EMI share options continue to be an effective and flexible way to incentivise employees towards a company’s productivity and growth. Options might be exercisable on satisfaction of certain conditions (for example, key milestones), or events (such as a company disposal or listing).

There can also be tax advantages in using an EMI share option scheme for both the employer company and employee option holder.

The employer company must:

  • be independent and not be owned by another company;
  • have gross assets of less than £30 million;
  • have fewer than 250 employees;
  • not be property investment, banking, insurance, and professional services; and
  • not grant options of more £250,000 per employee, or more than £3 million to all employees.

The tax advantages to the employee is that for schemes registered with HMRC (and it is advised that a valuation be agreed with HMRC before options are granted), employees should pay capital gains tax, rather than income tax, on the proceeds of sale of the EMI option shares.

Changes under the Spring Budget 2023

The Budget introduced some changes and simplifications to the process for granting EMI share options:

  • From 6 April 2023, in a change to current requirements:
  • details of any restrictions affecting EMI option shares will not be required to set out within the body of an option agreement; and
  • a company will not be required to provide a declaration that its employees have signed a working time declaration when they are granted an EMI share option.
  • From 6 April 2024, a company will need to notify HMRC of the grant of EMI share options by 6 July following the end of the tax year in which the share options are granted (not, as is currently the case, within 92 days following the grant of each EMI option). This is in line with the date on which a company must file its annual EMI end of year return.

For further information about this, please contact Corporate and Commercial Solicitor Nick Mayles.  Nick is a highly experienced transactional corporate and commercial, and EMI share incentives lawyer.  If we can assist with any questions you may have in relation to your business, please get in touch by emailing nick.mayles@tsplegal.com or call 01206 574431.