UK News

Budget 2012 gives boost to EMI Options

March 2012

Being able to access the 10% effective rate of tax through Entrepreneurs' Relief and a raise in limits breathes new life into EMI.

The Chancellor announced in his Budget 2012 key enhancements to the rules governing Enterprise Management Options (EMI).

These enhancements are set out below:

  • An increase to the individual limit on qualifying Enterprise Management Options (EMI) from £120,000 to £250,000. This change will be made as soon as possible by secondary legislation, subject to EU State Aid approval.
  • Shares acquired through exercising EMI Options on or after 6 April 2012 are to qualify for Entrepeneurs' Relief from capital gains tax (CGT) where the shares acquired upon the exercise of an option are held for a minimum of one year. Gains on disposal of EMI share will qualify for the reduced 10% rate. The earliest time where EMI option shares will qualify for Entrepeneurs' Relief is 6 April 2013. This change will be made in the Finance Bill 2013, again subject to EU State Aid Approval.

The qualification requirements for a company to be able to grant EMI options (that is, the company having fewer than 250 employees, gross assets of less than £30 million and carrying on a qualifying trade) remain unchanged.


In cases where EMI share options (from 6 April 2012) can be exercised immediately, optionholders should evaluate whether to exercise their options earlier to ensure they benefit from the lower 10% CGT tax rate.

Companies with outstanding options, which are only exercisable at the time when there is a share sale exit by majority shareholders may wish to invite optionholders to surrender existing EMI options in return for new EMI options that will be exercisable at an earlier stage. This would allow them, potentially, to exercise and hold the shares and benefit from the 10% CGT rate. This may be attractive to those companies which do not envisage a shareholder exit before a one year holding period for the acquired shares expires.


UK Budget 2012 - Income tax overview

For further information or to discuss the issues raised, please contact Guy Abbiss or John Mooney on +44 (0)20 3051 5711.