Budget boost for EMIs
Alastair Darling announced that, from 6th April 2008, the upper limit on the value of shares that can be offered under an Enterprise Management Incentive (EMI) scheme will increase from £100,000 to £120,000. This will allow more high level executives to take their rewards in a tax-efficient manner. It also indicates the government's continuing support for this important and attractive incentive. More than 8,000 companies have now granted EMIs to a total of well over 100,000 employees.
Having given with one hand, Darling took away with the other. Companies with 250 employees or more will not be able to offer EMIs as from the date of Royal Assent to the Finance Bill 2008 (usually in July following the Budget). This restriction will affect very few companies, however, since those with gross assets in excess of £30 million are already excluded. Part time employees are counted on the basis of the number of hours they work as a proportion of a "standard" 35 hour working week.
Oddly, Darling also announced that companies engaged in shipbuilding or the production of coal or steel will be unable in future to offer EMI options. Given the gross asset test just mentioned, we think that very few if any companies will be affected by this restriction, especially as the shipbuilding restriction applies only to larger vessels. It looks as though this measure was introduced for technical reasons, to accord with European Directives.
It may have been plain sailing for employee share schemes, but disquiet continues to grow within sections of the Labour Party in respect of other of Darling's measures, in particular the abolition of the 10% income tax band. We predict further trouble ahead for the embattled Chancellor...