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

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

There's no margin for error. Think Tax.
Think Tolley.

TolleyGuidance gives you direct access to critical, comprehensive and up-to-date tax information and expertise you can rely on.


Popular Articles

Settlor-interested trusts

What is a settlor-interested trust?A settlor-interested trust is one where the person who created the trust, the settlor, has kept for himself some or all of the benefits attaching to the property which he has given away. A straightforward example is where a settlor transfers assets to trustees for

23 Mar 2022 10:33 | Produced by Tolley Read more Read more

Self assessment ― estimates and provisional figures

If the taxpayer does not have sufficient information to enable them to complete the tax return in the time allowed, they should include either a best estimate or a provisional figure. The taxpayer should not either leave a box blank or enter ‘details to follow’ as HMRC will regard this as an

25 Feb 2022 15:16 | Produced by Tolley Read more Read more

Close companies ― overview

Close companies ― overviewMeaning of close companyThe tax rules for close companies are intended to address those companies that are closely controlled (ie by the owners and their families) and therefore could be used to manipulate the tax position of its activities and its investors. Therefore,

09 Mar 2022 14:32 | Produced by Tolley Read more Read more