Qualifying conditions for EMI schemes – employees

By Tolley in partnership with Andrew Rainford
Employment_tax_img10

The following Employment Tax guidance note by Tolley in partnership with Andrew Rainford provides comprehensive and up to date tax information covering:

  • Qualifying conditions for EMI schemes – employees
  • Employment status
  • Working time
  • Material interest
  • Disqualifying events

In addition to requirements for companies, there are a number of conditions that must be met before employees can benefit from EMI schemes.

 

In addition to requirements for companies, there are a number of conditions that must be met before employees can benefit from EMI schemes.

In order to be an eligible employee, there are three different types of condition that have to be met. These relate to:

  • employment status
  • working time
  • material interest

The legislation is covered in ITEPA 2003, Part 4, Sch 5.

Employment status

This requirement defines an eligible employee as somebody who is working either for the company running the plan or any one of its qualifying subsidiaries.

ITEPA 2003, Sch 5, para 25

This means that EMI cannot be used to reward self-employed consultants, unless they become employees.

However, consultants may offer services to a number of companies in start-up mode without wishing to work exclusively for a single one.

Working time

Under the current EMI legislation, which differs from that for some of the other tax-advantaged schemes, it is necessary for an employee’s ‘committed time’ to meet one of the two criteria. Either individuals must work for at least 25 hours a week or, if less, 75% of their total working time. It is relatively rare for a company to wish to invite someone to use EMI who fails to exceed the 25-hour limit.

ITEPA 2003, Sch 5, para 26

Committed working time is extended beyond time actually spent working.

It also includes time when the employee would have been working for a relevant business but was incapacitated due to any one of the following:

    More on Enterprise management incentive scheme: