Stephen Woodhouse
After studying law at Leicester University and a career in the City of London spanning 30 years Stephen joined Pett Franklin as the third partner in the team on 1st December 2013.
While practising in the City, Stephen trained at Slaughter and May working in their tax department for seven years after qualifying across a range of tax matters but particularly on employee share schemes. From there he joined Norton Rose to assist with building their employee share scheme practice. He joined Touche Ross (later, Deloitte LLP) in 1994 becoming a partner in 1999 until leaving Deloitte to join us on 1st December 2013.
Throughout his career, Stephen has advised on tax with particular emphasis on employee share schemes and related remuneration issues. He has advised on both domestic and international issues and become an acknowledged expert on employee benefit trusts in their many different guises, both as an adjunct to the operation of employee share schemes as through their wider use to deliver cash based benefits to senior employees, a vehicle to facilitate employee ownership and as part of the succession and exit planning for privately owned companies.
In addition, he has advised extensively on pension planning, particularly for plans to top up the benefits allowed under HMRC registered plans. This includes plans designed consistently with the requirements of the relevant legislation to permit the building up of pension benefits for senior executives in excess of the annual allowance for tax protected pension accrual and the lifetime allowance for tax protected benefits under UK registered plans. He believes that this will be an important area for focus in remuneration and benefits design as the lack of any index linking for registered plan limits mean that the real value of those benefits will erode over time.
As a leading adviser, Stephen speaks frequently at conferences and publishes in the tax press, being a regular contributor to Tolley's Tax Planning and a range of articles and other publications. He also co-authored a textbook on The Taxation of Pension Schemes and worked with the Goode Committee on Pension Law Reform.
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7 Contributions by Stephen Woodhouse
PRACTICE NOTES
Employee Ownership Trusts: UK legal and tax framework, conditions, reliefs (CGT/bonuses/IHT), 2024–2026 changes, compliance and practical structuring considerations
What is an employee ownership trust?
An employee ownership trust (EOT) is a specific kind of employee benefit trust (EBT) that must meet statutory criteria. The concept was introduced by the Finance Act 2014 (FA 2014), together with tax advantages for companies owned by an EOT and for individuals who dispose of shares to an EOT. If the statutory criteria are not met in relation to the EOT, these reliefs will not be available. The reliefs were enacted by FA 2014, Sch 37, following a Budget 2013 announcement and a subsequent consultation. For guidance on pitfalls and common errors when creating or running an EOT, see Practice Note: Pitfalls of setting up and operating an employee-ownership trust. For general information on EBTs, see Practice Note: What is an employee benefit trust?
What tax reliefs can an EOT provide?
Three tax reliefs were legislated, in line with a policy of encouraging the development of employee-owned companies as an alternative to a trade sale or other loss of independence for a privately owned company, or as a vehicle for...
Share Incentives
PRACTICE NOTES
Employee shareholder shares (ESS): removal of tax reliefs and guidance for pre-1 December 2016 agreements: requirements, tax, valuation, employment rights and company law
Archived:
The option to grant tax‑advantaged Employee Shareholder Shares (ESS), often used in private equity arrangements, has been withdrawn.
In the Autumn Statement 2016, the government confirmed the removal of these ESS-related reliefs:
income tax and NICs relief on the first £2,000 of ESS received by an individual;
the capital gains tax exemption on all or part of the ESS; and
the rule that, where a company repurchases ESS from an employee shareholder, the consideration is not treated as a distribution in the shareholder’s hands.
These withdrawals apply to any employer shareholder agreements entered into on or after 1 December 2016.
However, individuals who obtained independent advice about entering an employer shareholder agreement before 23 November 2016 could still proceed before 1 December 2016 and retain the beneficial income tax and CGT treatment.
Likewise, anyone who received independent advice on 23 November 2016 before 1.30 pm could still access the tax advantages, provided they enter into the Employee Shareholder agreement on or...
Share Incentives
PRACTICE NOTES
Joint Share Ownership Plans (JSOPs) in the UK: commercial rationale, legal structure, tax treatment, valuation, accounting, risks and DOTAS
What are JSOP awards?
Jointly owned shares are exactly what the term suggests: shares held together by an employee or director and another party — either a company investor or, more typically, the trustees of an employee benefit trust (EBT). Joint share ownership arose as a substitute for other share incentive arrangements, for example share options, restricted shares or performance share plans (frequently delivered via nil cost options). Under a joint share ownership plan (JSOP), the value received equals the uplift in the share price after grant (usually plus a ‘carrying cost’). Consequently, a JSOP operates like a market value share option, albeit with a distinct tax outcome. In essence, the plan focuses value on growth arising after grant, rather than existing value at the time of award for participants today.
Commercial rationale
The JSOP model offers a number of commercial strengths when set against alternative award structures. These include:
Compared with share options or performance share plans where share acquisition is deferred:
clearer alignment between participants and other shareholders because the participant immediately acquires beneficial ownership in a stake of the shares
by virtue of that ownership, an immediate entitlement for participants to receive dividends proportionate to share interest
...
Share Incentives
PRACTICE NOTES
Joint Share Ownership Plans (JSOPs): UK tax treatment—employment-related/restricted securities, section 431 elections, valuation, PAYE/NICs, realisation, disguised remuneration, call options, CGT, corporation tax, stamp duty
Summary of the tax treatment of the acquisition of an interest in a jointly owned share
Putting to one side the specific statutory provisions for employment-related securities outlined below, providing an individual with an interest in jointly owned shares as part of their overall package would be taxed as ordinary pay. Nevertheless, the employee acquires an “interest in an employment-related security”. Moreover, the eventual tax position is influenced by the targeted provisions in the Income Tax (Earnings and Pensions) Act 2003 (ITEPA 2003) concerning restricted securities. Typically, to avert later income tax and National Insurance contributions (NICs) becoming payable when such restrictions are lifted or amended, the parties enter into a joint election under ITEPA 2003, s 431. This Practice Note explores each of these tax considerations in greater depth below. For more general guidance on joint share ownership plans (JSOPs) and awards, see Practice Note: Introduction to JSOPs.
Employment-related securities
The interest obtained by the employee is an interest in an employment-related security...
Share Incentives
PRACTICE NOTES
Joint share ownership plans compared with unapproved options, LTIPs and growth shares: UK tax, legal and implementation considerations
Jointly owned awards
Jointly owned awards are exactly what the name suggests: shares held jointly by an employee or director and a separate party, being either an investor in the company or, more commonly, the trustees of an employee benefit trust (EBT). The jointly owned share model was developed as an alternative to other share incentive arrangements, including share options, restricted shares, or performance share plans, often delivered through nil-cost options. For more general background on joint share ownership plans (JSOPs), see Practice Note: Introduction to joint share ownership plans.
This Practice Note is intended to compare JSOPs with other unapproved share scheme structures in this context. Undertaking an exhaustive analysis is challenging, as there exists a multitude of structures, approaches—both distinct and overlapping—and variations on a common theme across the market in practice. Accordingly, the comparison drawn here, so far as practicable and for ease of reference, sets JSOPs alongside each of the following three types of arrangements:
unapproved share options
long-term incentive plans (LTIPS)
growth/value shares
For additional comparisons, consult Practice Notes: The advantages and disadvantages of each share incentive arrangement and Selecting the right share scheme for further detail and contextual guidance where appropriate...
Share Incentives
PRACTICE NOTES
UK Joint Share Ownership Plans (JSOPs): Funding EBT Share Purchases—Contributions, Company Loans (Close Company Rules) and Third-Party Debt—and Core Terms on Acquisition, Dividends, Voting, Vesting and Realisation
Basic structure of a JSOP
The basic structure of joint ownership features two holders: the employee participant, who takes the growth interest, and the co-owner, who retains the remaining interest in the shares. In most cases, the co-owner is the trustee of an employee benefit trust (EBT) set up by the company, either expressly to support the jointly owned share arrangement or as a general employee share ownership trust. For this practice note, it is assumed that the co-owner is an EBT trustee. For wider background on joint share ownership plans (JSOPs), see Practice Note: Introduction to JSOPs.
Funding the acquisition of the jointly owned shares
The EBT trustee is usually funded by the company. There are multiple ways to finance this, and each method brings different consequences and considerations.
Contribution
The most straightforward option is for the company to make a contribution by way of gift to the EBT. This is the simplest route because it removes the need for loan documentation and avoids the involvement of third-party lenders...
Share Incentives
PRACTICE NOTES
UK JSOPs: adoption and granting awards, documentation, EBT funding, share sourcing, private and listed company approvals, MAR/AIM compliance, HMRC trust notifications and ERS annual returns
Implementing a joint share ownership plan (JSOP) is largely the same as adopting any other share scheme, except that where new shares are created, the share interest is issued at once rather than, as with an option, at a future point. The shares are also held jointly by the employee and a third party, as co-owners in law.
Why establish a JSOP?
Although JSOP awards offer an advantage comparable to a market value share option for recipients, when arranged and operated correctly and consistently, any profit realised under a JSOP award should fall within capital gains tax rather than income tax and National Insurance contributions. For more commercial reasons for JSOPs, see the Practice Note: Introduction to JSOPs—Commercial rationale.
Who is the joint owner?
The employee beneficially holds shares together with a third party (in substance, as ‘tenants in common’). Shares are commonly held jointly by an employee or director and a third party, either an investor in the company or, more frequently, the trustees of an employee benefit trust (EBT) or, potentially, a specially constituted Guernsey or Jersey ‘purpose trust’. In this Practice Note, it is taken that the co-owner will be the trustees of an EBT in practice...
Share Incentives
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