CORPORATE

Urgent Information for Companies Preparing to Grant EMI Options

An enterprise management incentives option (EMI option) is a type of employee share option specifically designed for smaller companies under which a company may grant options to selected employees to allow them to acquire its shares over a prescribed period and, provided certain qualifying conditions are met (and subject to the recent development detailed below), enjoy favourable tax treatment.

The tax relief associated with EMI options is technically a form of state aid to the companies granting the options. The relief therefore requires approval from the EU Commission. However, HMRC announced on 4 April 2018 that this approval was due to expire on 6 April 2018. It is understood that HMRC applied for renewal of approval last year, but the renewal has not yet been received from the Commission.

HMRC has indicated that options granted in the period after 6 April 2018 until state aid approval is renewed "may" have to be treated as non tax-advantaged options. Therefore, it would be sensible for companies proposing to grant EMI options after 6 April 2018 to consider deferring such grant until such time as the government has secured fresh EU state aid approval.

If there is some compelling commercial reason why a company needs to grant employee share options after 6 April 2018, and before such time when state aid approval has been received, careful consideration needs to be given to the terms on which they are granted so that, if necessary, it will be open to the parties to cancel and re-grant such options at a time when they will qualify for the tax reliefs associated with EMI share options.

If you require advice or guidance in relation to EMI options or share schemes generally, please contact Louise Kerlin on louise.kerlin@mmwlegal.com. Louise is a solicitor in our corporate department with particular expertise in the area of employee share schemes and incentives.

 

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