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.