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Enterprise Management Incentive (EMI) Option Scheme goes on hold (for now)

Enterprise Management Incentive (EMI) Option Scheme goes on hold (for now)

With effect from 7 April 2018, EU State Aid approval for UK’s EMI Option Scheme has expired. The scheme is a popular choice for smaller trading companies that wish to provide their employees with tax-efficient equity participation.

Her Majesty’s Government has applied for the renewal of State Aid approval in respect of the EMI Scheme, and is currently awaiting the Commission’s ruling. While a favourable decision is hoped for, its absence creates a potential pitfall for any share options that are granted between 7 April 2018 and the date on which EU State Aid approval may be received.

HMRC have issued a warning that options which are granted during this “interim period” may not receive the desired tax-advantageous treatment, and could therefore be subject to income tax and NICs on their exercise. As such, companies may wish to consider delaying the grant of employee share options that purport to receive tax benefits under the EMI rules until the Commission issues a fresh approval for the Scheme.

HMRC confirmed that EMI options that have been validly granted on or before 11pm BST on 6 April 2018 will still enjoy the full tax advantage. HMRC’s Bulletin can be viewed here.

by Ronnie Brown

Burness admin