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EMI Share Options

Get the best out of your employees with an EMI Scheme.

EMI schemes are a great way of increasing employee motivation and longevity.

Enterprise Management Incentive (EMI) schemes are tax approved schemes for employees and are available to most trading companies. They allow an employer to grant share options to key staff tax efficiently.

An employer grants an employee an option to acquire shares in the company. The options are usually linked to the employee meeting certain targets, length of service milestones or the sale of the company.

The market value of the share options is agreed with HMRC initially and the employee is only required to pay for them when the shares are exercised.

Employee share ownership helps to align the interest of the shareholders with that of employees.

One of the big advantages for an employee is that if they acquire the shares for the market value when the options were granted, they do not pay income tax on the uplift in the value of the shares when exercised.

For example, you are granted share options with a market value of £5,000. Upon meeting certain targets, you decide to exercise your share options when their market value has now increased to £40,000. You acquire the shares for £5,000 and the increase in value of the shares of £35,000 is free from income tax.

When the shares are sold, capital gains tax is due on any capital gain, however this will be taxed at either 10% or 20%.

An employer will receive corporation tax relief on the costs associated with setting up the share option scheme and the value of the employee tax benefits will also attract corporation tax relief for the company.

Before any share options are granted it is advisable to obtain advance assurance from HMRC that the options qualify.

The following are the main criteria for both employers and employee’s:

Employers must:

Not have total gross assets which exceed £30million
Be a trading company
Not be a subsidiary of controlled by another company
Have fewer than 250 employees at the date the options are granted.

Employee’s must:

Be an employee of the company (or an employee of a subsidiary) working at least 25 hours of a week, or 75% of their time working for the employer.

Not hold more than 30% of the issued share capital of the company

JWR are experienced in dealing with EMI schemes, including advance assurance applications, agreeing share valuations with HMRC or just general advice in relation to EMI schemes.