Enterprise Management Incentives (EMI)
Equity participation, or share schemes, is one of the best ways to incentivise and hold on to exist staff and one of the most successful ways of recruiting new staff. In small private companies or family companies it is not always desirable for employees to actually have shares in the company. One of the ways to get round this issue would be to provide share options to employees. This would give the employee a right to purchase shares in the future, at afixed price which would be determined at the time the option is granted.
The best scheme suited and the most tax-efficient for small and medium sized enterprises is an Enterprise Management Incentive (EMI) scheme.
You can grant options worth up to £120,000 at the date of grant for each selected employee and up to £3 million for all employees. Eligible employees must work a minimum of 25 hours a week or 75 per cent of their working time. You don’t need HMRC’s approval but you must notify HMRC within 92 days of granting the options. Corporation tax relief is available for the cost of providing the shares to employees.
Only independent trading companies or trading groups with less than £30 million in gross assets can grant EMI options and trading activities must be carried out mainly in the UK. Certain business sectors are excluded.
It was announced in the 2008 Budget that - in future - only businesses with fewer than 250 employees will be able to operate EMI schemes. In addition, companies involved in shipbuilding, coal and steel production will be added to the list of excluded sectors. These changes will come into effect later in 2008.
There is no income tax or NICs to pay when options are granted, nor when they are exercised if the option price is at least the market value of the shares when the options were granted.
Options must be exercised within ten years.
If you’d like more information about our EMI scheme services, or have any other questions, please complete the simple form below today!
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