TT270: EMI share option schemes

May 01, 2018

Enterprise Management Incentive (“EMI”) share option schemes have been an extremely popular tool used by companies to incentivise and retain key employees since their introduction a number of years ago.   Which makes the announcement on 4 April 2018 by HMRC a concern for the companies that we advise.

As certain aspects of EMI schemes constitute State Aid, approval needed to be obtained from the European Union. Rather incredibly the EU State Aid approval lapsed on 6 April 2018 and the announcement from HMRC on 4 April 2018 contained the following paragraph:

EMI share options granted in the period from 7 April 2018 until EU State Aid approval is received may not be eligible for the tax advantages presently afforded to option holders, and accordingly share options granted in that period as EMI share options may necessarily fall to be treated as non-tax advantaged employment-related securities options.

It is unbelievable that this situation has been allowed to happen given that HMRC knew that the approval was going to lapse.

Whilst we do not necessarily agree that the lack of EU State Aid approval should affect provisions under UK legislation, Barnes Roffe LLP is advising clients to hold off implementing any EMI schemes until after EU State Aid approval is received or until further announcements are made by HMRC.

HMRC state that for EMI share options granted before 7 April they will continue to apply their current guidance and practice and so there should be no issue with these.

If you have key employees that you wish to retain and incentivise then you should still speak with a partner of Barnes Roffe LLP so that they can explain the benefits of EMI for your company and employees with a view to implementation in due course.

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