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Contrary to their name "Unapproved" Plans are perfectly acceptable ways of rewarding directors or employees by using shares or options. They are so called because they are not approved by HM Revenue & Customs, which means they do not attract the tax benefits which can be enjoyed under Approved Plans. So, for example, a participant may pay income tax and national insurance on the exercise of options, or on the receipt of free shares.

However, Unapproved Plans are a lot more flexible than Approved Plans. This means you can grant options over shares up to any value, set any performance targets you wish, and have an option plan lasting for as long or as short a period as you require. Listed companies are, however, advised to bear in mind the Guidelines set out by the Association of British Insurers.

Unapproved Plans are ideal for rewarding staff at executive or director level, particularly where demanding individual performance targets are required.

Unapproved Plans can also be adapted so that incentive plans can be set up without using real shares. This can be done either to avoid complex control issues, or for organisations where there is no actual share capital.