Posted by Tax Innovations on 10 Apr 2018

The Enterprise Management Incentive (EMI) Scheme is a popular scheme for smaller companies to provide their key employees with tax-advantaged share options, but delays in obtaining renewal of EU State Aid approval for the EMI scheme means that the benefits will be switched off for an unknown period.

EMI Options

EMI options can be granted to employees at market value with no liability for income tax arising on exercise, meaning any gain on the share price between grant and eventual sale is charged to CGT (rather than the higher rates of income tax). Shares received under EMI options also have reduced requirements to qualify for Entrepreneur’s Relief. In 2015/16 alone, £380m of EMI share options were granted to employees.

EU Approval

The availability of the tax advantages relies upon the UK EMI system having EU State Aid approval. Unfortunately, the current approval lapsed on 6 April 2018 and it will take time for replacement approval to be arranged.

Delaying Grant of Options

HMRC have indicated that any options granted in the hiatus period will not receive EMI relief and have therefore suggested that “Companies may wish to consider delaying the grant of employee share options intended to qualify as EMI share options until fresh EU State Aid approval has been given.” The Government have stated that they are “working hard to ensure this period is as short as possible.”

If you are intending to grant EMI options to any of your employees in the near future and would like further information on how the EMI scheme has been affected then please contact Tax Innovations and we will be happy to assist you.

If you would like any advice regarding the changes to the Enterprise Management Incentive or would simply like to discuss other ways in which we could help you or your business, please contact us on 01962 856 990 or customerservice@taxinnovations.com