The hurdle is the whole idea
Everything about growth shares follows from one mechanism, so it's worth getting straight first.
Say your company is worth £2m today. You want to give a key hire a genuine stake, but you don't want to hand them a slice of the £2m you've already built - they had nothing to do with it. So you create a new class of share carrying a hurdle: it participates in the company's value only above £2m.
If you sell tomorrow for £2m, those shares are worth nothing. If you sell in five years for £6m, they share in the £4m of growth - the part they actually helped create.
That's it. That's the whole concept. Everything else - the tax treatment, the flexibility, the reason they exist - falls out of that one design choice.
You keep what you've built. They share in what you build together. The hurdle is just where you draw that line.
Why the hurdle solves the tax problem
Here's the elegant part.
The reason you can't casually hand an employee ordinary shares is that ordinary shares in a £2m company are worth real money, and giving someone something worth real money is - to HMRC - just an unusually inconvenient way of paying them. Income tax, National Insurance, on the value received.
A growth share with a hurdle set at today's value is, at the moment of issue, worth very little. There's no built-in value to tax, because all the value it might ever have sits in the future, above the hurdle. So the recipient can acquire them cheaply, or for very little, without triggering a meaningful charge on day one - and their eventual gain is a capital gain on shares they genuinely own.
The valuation still matters enormously - the hurdle has to be set defensibly, and "very little" isn't the same as "nothing". But the shape of the thing is what makes it work.
Growth shares vs options
The distinction people miss: an option holder isn't a shareholder. A growth shareholder is - from day one.
With an option, someone holds the right to buy shares later. Until they exercise, they own nothing, vote on nothing, and if they leave early they simply don't exercise and disappear. Clean.
With growth shares, they're on your register from the moment of issue. They hold a real share, with whatever rights that class carries. If they leave in six months, you don't get to shrug - you have a departed employee who is still a shareholder, unless you built in a mechanism to buy them back. That mechanism is not optional; it's the difference between a growth share scheme and a long-term problem.
The trade-off in one line: options are cleaner to unwind, growth shares are available when EMI isn't.
When growth shares are the right call
They're rarely the first choice. They're very often the right one:
- Your trade is excluded from EMI. Banking, farming, property development, ship building and the provision of legal services are all out, among others, however well the company would otherwise qualify.
- You've outgrown EMI - past 500 employees or £120m of gross assets since the limits rose in April 2026 - and CSOP's £60,000 individual cap is too tight for what you want to give someone.
- The person isn't an employee. EMI needs a qualifying employment relationship, so consultants, advisers and non-executives are out. Growth shares don't care.
- You specifically want a real shareholder rather than an option holder - occasionally there's a good commercial reason, though it's rarer than people think.
If you qualify for EMI, use EMI. It's more generous and easier to unwind. Growth shares are the sensible answer to "we can't", not to "we couldn't be bothered checking".
Frequently asked questions
What are growth shares?
Growth shares are a separate class of share that only participates in a company's value above an agreed hurdle, usually set at or near the valuation on the day they're issued. The holder shares in future growth, but not in the value the business had already built before they arrived.
How are growth shares taxed?
Because a growth share with a hurdle at current value is worth very little when issued, it can usually be acquired without a significant immediate income tax charge, and the eventual gain is treated as a capital gain. The hurdle and the valuation have to be set defensibly for that treatment to hold.
Growth shares or share options - which is better?
If you qualify for EMI, options are usually better: more generous tax treatment and far cleaner if the person leaves, since an option holder never becomes a shareholder unless they exercise. Growth shares come into their own when EMI isn't available - excluded trades, companies past the size limits (500 employees or £120m gross assets since April 2026), or recipients who aren't employees.
Can I give growth shares to a consultant or adviser?
Yes. That's one of their genuine advantages. EMI requires a qualifying employment relationship, which rules out consultants, advisers and most non-executives. Growth shares are an ordinary company law structure with no such requirement.
Not sure whether you qualify for EMI?
That's usually the first question worth answering, because it decides everything after it. Silva sets up EMI schemes on a fixed fee - and where EMI won't work, we'll tell you plainly and talk you through what will.