Your firm has been asked to provide advice to Methley Ltd, a close company, in respect of the provision of share incentives, a motor car and an interest-free loan to employees.

Methley Ltd:
– Is a UK resident trading company which is a close company.

Simon – share incentives:
– Simon is a director of Methley Ltd and owns 20% of its ordinary shares.
– Methley Ltd intends to provide Simon with shares worth £25,000, in the form of either free shares or share options.
– The free shares would be issued as employee shareholder shares in June 2017.
– The share options would be issued under an approved company share option scheme (CSOP) in June 2017 and Simon would exercise the options in October 2021.
– In either case, Simon will sell the shares in December 2022.
– Simon is a higher rate taxpayer.

Required:
(a) Compare and contrast the tax implications of both the acquisition and disposal of the shares in Methley Ltd if Simon acquires the shares through an approved company share option scheme (CSOP) or, alternatively, as employee shareholder shares.

Note: You are not required to comment on any national insurance contributions implications. (7 marks)