Enterprise Management Incentives (EMI)
No tax or NICs are due on the grant or exercise of a qualifying option under the Enterprise Management Incentive as long as the exercise price is not less than fair market value at the date of grant. On sale of the shares acquired through an EMI share option scheme, gains will be taxed as capital gains.
About the Enterprise Management Incentive
Recipients are selected at the employer’s discretion. Employees are granted the right to purchase company shares worth up to £250,000 at a price set at the date of grant.
The value of the EMI share option increases when the value of the shares rises above the purchase (exercise) price. Gains are subject to capital gains tax up to 28% or less as opposed to top rate income tax (and often) NICs payable on unapproved options.
Qualifying for the Enterprise Management Incentive
Companies offering options under the Enterprise Management Incentive must be independent, with gross assets not exceeding £30 million at the date of grant and fewer than 250 employees. Companies engaged in activities such as certain financial or legal services, dealing and property are excluded. Overseas companies can offer EMI schemes but only in some circumstances. The shares may be with or without restrictions and may be non-voting.
Performance conditions for EMI share schemes
Individual performance conditions can be attached both to the grant and the exercise of each EMI share option, and EMI share options can therefore be used as powerful short term or medium term incentives, or both. There is no statutory minimum exercise period.
Companies offering options under the Enterprise Management Incentive do not need prior approval from HM Revenue and Customs but EMI share options must meet detailed conditions and annual scheme returns are required.
Private companies can create an internal market in their shares by means of an employee benefit trust.
This section will provide links to important scheme-related articles, including up to the minute legislation changes and beneficial information regarding this option.
- STOP PRESS!! Employees can get 10% tax rate without holding shares before exit
- EMI: The Gymnast of Share Schemes
- Calling all Spin-Outs: Academics to qualify for EMI options!
- Termination Payments: EMI Judgement Day
- EMI News Update
- Share Scheme Tax Comparison
- Great news for EMI but proceed with caution
- Budget 2012 Enhancement of EMI announcements