What happens to my EMI options if I am furloughed?

Posted by RM2 at 11:58 on 3 Apr 2020

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This article is not an attempt to increase levels of “collective hysteria” which are certainly not welcome at the current time, but the blog is intended to be merely noteworthy.

It is undeniable that due to the current coronavirus pandemic, the Government has acted in ways that many business people and professional advisers would have believed to be unthinkable only a couple of months ago. As always the “devil is in the detail” and at this time in relation to the Coronavirus Job Retention Scheme (i.e. furloughing employees) this detail is inevitably still being worked through.

Is furloughing a disqualifying event?

In particular, if a company has Enterprise Management Incentive option holders who won't be working for the company during a period of “being furloughed”, RM2 are of the view that technically it is a “disqualifying event” under EMI legislation and the relevant tax advantages for the individual participant could potentially be lost. This is because the employee would have no "committed time" as defined in the EMI legislation as the employee would not be required to spend any time on the business of the company (and in fact would be required not to do so).

What is being done?

We understand that this issue has already been raised with HM Revenue & Customs (by ProShare among others) and the very realistic hope is that the government will publish a concession similar to the one that already exists for EMI option holders who are called up to serve as armed forces reservists. We hope that such a concession can be provided soon to aid “struggling” companies dealing with furloughing within their organisation.

We will continue to keep you updated, but in the meantime if you have any questions about your employee share scheme or employee ownership arrangements please don’t hesitate to contact us at enquiries@rm2.co.uk