The enterprise management incentives (EMI) scheme is a popular, tax-efficient and flexible scheme designed specifically for small/medium-sized businesses to incentivise employees.
Under an EMI scheme an option is granted to selected employees to buy shares in their employer company. If an employee decides to exercise the option (and acquire the shares), he or she will pay a fixed price which is often (but not always) equal to the value of the shares at the time the EMI option is granted (and which has been agreed with HMRC), regardless of the value of the shares at the time the option is exercised. There is no obligation on the employee to exercise the option but if they do, then provided the price paid for the shares on exercise is at least the value agreed with HMRC, then neither income tax nor national insurance will be payable.
The tax benefits received from EMI schemes in the UK are currently reliant on EU State Aid approval from the European Commission. On 4 April 2018, HMRC released a statement in relation to the validity of EMI schemes following the expiry of EU State Aid approval at 11 pm on 6 April 2018. HMRC at that time warned that any intended EMI options granted between 6 April 2018 and the date on which approval was given might not qualify for the tax advantages previously afforded to option holders, and advised delaying granting new EMI schemes until a new EU State Aid approval had been given.
On 15 May 2018 the European Commission announced that it had approved under EU State Aid rules the continuation of the UK EMI schemes. However, HMRC has not confirmed the official date that this will be implemented and it is still not entirely clear whether EMI options granted between 11 pm on 6 April and 15 May 2018 will fall within the scope of the new approval.
The government has confirmed that it is working hard to ensure that the period between the lapse of the existing approval and the new approval is as short as possible and so check our website regularly for further updates.
If you are intending to grant a new EMI scheme and require further information or advice, please call Jonathan Priestley on 0113 234 0220.
Please note HMRC has confirmed that this does not affect any employment-related securities options validly granted as EMI share options up to and including 6 April 2018.