UK News

Compensation & Benefits: Enterprise Management Incentives ("EMI") schemes

November 2009

HMRC has recently announced two significant developments concerning EMI schemes.  In particular, a greater number of companies will now be able to take advantage of tax-favourable EMI schemes.

State aid concerns of the European Commission

Discussion between the UK and the European Commission has been ongoing for some time as to whether the EMI regime was in breach of the Commission’s state aid rules.  Restrictions to the regime were introduced by the Finance Act 2008 in order to address these concerns.

However, the European Commission has now confirmed that there is no state aid breach and the EMI regime has been approved for use until 2018.

Widening of eligibility criteria for companies

For a company to qualify to grant EMI options, the EMI legislation requires that it must carry on an EMI qualifying trade wholly or mainly in the UK.

The recently announced proposal will relax the current requirements of the legislation and will enable companies with a permanent establishment in the UK to grant options under the EMI regime (subject to the other EMI criteria being satisfied).  This means that UK companies with a significant level of overseas trading activity will shortly be able to take advantage of the EMI regime.

The proposed amendment to the EMI legislation is to be included in the Finance Bill 2010 and is intended to take effect from 6 April 2010.

As now, companies will still need to have gross assets of not more than £30 million, have fewer than 250 full-time equivalent employees and not be under the control of another company.

Commentary

The changes are beneficial for UK tax-paying employees of overseas companies with a permanent establishment here and, importantly, will assist UK small and medium sized companies with substantial overseas trading activities in offering the desired tax advantages of EMI options.

Resources

HMRC Guidance

For further information on the EMI scheme, or to discuss any of the issues raised, please contact Guy Abbiss (guy.abbiss@abbisscadres.com) or Libs Davies (libs.davies@abbisscadres.com) on +44 (0) 203 051 5711.

Disclaimer

Content is for general information purposes only.  The information provided is not intended to be comprehensive and it does not constitute or contain legal or other advice.  If you require assistance in relation to any issue, please seek specific advice relevant to your particular circumstances.