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HMRC internal manual

National Insurance Manual

Class 1 NICs: Employment - Related Securities: Shares - Share Plans


Share plans usually consist of the grant of options to employees which entitle them to subscribe for a set number of shares, usually in the company that employs them, at a set price per share (that is the ‘exercise’ or ‘acquisition’ price).

Employees can acquire shares and share options through a plan:

  • which has been approved by HMRC; or
  • set up by a company to grant options to employees but not approved by HMRC; or
  • set up by a company to provide shares to employees but not approved by HMRC.

Approved share plans

Approved share plans provide income tax and NIC advantages for both employees and employers and normally no income tax change or NICs liability arises when shares are acquired in accordance with the plan rules. There are three approved plans:

Companies who set up a formal share plan can seek approval from:

Charity Assets and Residence, Employee Shares and Securities Unit, Nottingham Team, 1s t Floor, Ferrers House, Castle Meadow Road, Nottingham NG2 1BB

In addition to the above, Enterprise Management Incentive plans also offer tax and NIC advantages but companies do not need to seek approval from HMRC - see NIM06810.

Share plans which do not satisfy the criteria for approval are called ‘unapproved plans’ and any NICs liability on gains from such plans is generally determined by reference to section 4(4)(a) Social Security Contributions and Benefits Act 1992 and regulation 22(7) Social Security (Contributions) Regulations 2001 - see NIM06823.