The following Employment Tax guidance note by Tolley in association with Andrew Rainford provides comprehensive and up to date tax information covering:
In order to qualify for the tax breaks that Enterprise Management Incentive (EMI) brings, companies have to meet a number of requirements.
The legislation is covered in ITEPA 2003, Sch 5, paras 8–23.
For more on the reasons for using EMI schemes, see the Why use an EMI scheme? guidance note.
The requirements broadly fall into three categories:
HMRC guidance on qualifying companies is at ETASSUM52010 onwards.
In order to qualify, the company whose shares are to be granted under EMI must not be a 51% subsidiary of any other company. Care must be taken to go beyond merely ensuring that current shareholdings meet this rule. When determining the shares that a company holds, it is necessary to look at not only their own shares but also those of associates (a concept which is extremely widely defined and includes family members, trusts and other companies).
In addition, it is necessary to look at any rights or arrangements that exist which might enable a company to acquire more shares, eg options. Effective control, even where shareholdings do not immediately add up to more than 50%, also prevents a group using EMI.
A company under the control of an employee ownership trust may also operate an EMI scheme.
Every subsidiary controlled by a company granting EMI options must be a qualifying subsidiary. This means that the grantor company
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