3 May 2017
Enterprise Management Incentive schemes, known as EMIs, are share option schemes that offer tax benefits for employer and employee alike.
A share option is simply a promise to issue shares to an employee at a fixed price at some date or dates in the future, or perhaps on the sale of the company. On exit-only or sale-only EMIs there’s no immediate dilution of owner’s share capital and no need for complicated shareholder agreements to cope with the potential new shareholders. And as long as you get the valuation of the shares agreed up-front with HMRC and the option shares are not offered at a discount to current value, the tax position is relatively straightforward and beneficial. Namely:
- The company will get a corporation tax deduction, no tax or NIC on the grant (award) of the option;
- No tax or NIC on the exercise of the option;
- No PAYE or NIC obligations for the company;
- The employee should (subject to certain conditions) be able to claim entrepreneur’s relief on the disposal of the shares as long as the options were granted at least 12 months prior to the disposal;
- The company when the options are exercised.
As always there are conditions to be met but, compared to other types of share scheme, or the unapproved route, these conditions are generally not onerous.