Enterprise Management Incentive (EMI) schemes are an example of a tax-efficient share scheme. Qualifying employees of a company can be granted share options potentially without giving rise to income tax charges on the shares (which may otherwise happen with certain employment benefits in kind).

A properly implemented EMI scheme can be a very effective way of retaining and incentivising key employees as an alternative to cash rewards.

Working time criteria

One of the criteria for an employee to be eligible to be granted an EMI option is that they must work for the company for at least 25 hours a week (or, if less, 75% of their working time). The coronavirus (COVID-19) pandemic may have caused difficultly with this. However, HMRC have suggested that between 19 March 2020 and 5 April 2021 employees will be eligible (and existing option holders will not suffer a disqualifying event) if they would have otherwise met these requirements but for COVID-19. If the pandemic hasn’t ended by then, it is indicated that HM Treasury will be able to extend this exception for another 12 months.

EMI state aid

Initially, the tax reliefs that EMI schemes grant were approved under EU state aid rules. Following Brexit, the EU Commission decided that EU state aid approval for EMI schemes would remain in place for the duration of the transition period. HRMC have now confirmed that following the end of the transition period on 31 December 2020, EMI schemes “will continue to be available under UK law.”

Further reading: Using an EMI Scheme to retain and incentivise key employees during the COVID-19 pandemic.

BHW can help you with EMI and other share schemes. For further information, contact our Corporate and Commercial department on 0116 289 7000 or email info@bhwsolicitors.com.


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