Find answers to common questions about equity and services.
An Enterprise Management Incentive (EMI) scheme is a UK government approved share option plan designed to help smaller companies attract and retain key employees by offering tax advantaged share options. Employees are granted the right to acquire shares at a predetermined price, benefiting from potential future growth.
EMI schemes offer significant tax benefits. For employees: No income tax or national insurance contributions (NICs) are due when the option is granted or exercised, provided certain conditions are met. Upon selling the shares, capital gains tax (CGT) is payable, often at a reduced rate if Business Asset Disposal Relief applies.
For Employers: The company may qualify for a corporation tax deduction equal to the difference between the market value of the shares at exercise and the amount paid by the employee.
To qualify for EMI, the company must:
The company must have gross assets not exceeding £30 million.
It must have fewer than 250 full-time equivalent employees.
The company must carry out a qualifying trade on a commercial basis with a view to profit. Certain trades, such as banking, farming and property development are excluded.
Employees must:
Work at least 25 hours per week or, if less, at least 75% of their working time for the company.
Not hold more than 30% of the company's shares.
Be employed by the company or a qualifying subsidiary.
Yes. It's advisable to agree on the market value of the shares with HMRC before granting EMI options. This ensures clarity on the tax position and helps avoid disputes later. HMRC offers a valuation check service for EMI options, which is generally straightforward.
