UK Enterprise Management Incentives ("EMI") schemes and foreign companies
The highly tax efficient share scheme for smaller companies is to be made available to foreign companies.
EMI schemes are the most flexible of the UK’s tax favoured share option plans and provide generous tax treatment to participating employees of smaller companies (gross assets of £30 million or less). Only companies which satisfy the qualifying criteria may grant EMI options. One of the qualifying conditions is that the company which is seeking to grant EMI options must carry out a qualifying trade wholly or mainly in the UK. This prevents employees of foreign companies, which would otherwise qualify, from benefitting.
It was originally intended to make an amendment to permit foreign companies with a permanent establishment in the UK to grant EMI options from 6 April 2010. However, due to the general election, this was postponed.
The proposed amendment is contained within the Finance (No.3) Bill 2010-11 which is expected to become law on 16 December 2010.
This is a welcome change to the EMI regime as it will enable overseas companies with a permanent establishment in the UK to offer EMI options to their UK tax-paying employees. In an uncertain economy EMI options are a particularly tax effective cash-free method of remunerating and incentivising employees.