Will Rishi grant our Wish(i)?

It’s nearly budget time and the share plans world is excited to see if there will be changes to the rules relating to Enterprise Management Incentive (EMI) share option schemes. 

Last year the Treasury launched a consultation calling for evidence from company owners and practitioners about EMI, with the intention of finding out if extending the scheme might be beneficial. 

RM2 responded last May and we know that our responses and suggestions corresponded with many other practitioners’ views.  Our suggestions included: 

  • Increasing the maximum employee numbers from 249 to, say, 500  
  • Removing the “working time” limitation (this requirement is increasingly irrelevant in a “gig economy”) 
  • Changing the rules relating to joint ventures and majority controlled subsidiaries 
  • Easing the requirement for qualifying trades  
  • Clarifying the rules relating to independence (in particular in the context of Venture Capital backed companies) 

We also suggested updating the rules relating to Company Share Option Plans (CSOPs).  CSOPs are the “next best” tax advantaged discretionary option plan available to companies but in comparison to EMI the rules are inflexible.  In addition, the limits (£30,000 worth of shares per individual for CSOP, as against £250,000 for EMI) are less than attractive.  Private companies who outgrow EMI can find the rigidity of CSOP a real shock – some private companies with multiple share classes can’t use CSOP at all.   

This is really unfortunate given the “cliff edge” nature of EMI qualification, where the hiring of one employee (even on a part-time basis!) can tip a company over from EMI qualifying to non-qualifying.   

We know Rishi has a lot on his mind at the moment, but some of the suggested changes from RM2 and others could result in a positive outcome for private companies looking to hire – and hold onto – employees in a challenging recruitment market. 

If you’d like to discuss EMI, CSOP or any other form of equity incentive for your employees, contact operations@rm2.co.uk or call 0208 949 5588 to arrange a free consultation with one of our expert advisers.