Why use an EMI scheme?

Produced by Tolley in association with Andrew Rainford

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

Why use an EMI scheme?

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.

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 th

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