Free UK Growth Shares Plan + Subscription Template

A UK Growth Shares Plan is an equity-incentive arrangement under which a private company creates a separate class of "growth shares" — shares that participate in value only ABOVE an agreed HURDLE, typically set at the company's market value at the date of grant plus a small premium (5-25%). The holder acquires the shares at LOW "HOPE VALUE" — the present value of the future upside above the hurdle, generally a fraction of the unrestricted share value — and pays unrestricted CGT (potentially with Business Asset Disposal Relief at 10% on the first £1m gain) on disposal at exit. Growth shares are the dominant UK equity-incentive route once a scale-up has outgrown the EMI option scheme caps (£30 million gross assets cap, £4.5 million unexercised options cap, 250 full-time-equivalent employee cap). They are also the route of choice for senior hires, advisors and consultants who fall outside EMI eligibility.

Growth shares operate under the Income Tax (Earnings and Pensions) Act 2003 Part 7 — the employment-related securities (ERS) regime. Section 421B treats shares acquired by reason of employment as ERS, bringing the entire Part 7 framework into play. Section 422 defines "restricted securities" — shares whose value is depressed by restrictions on transfer, forfeiture, hurdle subordination or other limitations. Growth shares are restricted securities by their nature. Section 428 imposes an income tax (and Class 1 NIC) charge on the lifting or variation of those restrictions — typically at exit, when the hurdle is met and the shares behave like ordinary shares. The single most important practical step is the SECTION 431 ELECTION — a joint election by the employee and employer under section 431 ITEPA 2003 to be taxed at acquisition on the FULL UNRESTRICTED MARKET VALUE (rather than the lower restricted value). The election fixes the acquisition charge, eliminates the section 428 income tax on the subsequent lifting of restrictions, and converts the entire upside into CGT-taxed gain.

The s.431 election must be made WITHIN 14 DAYS of acquisition. The window is strict — section 431(5) ITEPA 2003 contains no extension power and HMRC does not accept late elections except in the most exceptional circumstances (HMRC ERSM30450, ERSM30470). A growth shares deal that misses the 14-day window typically loses its income-tax-to-CGT conversion and the employee faces income tax + Class 1 NIC at exit instead of 10% CGT under Business Asset Disposal Relief. The template's Expert tier surfaces the election with AMV (Actual Market Value at acquisition) and UMV (Unrestricted Market Value at acquisition) fields, the integrated joint election form and a 14-day reminder. UK market practice is to execute the s.431 election simultaneously with the subscription, on the same business day, to remove any timing risk.