EMI was introduced in ; however, recently there have been a number of changes that have made the scheme even more attractive. These conditions are not particularly difficult to meet or exhaustive but the tax advantages that can be obtained can be very beneficial to both parties involved.

This article sets out the qualifying requirements for an EMI scheme, the tax advantages that can arise from an EMI scheme and the recent beneficial changes.

Generally, if an employer rewards an employee with unapproved shares, Income Tax and National Insurance Contributions will be charged on the difference between the market value of the shares and any amount paid towards them, in the same way as a salary or bonus. If, however, EMI options are granted at market value there will be no charge to Income Tax or National Insurance Contributions at either grant or exercise of the options.

Topical Tax: Corporation tax deductions and EMI. By Paula Tallon | AccountingWEB

Prior agreement of the value of the company shares at grant can be obtained from HMRC. For example, if the value of the shares has increased substantially at the date of exercise, the employee will only be required to pay the agreed market value at the date of grant, satisfying this condition and ensuring that no Income Tax charge will arise. Importantly for the employer company, upon exercise of the options, the company can usually claim a Corporation Tax deduction equalling the market value of the shares at exercise less the amount paid by the employees.

The employer also benefits from National Insurance Contributions not being payable. In order for the employer to ensure that options granted will qualify under the EMI scheme, the company can obtain prior clearance from HMRC confirming; i that the employer is a qualifying company, and; ii what the market value of the shares is at the date of grant.

It is also necessary to notify HMRC once the aforementioned options have been granted within certain time limits. If these deadlines are missed the options granted will not qualify under the EMI scheme and thus will be deemed unapproved share options.

For more information and advice on EMI schemes and on share schemes in general, please contact us. Magma is a leading firm of Chartered Accountants and Chartered Tax Advisers, providing a wide range of professional advisory services to owner managed businesses and private individuals.

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Magma offers a breadth of technical expertise and specialist advisers across six integrated service areas: Audit and Assurance, Business Services, Corporate Finance, Corporate and Business Tax, Private Client Tax and Wealth Management. This document has been prepared as a general summary. It has been written for information purposes, should not be relied upon and is not a substitute for professional advice which should be sought.

This document does not constitute taxation, financial planning or investment advice. Neither Magma Chartered Accountants or any of its employees accept any responsibility for loss or damage incurred as a result of acting or refraining from acting upon anything contained in or omitted from this document.

EMI Employee Share Options

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EMI scheme | Gannons Solicitors

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Introduction EMI was introduced in ; however, recently there have been a number of changes that have made the scheme even more attractive. The company must be a trading company i.

The company must not be a subsidiary of or controlled by another company, however, parent companies can qualify for EMI. There must be fewer than employees at the date the EMI options are granted. Qualifying employees The following conditions must be met by the employee; The individual must be an employee of the issuing company, or an employee of a subsidiary directors included.

Qualifying options The following conditions must be met as regards to the share options; The shares must be ordinary, non-redeemable shares. The options must be exercisable within 10 years of grant. Any options which exceed this limit will be unapproved share options and will fall out of the EMI regime.

The terms of the option must be agreed in writing and must prohibit the option holder from transferring their rights. All other terms and conditions, such as the trigger point allowing employees to exercise their options, are flexible and therefore can be decided by the company. Tax advantages Generally, if an employer rewards an employee with unapproved shares, Income Tax and National Insurance Contributions will be charged on the difference between the market value of the shares and any amount paid towards them, in the same way as a salary or bonus.

Procedures In order for the employer to ensure that options granted will qualify under the EMI scheme, the company can obtain prior clearance from HMRC confirming; i that the employer is a qualifying company, and; ii what the market value of the shares is at the date of grant. Recent changes There have been important recent tax changes introduced in respect of EMI schemes.

However, the changes from 6 April will mean that, in relation to EMI shares only: Therefore EMI share option holders can be entitled to ER regardless of how many shares they hold; and The 12 month ownership period will commence upon grant of the options instead of upon exercise of the options, as was the case previously.

Conclusion An EMI scheme may be attractive to companies who wish to: Contact Us For more information and advice on EMI schemes and on share schemes in general, please contact us. Recent Posts Magma strengthens Private Client Tax 6th June Automatic Exchange of Information AEOI — returns deadline 31 May 26th May Reporting requirements for Trusts and Estates 22nd May Popular Posts Magma strengthens Private Client Tax 6th June Magma Chartered Accountants strengthens finance team 28th February Magma Chartered Accountants strengthens Audit and Assurance team 7th March Company About Us Our Team Careers Legal and Privacy.

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