EMI updates and compliance process

The European Commission(“EU”) announced on 15 May 2018 that it has renewed the State Aid approval for the UK Enterprise Management Incentive (“EMI”) scheme. The previous approval expired on 6 April 2018. The good news is welcome by small and medium enterprises as EMI remains one of the most popular employee share schemes. The scheme offers generous tax relief and great flexibility which enable companies to tailor the scheme to meet specific objectives.

Following the EU announcement, HMRC confirmed on 31 May 2018 that options validly granted and exercised under the EMI scheme continue to be eligible for tax relief and there are no changes to the scheme. The HMRC update does not make distinction to options that were granted after 6 April 2018 and before the renewal approval on 15 May 2018. This gives comfort to employers who have granted EMI options to its employees during this period as this indicates that these options will also qualify for tax relief under the EMI scheme.

Once the EMI options have been granted to an employee, the employer has various administrative duties to follow. These are as follows:

1. Register EMI Plan

In order to register the EMI plan with HMRC, the employer must firstly be registered to use HMRC Online Services and have access to PAYE for Employer. Once the PAYE for Employer service has been set up, the employer can register the EMI plan with an active PAYE reference. HMRC will then issue a unique scheme reference number. The employer will only need to register the EMI plan once.

2. Notify the grant of EMI options

Once the EMI plan has been registered, the form EMI1 which reports the grant of options can either be submitted online by an agent or by the employer directly. The notification of the grant of EMI options must be made online within 92 days of the date of grant, otherwise it will cease to be qualifying under the EMI rules and hence no tax relief. It is therefore advisable to register the EMI plan with HMRC as soon as possible in order to avoid missing the reporting deadline due to delays in setting up HMRC Online Services. Paper notification will not be accepted by HMRC.

3. Annual Return

Following the registration process, on an annual basis the employer is required to complete and submit a form EMI40 in respect of its scheme by 6 July following the end of the tax year. The form summarises the activity on the scheme and is used to report cancelled, replaced and amended options as well as any disqualifying events in the tax year. Penalties will apply if the form is not submitted by the deadline.

If you would like further information on the EMI share option scheme, please contact your Barnes Roffe partner.


Blog Written by Parminder Gharial

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