Enterprise Management Incentive (EMI) share options are an attractive and flexible method of rewarding key people in an organisation.

Where the qualifying conditions are met, EMI share options are free of both income tax and employers' and employees' National Insurance Contributions (NICs).

EMI share options are popular with small companies seeking to grow who need to recruit and retain important employees who have a strategic part to play. A company can grant up to £3m worth of shares under EMI at a given time and an employee can generally hold shares under EMI up to the value of £250,000.

Bishop Fleming has experience of setting up and advising on a number of EMI schemes and is able to advise on the best way to incentivise key personnel as well as providing guidance on the most tax-efficient remuneration packages.

Please download our factsheet - Share Ownership for Employees - EMI.

 
 

Our specialist Enterprise Management Incentive Team

 
 

What's involved in an EMI share scheme?

Tax reliefs

  • The grant of shares is free of both income tax and NICs.
  • The exercise of an option within ten years of the grant is also normally free of both income tax and NICs.
  • Capital gains tax (CGT) is payable on the sale of option shares, but they may qualify for the reduced Entrepreneurs’ Relief rate of only 10%.

What kind of shares can be used?

The shares must be fully paid up ordinary shares and not redeemable or convertible. They can be subject to certain restrictions where desired.

Does the company qualify?

In order to qualify, the company must have a permanent establishment in the UK, be carrying on a qualifying trade and have gross assets of less than £30m and fewer than 250 employees. There are also conditions about the independence of the company.

A qualifying trade is broadly one which is intended to be profitable and not involved in various excluded activities such as: property development, farming, hotels, nursing homes, residential care homes, leasing or financial trading.

Which employees qualify?

A qualifying employee must spend at least 25 hours a week or, if less, 75% of their working time, on company business. Written declarations to this effect must be retained by the company.

In addition, the employee must not have a material interest (more than about 30%) in the company or any of its subsidiaries, either on their own or in consort with one or more associates.

 

Enterprise Management Incentive Documents

 
 

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