EMI arrangements give employees options to acquire shares at a price, fixed in advance, during a time window at some point in the future. With us since 2000, they continue to be very popular as an effective means of recruiting and retaining key staff members. This is the result of a combination of great flexibility and the most favourable tax treatment of any approved share scheme for both employer and employee.
Click here to download our briefing on Enterprise Management Incentives
The advantages
- potentially no income tax or NIC
- simple to operate and understand
- the company can choose which employees it wishes to reward and to what extent
- share values are agreed with HM Revenue and Customs in advance
- no hidden surprises for employee or employer
- no expensive commitments for employees
- no minimum exercise period or price
- options will usually lapse on termination of employment
- the employing company will get corporation tax relief at the time that options are exercised.
Qualifying companies
In order to qualify, a company must meet a number of requirements including:
- it must be independent i.e. not a subsidiary of another company
- its gross assets at the date of grant must not exceed £30 million
- on the date of grant have less than 250 full time staff or equivalents (from the date of Royal Assent to the Finance Act 2008)
- the company or group must be carrying on a qualifying trade. In particular property ownership and professional services such as accountancy and the law are excluded
- at least one group company must be trading primarily in the UK.
Companies that do not qualify should consider using CSOPs.
Limits on employees
- employees can only be offered options worth up to £120,000 by their employer
- there is an overall limit of £3 million per company
- employees must work full-time, that is either at least 25 hours per week or 75% of their total working time.
Unapproved options can be used to top-up entitlements.
This is a very tax-efficient scheme that will benefit growing companies. It allows employees to get a real sense of involvement in the business for which they work and along the way, to benefit from a scheme that has been specifically devised to be tax efficient.
We have great experience in implementing schemes with the minimum of fuss in a very short period of time and in smoothing the path to registration.
For further information please click here to contact us.
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