As many business owners will recognise, it is imperative to recruit, retain and motivate key employees to support growth and future success. Enterprise Management Incentive Option Schemes (EMIs) are a type of HMRC recognised employee share scheme specifically targeted for use by small, privately owned companies. EMIs are popular because, unlike other share incentive schemes, they enjoy tax favourable treatment and do not need HMRC’s prior approval.
The life-cycle of an EMI can be roughly broken down into three stages: (1) the grant of the EMI option to the employee(s), (2) the exercise of the option by the employee(s) which converts the option into actual shares and (3) the subsequent sale of the shares.
Ordinarily, if a company gives shares (or options for shares) to an employee then income tax and NIC liabilities will arise on the grant and exercise of the option. These liabilities can be significant.