Tax Advantage of EMI Share Option Schemes Lapses

HMRC have advised companies to consider delaying the grant of Enterprise Management Incentive (“EMI”) share options until fresh State Aid approval has been granted by the EU.

As the UK Government were late in applying for an extension (12 months’ notice is required) the existing approval expired on 6 April 2018 and EMI share options granted after that date before new approval is received may be treated as non-tax advantaged employment-related securities options.

The EMI share option scheme introduced in 2000 was the most tax efficient scheme to attract and retain key staff, providing employees in receipt of qualifying options with significant tax advantages.

Depending upon the price paid by the employee for their shares on exercise of EMI options, the receipt and subsequent sale of the shares is subject to capital gains tax at just 10% instead of PAYE and NIC.

We are expecting the scheme to be re-approved under the State Aid rules and we will let you know when this happens.