Technology start-ups and companies beginning to scale-up inScotland are increasingly competing with large corporates by offering flexible remuneration packages, some including share options.
“A lot of these companies don’t have the clout to pay the salaries that, in the tech space, the larger banks and insurance companies are paying. You see a lot of people taking very good salaries, with benefits and a straight-forward working pattern in a big team,” said Holloway.
“But the flipside is that there are some fantastic start-ups and scale-ups in Edinburgh, Glasgow and Aberdeen, indeed throughout Scotland, who are looking to grow quickly, raise external finance, can offer people the reward of being part of the company’s success story and to be able to share in the value it creates.”
The companies are looking at ‘cash runway’, and the most effective ways to grow their teams while maximising value from investment.
Holloway is Head of Entrepreneurial Taxes at Johnston Carmichael. His team’s work encompasses a number of different tax reliefs that are available to individual investors as well as share option schemes that can be implemented by companies to incentivise, motivate and retain staff.
The UK Government-backed Seed Enterprise Investment Scheme(‘SEIS’) and Enterprise Investment Scheme (‘EIS’) both help smaller, unquoted businesses obtain the funding they need to invest in their infrastructure, whilst also providing generous tax relief for individual investors.
“Structuring appropriately and being aware of potential pitfalls in relation to SEIS and EIS are really important in allowing businesses to get the capital they need to grow their businesses,” said Holloway, “it’s risk reduced capital for investors, given immediate tax repayments on offer, and the cash received can have fantastic benefits for the recipient companies.”
In addition, share option schemes can be used within owner-managed businesses to provide employees and management with equity incentives.
Holloway is experienced in helping clients establish Enterprise Management Incentives (EMI) share option schemes which allow employees to acquire shares at a fixed price, with the employee accruing benefit through future growth in company value. EMI schemes are often utilised by business owners to retain and incentivise key staff.
“The team is integral to the success of any business and these schemes go a step further in creating a mutual understanding that everyone is working towards the same goal,” said Holloway.