Employment Tax

Qualifying conditions for EMI schemes ― employees

Produced by Tolley in association with Andrew Rainford
  • 19 Apr 2022 08:21

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

  • Qualifying conditions for EMI schemes ― employees
  • Employment status
  • Working time
  • Material interest
  • Definition
  • Maximum entitlement
  • Disqualifying events

Qualifying conditions for EMI schemes ― employees

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.

As the EMI scheme is attractive, there are conditions that must be met by the company as well as the employees. For the conditions that must be met by the company, see the EMI qualifying conditions for companies guidance note.

This guidance note considers the conditions that must be met by the employees.

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

  1. employment status

  2. working time

  3. material interest

These are considered below.

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.

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 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’ (as defined in ITEPA 2003, Sch 5, para 27). It is relatively rare for

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