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[Ben Griffiths]

So, I'm not an expert, but I've been through this on both sides. Get
expert advice on tax and equity matters, folks.

It's pretty unusual for a straight grant of equity not to be
immediately taxable as employment-related income - HMRC will usually
(not always) see them to be valued at the value of the last funding
round. If I recall correctly it's the Income Tax Act of 2003 that sees
to this.

Equity grants only really make sense for the employee if given at par
- that is before any funding round when the stock can be said to have
a penny value.

This is also why founders tend to not have equity vest, but have it
given in bulk but subject to compulsory repurchase at par if, say,
they leave the company.

Taking equity, therefore, means a tax bill to you straight-away and a
larger tax bill later. It's hardly ever the smartest route for an
individual.

The best way, for you as an employee, to get a meaningful share of the
company without the risk of a big tax bill on what may turn out to be
worthless shares (you won't get the tax back, of course), is to accept
a grant of options under an EMI scheme.

http://www.hmrc.gov.uk/shareschemes/emi-new-guidance.htm

You'll pay no tax now, if the company goes under, nothing either, but
if it does well and you've remained an employee, you'll pay less
capital gains.

For this reason, in my experience, equity is very rarely given after a
funding round. Options under an EMI scheme are very much better for
the employee in almost all cases.

Ben