HMRC guidance manual updates published
HMRC have recently published updates on
their Employee Tax Advantaged Share Scheme User Manual (ETTASUM). This includes
updated guidance on how employees should be notified of restrictions attaching
to shares acquired under Enterprise Management Incentive (EMI) options.
When
EMI options are granted, the agreement must contain certain information as set
out in the legislation. This includes “details of any restrictions on the
shares” (for example, if the shares don’t carry votes, or if they are subject
to compulsory transfer if an employee leaves).
The
restrictions on the shares can be referred to in the option agreement itself,
or the document that contains the restrictions (e.g. the Articles of
Association) can be attached to the option agreement. However, it is not
sufficient simply to refer to the Articles – the restrictions must be
identified for the participants.
This
seems a fair approach as it would be unreasonable to expect an employee to read
through swathes of legal documentation in order to identify share
restrictions. Thus, when EMI options are granted, care should be taken to
draw the participants’ attention to the particular restrictions. To
comply fully with HMRC guidance this should be included in the option
documentation itself. It may also be sensible to include a summary of the
restrictions in any employee communication documents provided at the time
options are granted.
For more information, see the HMRC update here.