EMI—trading activities

The following Share Incentives practice note provides comprehensive and up to date legal information covering:

  • EMI—trading activities
  • HMRC guidance
  • The trading activities test—single company
  • The trading activities test—parent company
  • Meaning of a substantial part or a substantial extent
  • Permanent establishment
  • Research and development
  • Excluded activities
  • Excluded activities—wholesale and retail distribution
  • Excluded activities—banking, insurance, money-lending, debt-factoring, hire purchase financing and ‘other financial activities’
  • More...

EMI—trading activities

EMI Review: In the Spring Budget 2020, the government announced that it will review the enterprise management incentives (EMI) scheme (see News Analysis: Spring Budget 2020—Tax analysis). On 3 March 2021, the government published a call for evidence regarding a possible expansion of EMI schemes. This seeks views on the current EMI scheme to assess the effectiveness of its targeting and whether more companies should be able to access the scheme to recruit and retain the key talent they may need to grow and scale up. For further information, see Enterprise Management Incentives: call for evidence.

The enterprise management incentives (EMI) regime is prescriptive and sets out numerous requirements that must be met at the time the options are granted, including in relation to:

  1. the company granting the options

  2. the employees being granted the options

  3. the shares being placed under option, and

  4. the options themselves

This Practice Note analyses the legislative detail of the trading activities test that companies must satisfy in order to grant EMI options. The Practice Note explains what is meant by a qualifying trade and it highlights relevant HMRC guidance and practical issues relating to it. For details of the EMI qualifying tests relating to a company’s independence, qualifying subsidiaries, gross assets and number of employees, see Practice Note: EMIs—qualifying companies.

For a flowchart determining a company's eligibility to grant EMI options,

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