Management Incentive Plans
Practical valuation advice based on expertise and experience
Management incentive plans fall into two categories:
How a management team is rewarded can have a decisive impact on the value a business creates. The right structure aligns the ambitions of key individuals with the priorities of shareholders, driving focus, commitment and long- term performance. The wrong structure risks misalignment, missed targets and lost value. Management Incentive Plans (MIPs) are now a standard tool for linking executive reward to the growth and profitability of a company. In the UK, there is a well- established range of mechanisms, from tax-advantaged share schemes to bespoke growth share arrangements, that can deliver meaningful incentives while protecting stakeholder interests. The challenge lies in selecting and structuring the right plan, securing HMRC clearance where possible, and ensuring the valuation is both defensible and commercially realistic. FRP’s valuation specialists work alongside legal and tax advisers to design, assess and value MIPs that meet these criteria. Our role is to bring robust analysis, market insight and practical guidance to what is often a complex, high-stakes process.
Tax Advantaged Schemes:
Non-Tax Advantaged Schemes: Whilst not having direct tax benefits, schemes can be designed to provide an attractive economic structure by the potential future income to the recipient being materially greater than the value of the awards (and the These have attractive tax benefits such as recipients not paying income tax or national insurance on the value of the awards received. They also have the advantage of ‘pre- transaction clearance’ meaning companies can obtain agreement from HMRC as to the value of the awards before they are issued. tax payable) at the outset, with complete downside protection.
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