Enterprise Management Incentive (EMI) schemes
The use of the EMI can help small growing companies to attract and retain sought after employees. The EMI allows employees to buy shares free of Income Tax and NICs on the difference between the amount paid for shares when an option is used and the actual value at the time. HMRC’s guidance has been updated.
The value of shares over which options may be held by an employee under the EMI scheme is currently £250,000 subject to a total share value of £3 million (under EMI options) to all employees. In addition, the shares must be in an independent trading company that has gross assets not exceeding £30 million, has fewer than 250 employees and operates a ‘qualifying’ trade.
Companies that work in ‘excluded activities’ aren’t allowed to offer EMIs. Excluded activities include:
- property development
- provision of legal services
- ship building
Shares acquired under the EMI scheme are eligible to the entrepreneurs’ relief 10% rate of capital gains tax. There is no longer a minimum shareholding requirement in order for shares acquired under the EMI scheme to qualify. Employers must tell HMRC about a grant of an EMI option within 92 days of the date of the grant of options. If the notification is not made within the set time limit the EMI option is not valid.