HMRC has published an announcement affecting grants under the Enterprise Management Incentive (“EMI”) Option Schemes from 7 April 2018.
EMIs are HMRC approved employee share schemes that are available to most trading companies which allow employers to grant share options to key employees tax efficiently, as a reward for their efforts within the business and/or to retain and incentivise key staff.
The EMI scheme relies upon EU State Aid approval, which expires on 6 April 2018. The government is in the process of applying to the European Commission for fresh approval however we now know this will not be granted before 6 April 2018.
Companies who are currently considering granting EMI share options therefore need to assess the potential impact of this for the period between the lapse of the existing approval on 6 April and a decision by the EU Commission on a fresh approval.
- EMI share options granted up to and including 6 April 2018 are understood to be unaffected by this lapse of approval.
- EMI share options granted from 7 April 2018 until fresh EU State Aid approval is granted may not be eligible for the tax advantages presently afforded to option holders, with share options granted during that period risking treatment as ‘unapproved’ grants and thus liable to employment-related income tax and national insurance liabilities.
In light of the above, companies and/or their shareholders should consider deferring further grants of EMI options where possible until such time as the government has secured fresh EU State Aid approval from Brussels.
Where there is a compelling commercial requirement to grant employee share options during this time the terms of such options should be considered carefully so that they can be cancelled and re-granted at a time when they will qualify for the tax reliefs associated with EMI share options.
Further updates will follow when available.
If you require any support or advice in structuring tax efficient share incentives please contact Amanda Ollason (firstname.lastname@example.org) or your usual AAB contact.