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HMRC internal manual

Employee Tax Advantaged Share Scheme User Manual

Schedule 4 Company Share Option Plan (CSOP): Eligibility of individuals to participate: The 'no material interest' requirement: Material interest limits

Paragraph 10 defines the material interest limits for participation in a Schedule 4 CSOP scheme as more than:

30%* of the ordinary share capital of the company.

The interests to be tested will generally be the percentage of the ordinary share capital of which the intended participant is the beneficial owner or has the ability to control (directly or through the medium of other companies or by any other indirect means). The following should be included in computing a participant’s percentage interest in the ordinary share capital of the company concerned:

  • shares held by the participant,
  • share options held by the participant (see ETASSUM42380),
  • shares and share options held by his or her associates (see ETASSUM42340),
  • interests held by any companies which the participant or his associates control by direct or indirect means.

Paragraph 10(3)(b) provides an additional test. This is based on whether the participant (and/or associates) have rights which would enable them to secure an entitlement, for example in the event of a winding-up, to more than 30%* of the assets which would be available for distribution among the participators.

Even if the intended participant currently has no interests at all in the company, he will be precluded from participating if the interests of his associates are, or were in the previous 12 months, material.

  • 25% in relation to share options granted before 17 July 2013.