16 May 2018
HMRC recently announced that EU State Aid approval for Employee Management Incentive (EMI) schemes had lapsed from 6 April 2018.
This meant that for any companies going through the implementation of an EMI scheme, it was not guaranteed that the beneficial tax treatment of the schemes would apply. This left many companies putting schemes on hold during a period of uncertainty.
The good news however is that the European Commission (EC) has now extended the approval of the scheme until the UK leaves the EU. No further details have yet been released by HMRC on this.
This will allow those schemes on hold to be continued with. Also, for companies who have not yet considered EMI, the EC announcement provides certainty that EMI will still be available to them.
What are EMI schemes?
EMI schemes are a HMRC approved, tax efficient method of rewarding key employees or directors of a company through the issue of share options. When structured correctly, the benefits can include:
- No Income Tax on the grant of the share option.
- No Income Tax when the shares are acquired by the employee.
- Capital Gains Tax at only 10% being chargeable when the shares are ultimately sold.
- The valuation of the shares can be agreed with HMRC prior to the implementation of the scheme.
Due to the flexibility of EMI schemes and the generous tax benefits available, they are becoming increasingly popular with companies seeking to recruit, retain and motivate key staff.