Employment Tax

Setting up and administering an EMI scheme

Produced by Tolley in association with Andrew Rainford
  • 22 Dec 2021 14:32

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

  • Setting up and administering an EMI scheme
  • Establishing that the company / group qualifies
  • Devising and structuring the plan
  • Agreeing a share valuation
  • Drawing up an agreement or scheme rules
  • Presenting the scheme to the staff
  • A note on share exchanges
  • Notifying HMRC ― an essential step
  • Monitoring the scheme and completing annual returns

Setting up and administering an EMI scheme

When compared with other tax-advantaged employee share schemes, Enterprise Management Incentive (EMI) has historically been relatively simpler both to set up and administer. This follows the principle that it is meant to be an inclusive scheme for smaller companies and therefore does not attempt to discourage those that might be tempted to try it out. Finance Act 2014 removed the formal approval process from all of the tax-advantaged schemes, instead moving toward a system of self-certification. This means that the benefits of simple set-up requirements which have long been enjoyed by EMI schemes are now enjoyed by the other schemes (SIPs, CSOPs and SAYE).

The several different stages of the process that do not necessarily need to be operated in a strict linear order are the following:

  1. establishing that the company / group qualifies

  2. devising and structuring the plan

  3. agreeing a share valuation

  4. drawing up an agreement or scheme rules

  5. presenting the scheme to staff

  6. notifying HMRC electronically

  7. monitoring the scheme and completing annual returns electronically

Establishing that the company / group qualifies

Inevitably, the first step is to decide on whether EMI is even a possibility. If the company is too large, carries on the wrong trade or the individuals that the company would like to include are not eligible, then an EMI scheme is not appropriate. See the EMI qualifying conditions for companies guidance note.

Devising and structuring the plan

Companies need to plan carefully in advance before implementing an EMI scheme. They should ideally establish

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