HMRC has issued Spotlight 28: Employee Bonus Schemes - Growth Securities Ownership Plan and other avoidance schemes based on contracts for difference.

This confirms HMRC's view that contracts for difference, particularly a scheme known as ‘the Growth Securities Ownership Plan’ (GSOP), are not effective.

Under this type of scheme:

  • An employee pays a premium to acquire a contract for difference and receives a cash payment on maturity, often at a pre-determined date when an agreed hurdle, such as company performance or other measures such as the disposal of the company has been achieved.
  • Theoretically, the employee is exposed to a financial loss if results fall below an agreed threshold.
  • In reality the potential loss and the associated risk is far less than the potential benefits of the agreement.
  • Promoters of the scheme have claimed that payments made to the employee on the maturity of the contract would be taxed as capital gains rather than employment income

HMRC disagrees with the scheme promoters; it consider that payments should be taxed as employment income, subject to PAYE and NIC.

  • When HMRC recovers tax and NIC from an employer, it is likely that the employer will be able to recover money from the employee under terms included in the original scheme agreement.


Employers who are looking to save tax and reward employees could have a far simpler life and fall back on approved share and share option schemes, see Employee share and share option schemes.


 Anti-avoidance: HMRC's spotlights for HMRC’s other spotlights