UK Share Plans: EMI options on hold
Enterprise Management Incentive (“EMI”) options are the most tax-advantageous share options which may be granted to employees in the UK, where the grantor company and the employee receiving the option satisfy certain statutory requirements. EMI options are designed for small to medium size companies (one of the statutory requirements is that the grantor company and its group have gross assets of no more than £30 million).
The tax advantages available for EMI options are dependent on EU state aid approval. However, the current EU state aid approval for EMI options expired on 6th April 2018. Negotiations between the UK and EU Commission for the extension of the EMI state aid approval have been on-going for some time, but so far this approval has not been obtained.
On 4th April 2018, HM Revenue and Customs confirmed its view that EMI options granted while EU state aid approval was in place up to and including 6th April 2018 will continue to qualify as EMI options and benefit from favourable tax treatment as and when they are exercised. However, options granted on or after 7th April 2018 will not qualify as EMI options unless and until EU state aid approval is renewed. It is not clear whether or not any renewal of EU state aid approval would be retrospective, and so options granted before approval is renewed may not qualify even if the approval is renewed. Companies wishing to grant options intended to qualify as EMI options may therefore wish to postpone granting the options until the position is clearer.
It is also possible that, once the UK has left the EU, the UK government could legislate to reinstate the tax advantages for EMI options without regard to EU rules (i.e. sometime after 29 March 2019, depending on the terms of the Brexit transition agreement with the EU), although there is no guarantee that the UK government would do this.
HM Revenue and Customs’ bulletin regarding EMI options can be found here.
There are other tax efficient share incentive arrangements which companies might be able to use to replicate some of the benefits of EMI options. If you would like to know more about these, please contact us.
For further information, contact Abbiss Cadres LLP on +44 (0) 203 051 5711 or email us on firstname.lastname@example.org