Private incentives

KEY POINTS

• Private equity-backed companies find it difficult to comply with the approved share plan regime
• Advantages of a phantom share scheme
• Employers' National Insurance cannot be transferred to the employee under a phantom scheme
• Corporation tax deduction may still be available

HMRC-approved share plans are in principle open to both listed and unlisted companies. In practice however relatively few unlisted private equity-backed companies (PEBCs) offer employees participation in them.

This is because the complex structure of such companies and the nature of their share capital mean it is often impossible to comply with the restrictive legislative conditions.

In its Pre-Budget Report submission in September 2007 the British Venture Capital Association raised concerns over the inability of PEBCs to participate in approved share plans.

The association said that the benefits of approved share plans should...