EMI Schemes are very popular in the recruitment sector as they can both retain and motivate key team members in a highly tax efficient manner (hence the State Aid aspect). Just to recap on the key tax benefits:
- Employees do not suffer income tax or employees’ National Insurance contributions when share options are granted.
- Opportunity for the bulk of the value growth in the shares they will hold to be taxed under the friendlier Capital Gains Tax regime.
- Reduced requirements to qualify for Entrepreneur’s Relief
The current EU approval lapsed on 6 April 2018 and it may take time for any extension to be arranged though HM Government have stated that they are working hard to ensure any delay is as short as possible. Whilst a favourable decision is predicted, there is an indication that any options granted in the interim period may not receive the desired tax advantages.
HMRC’s bulletin on this issue states “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.”
So, if you are considering an EMI share option scheme, we recommend that you put this on hold until approval has been received or explore alternative long term incentive schemes.
The full HMRC bulletin can be found here.
If you have any questions or require further information please contact James Price by email firstname.lastname@example.org or call 01462 687333.