Furloughing and EMI & CSOP options

Posted by RM2 at 16:51 on 9 Jun 2020

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To be a qualifying Enterprise Management Incentive (EMI) option on exercise there are certain working time requirements that an EMI option holder must meet throughout and furloughing an employee technically constitutes a ‘disqualifying event’ such that from the moment the EMI option holder ceases to work either 25 hours per week or 75% of their remunerated time working for the company or the group, the EMI tax benefits on exercise are restricted where that option has not been exercised within 90 days of ceasing to meet the working time requirements.

We, along with other share scheme advisers, have asked for clarity from HM Revenue & Customs (“HMRC”) on this matter as many of our clients that have furloughed their employees holding EMI options are fast approaching the 90 day deadline. HMRC have yet to provide an extra statutory concession on this matter, similar to the one issued to those who volunteer as armed forces reservists whilst in receipt of EMI options.

However, HMRC have confirmed that for the purpose of the grant and the holding of Company Share Option Plan (CSOP) options, the Coronavirus Job Retention Scheme does not change the legal status between an employee and their employer, and they continue to be eligible for CSOP irrespective of whether they have been furloughed or not.

If you have any concerns regarding this, please do get in touch by either emailing your usual contact or email enquiries@rm2.co.uk. We will provide an update as soon as we hear from HMRC.