Why use an EMI scheme?

Produced by Tolley in association with Andrew Rainford
Why use an EMI scheme?

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

  • Why use an EMI scheme?
  • Share options
  • Flexibility
  • What EMI will not do?
  • Personal tax treatment
  • Corporation tax relief
  • Share valuation

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant tax changes associated with Brexit began to take effect. This document contains guidance on subjects potentially impacted by these changes. Before continuing your research, see the Brexit ― personal and employment tax implications guidance note.

The legislation, primarily in ITEPA 2003, Sch 7, gives employers a strong clue as to the intended benefits of enterprise management incentives (EMI) schemes. It suggests that they should be used to recruit and retain members of staff.

When the legislation was originally introduced in 2000, the belief was that small, fast growing companies, particularly in the IT sector, would need a boost to assist in the retention of staff in a highly competitive market.

Many start-ups struggle to pay market rates and are therefore constantly at risk of losing the employees that they need to develop. As a result, EMI were introduced to help small companies. Today, most smaller companies are able to benefit from EMI and if they are able to do so, almost certainly should take advantage.

A good source of further information is at ETASSUM50000.

On 15 May 2018, the EU confirmed state aid approval for EMI schemes. Although the EU state aid approval had previously expired on 6 April 2018 and was only renewed on 15 May 2018, HMRC confirmed in its employment-related securities bulletin 30 (October 2018) that it will nevertheless treat EMI qualifying share options granted between 6 April and 15 May 2018 as continuing to receive EMI tax advantages.

The EU Commission extended this EU state aid approval for EMI schemes until 2023; however, in its employment-related securities bulletin 34 (February 2020), HMRC confirmed that state aid will continue to apply until at least the end of the transition period. HMRC will provide more

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