Enterprise management incentives

Produced by Tolley
  • (Updated for Budget 2021)
Enterprise management incentives

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

  • Enterprise management incentives
  • Summary
  • EMI requirements and definitions
  • Qualifying companies
  • Eligible employees
  • Requirements relating to options
  • Limit on options
  • Disqualifying events
  • Implementation of an EMI scheme
  • Administration
  • More...

Summary

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.

Note that although state aid approval for EMI schemes expired on 6 April 2018 and was only renewed by the European Commission on 15 May 2018, EMI options granted in the intervening period are treated as qualifying EMI options.

The European Commission originally extended state aid approval for EMI schemes until 2023. Although the EU state aid rules no longer apply to UK law with effect from 31 December 2020 (the end of the transition period), a similar system will be set up in the UK under the level playing field terms agreed in the Trade and Cooperation Agreement. HMRC confirmed in October 2020 that EMI schemes continue to be available under UK law from 31 December 2020 onwards.

The Government is to review the EMI scheme to ensure that it provides the right support for high-growth companies. The review will also consider whether more companies should be able to access the scheme. This was originally announced in Spring Budget 2020, but was delayed, perhaps due to the pandemic. This was re-announced at Budget 2021, and it is expected that a call for evidence will be issued in 2021.

EMI requirements and definitions

Qualifying companies

To qualify to offer EMI options, a company can be quoted or unquoted but must meet

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