Employee Share Schemes – Spring 2023 Budget announcements
Jeremy Hunt’s spring budget made a couple of surprise announcements about employee share schemes, and it’s largely good news for companies with Enterprise Management Incentive (EMI) schemes because it should make them simpler to put in place and administer.
Changes to EMI
- Easier registration of the option grant: at the moment, you must register the grant of an EMI option within 92 days of the date of the option grant for them to qualify as EMI options. This period is going to be extended so the options must be registered by the 6 July following the end of the tax year in which the option was granted. This change applies from April 2024 (so if you are in the process of EMI grants now, the 92 day limit still applies).
RM2 comment: this is a very welcome change as it’s one of the issues that causes most difficulty for clients – 3 months can cause a challenge in registering grants in time. Tying the deadline in with the existing Employment Related Securities deadlines makes good sense.
- Simpler documents: currently, EMI option agreements have to include a lot of detail about the type of shares over which options are being granted. Sometimes, this can result in very complex wording in the agreements which doesn’t (in our opinion) always add much value to the employee. This requirement is to be removed from 6 April 2023.
RM2 comment: we will need to await detailed guidance on this point as there has always had to be some reference to share rights in EMI documents – the question is, how much. In our view, it is sensible for employees and option holders to have some understanding of the rights attaching to the shares under option – for example, whether the shares carry voting/dividend rights or are subject to forfeiture if certain events arise.
- No working time declaration: currently, companies have to declare that an employee has signed a working time declaration in order to participate in an EMI. This is to be removed from 6 April 2023.
RM2 comment: this shouldn’t make much difference to most companies and we suspect (based on the limited guidance that has been issued) that employees will still need to make a declaration, but it’s worth noting that, whether or not it’s included in the documents, you should always check that your EMI participants meet the working time requirement before an option is granted or the option will not qualify for the plan. Ceasing to meet the requirements after the option is granted will also cause the option to become disqualified. So while this change is welcomed, it’s still very important that companies are aware of the minimum amount of time that must be worked for an employee to qualify for EMI status.
Changes to other share schemes
There aren’t any changes — yet. But the government will shortly launch a call for evidence on all employee share schemes, the Share Incentive Plan (SIP) and the Save As You Earn Plan (SAYE). We are looking forward to providing input on improving and simplifying these plans. Watch this space for information about how you can help feed back your views to HMRC on how these plans can work better for your business and employees.
If you’ve got any questions on how the spring budget might impact your share plans, get in touch: firstname.lastname@example.org