ACCA Advanced Taxation (ATX) Practice Exam

What is the minimum issue price for shares in the SAYE scheme relative to market value?

1. Not less than 60% of market value

2. Not less than 70% of market value

3. Not less than 80% of market value

4. Not less than 90% of market value

The correct answer is: Not less than 80% of market value

The minimum issue price for shares in a Save As You Earn (SAYE) scheme must be set at no less than 80% of the market value of those shares at the time the options are granted. This rule is designed to ensure that the price is set at a fair level, providing an incentive for employees while also reflecting the potential market value at which shares could be traded. In the context of the SAYE scheme, the formula ensures that employees are encouraged to participate by being given the opportunity to buy shares at a discounted price compared to their fair market value. Setting the minimum issue price at 80% allows for this discount while still maintaining a degree of value in the shares. This also helps to align the interests of employees with those of shareholders, as employees become part-owners of the company and are thus incentivized to contribute to its success. The other options suggest lower thresholds, which would not align with the regulatory framework that governs SAYE schemes. The specification of 80% serves as a regulatory measure ensuring that the scheme remains beneficial for both employees and the company, providing a balance between encouraging investment in the company and protecting shareholder interests.