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How does the EMI scheme work? | Enterprise Management Incentives scheme

How does the EMI scheme work? | Enterprise Management Incentives scheme

Mike Wakeford

What is the enterprise management incentives scheme
The use of enterprise management incentives scheme (EMIs) can help small growing companies to attract and retain employees. The enterprise management incentives scheme allows employees to buy shares free of income tax and NICs based on the difference between the amount paid for shares when an option is used and the actual value (provided the shares are purchased for at least the market value they had when the option was granted).

How to qualify for the Enterprise Management Incentives scheme
The value of shares over which options may be held by an employee under the EMI scheme is currently £250,000 in a 3 year period. In addition, the shares must be in an independent trading company with gross assets not exceeding £30 million, have fewer than 250 full-time equivalent employees when a qualifying EMI option is granted, and operate a ‘qualifying’ trade.
Companies that work in 'excluded activities' cannot offer EMIs. Excluded activities include:

  • banking

  • farming

  • property development

  • provision of legal services

  • ship building

Capital gains tax under the EMI scheme
Shares acquired under the EMI scheme are eligible for the Business Asset Disposal Relief (Entrepreneurs’ Relief before 6 April 2020) at a 10% capital gains tax rate. Employers must tell HMRC about a grant of an EMI option within 92 days of the grant date — if the option was granted before 6 April 2024 or by 6 July following the end of the tax year during which the grant was made. The EMI option is not usually valid if the notification is not made within the set time limit.

Contact Us
If you want to start offering your employees Enterprise Management Incentives , contact your specialist tax team on how we can help prepare your business to offer the scheme.