Enterprise management incentives

By Tolley

The following Personal Tax guidance note by Tolley provides comprehensive and up to date tax information covering:

  • Enterprise management incentives
  • Summary
  • EMI requirements and definitions
  • Disqualifying events
  • Implementation of an EMI scheme
  • Tax implications for the employee
  • Tax implications for the employer


The enterprise management incentive (EMI) scheme is a tax-advantaged share option employee incentive scheme aimed at small entrepreneurial companies that meet certain conditions. It is designed to assist such companies in recruiting and retaining high quality employees.

The scheme offers attractive opportunities for equity participation by employees in recognition of the fact that smaller companies may not be able to match salary levels paid elsewhere. The EMI scheme is also flexible enough to allow for the options to be geared to future capital growth and performance targets. So long as the options remain qualifying for EMI status throughout the period of ownership, the employee should be able to take advantage of income tax and national insurance reliefs.

EMI requirements and definitions

Qualifying companies

To qualify to offer EMI options, a company can be quoted or unquoted but must meet all the qualifying conditions contained in ITEPA 2003, Sch 5, Part 3, paras 8–23:

Condition  Reference
 The issuing company must not be controlled by another company ITEPA 2003, Sch 5, Part 3, para 9; ETASSUM52030
 All subsidiaries of the issuing company must be qualifying subsidiaries within the definition of the legislation ITEPA 2003, Sch 5, Part 3, paras 10–11B; ETASSUM52040, ETASSUM52050
 The gross assets of the company (or group) must not exceed £30m ITEPA 2003, Sch 5, Part 3, para 12; ETASSUM52060; SP 2/06
 The company (or group) employees must be less than 250 full-time equivalent employees (applies if the options were granted on or after 21 July 2008) ITEPA 2003, Sch 5, Part 3, para 12A; ETASSUM52070
 The company (or group) is carrying on a commercial trade which does not consist wholly, or as a substantial part, of excluded activities ITEPA 2003, Sch 5, Part 3, paras 13–23; ETASSUM52080, ETASSUM52090, ETASSUM52100
 The company (or at least one company in the group which has a qualifying trade) has a permanent establishment in the UK (applies if the options were granted on

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