targets.

The principal benefit to the employee is the receipt of one free share for every share purchased.

There are, however, numerous tax benefits also available to the employee, and, under normal circumstances, the shares need only remain in the scheme for five years for the employee to retain all the shares and the tax incentives.

Indeed, some benefits accrue after as little as three years.

The shares are purchased by way of a monthly deduction from the employees gross pay, the minimum amount being 10. The maximum could be as high as 125 depending on income.

As deductions are made from gross pay ie pre-tax and NI, a payment of the minimum amount of pounds 10 per month will result in a reduction in net pay of just pounds 6 for a higher-rate taxpayer, and pounds 6.80 for a standard-rate taxpayer.

As long as the shares remain in the scheme for five years the employee will not normally incur a liability to Income Tax, NI or Capital Gains Tax when the shares are removed from the scheme.

This is only intended to be a very broad overview of the AESOP and professional guidance should be sort before entering into any commitment to set up such a scheme.

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TAX INCENTIVES: Andrew Leonard is a Board member of Business Connect Wales, a partner in the Cardiff office of PKF and this year's president of the South Wales Society of the Institute of Chartered Accountants
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Title Annotation:Business
Publication:Western Mail (Cardiff, Wales)
Geographic Code:7QATA
Date:Nov 28, 2001
Words:325
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