The joy of shares: boost your business this Christmas

Last updated: 4th December 2023

Giving shares to your employees can be an incredibly powerful motivator. It’s something that can have a much greater impact on their life (and your business) in the long term than a cash bonus today (that will be forgotten in the aftermath of New Year's Eve).

Make a real difference to your business this Christmas.

Like a lot of business owners, you’ve likely been meaning to get around to putting that employee share scheme in place all year. Now the Christmas rush is closing in and you’re wondering if you’ve missed the boat, or if it’s still possible, or perhaps wondering:

1. How long will it take to set a scheme up?
2. Isn’t there a lot to consider?
3. How much will it cost?
4. Do I need a valuation?

Let’s take each of these one by one, so you have all the information you need to make progress.

In this post, we’ll assume you’re looking to set up an EMI option scheme (the most popular and tax-efficient scheme for UK SMEs). But most of the principles apply to any scheme (and our team of experts at Vestd would be happy to guide you through the choices, for free).

How long will it take to set a scheme up?

“Have I really still got time to get a share scheme in place before Christmas?”

The answer to this question used to be more uncertain and complicated.

First, you had to find an accountant and a lawyer to help you with the various elements, have the various meetings, and start working on your valuation.

Then they would start preparing the paperwork, adding various custom clauses for deliberation/discussion (but often with limited true utility).

After, you’d review the various versions and at some point, finally agree the documents and get them wet-signed by your team (after attempting to explain what everything meant) and then you’d still need to go through the process of registering the scheme with HMRC.

All this takes time and as you’ll know with lawyers and accountants, you are paying by the hour and it certainly starts to add up!

Today the story can be dramatically different depending on how you approach things.

By harnessing software, you can dynamically build an agreement that’s right for you, simply and in a few minutes - cutting your admin and time down massively and eliminating paperwork entirely.

The key thing to start early on is the valuation. That’s outside of everyone's control as you’ll be working to HMRC’s timelines and they take around four to six weeks to approve them.

If you want the scheme in place before everyone heads off for the holidays, I’d suggest you start the process in late October or early November.

Isn’t there a lot to consider?

“I’m coming into the busiest part of the year, have I really got time to do this with everything else going on?”

We hear this a lot and it’s understandable.

The decision is a seriously important one for the business, no one wants to make a mistake with their equity, and you want to make sure you have all the information so that you can have comfort in your decision.

I appreciate all the language and options are likely new and confusing when you first start to look at this!

However, choosing a scheme really isn’t that complicated once you understand what you are trying to achieve and what type of scheme can be used in your situation. Usually, your business circumstances will determine the option that's best for you.

At Vestd, we help  SMEs set up EMI share schemes every day.

We’ve taken all we’ve learnt and the common questions that come up and created this free share scheme guide, which only takes 10 minutes to read and will tell you all you need to know.

How much will it cost?

“I want to give shares as a bonus but don’t want to break the bank doing so.”

This is a hard one and it’s the reason we set up Vestd.

So many business owners know the power of sharing ownership (the research is clear - these companies outperform their peers on everything from productivity to revenue to happiness) however, cost can be a huge barrier.

And that’s just to get the scheme set up. Only business owners who have experience having been there before can appreciate how the hidden costs can mount up over the scheme's lifetime.

The fact is, it doesn’t have to be this way. Costs can be completely transparent, spread over the lifetime of the scheme and be predictable so you’ll know exactly where you are each month. No nasty surprises.

Yes, an EMI scheme can easily cost up to £10k if you are doing this the traditional way, and that's just to get it set up. With Vestd, you're looking at a fraction of that.

Do I need a valuation?

Yes, for an EMI scheme, you’ll need a valuation pre-approved by HMRC.

The time you’ll need to prepare the valuation can vary. Again, if you are doing this the traditional route, I’d allow up to a month to work with an accountant on this. And then you’ll need to allow at least four weeks for HMRC to approve the valuation before you can grant the options.

A lot of accountants don’t do these regularly, so they either take even longer or outsource to someone else (and you’ll be charged accordingly either way).

This used to be our biggest bugbear at Vestd. We’d reduced the costs and complexity of setting up and managing a scheme hugely by utilising technology and simplifying the process. However, it felt like we were going back in time every time a customer needed a valuation.

To solve the problem, we built our own in-house valuations team and tool. And we’ve included an initial valuation as part of our Standard plan.

That means, every time you need one to issue additional options, there are no extra costs to worry about and we can process the valuation for you quicker than anyone else.

So, if you're thinking about rewarding your team with a share scheme, you know what to expect. Even if you don't get it sorted before Christmas, an announcement in January is certainly a nice way to kick off the new year!

Book a free, no-obligation consultation today