Tax advantage of EMI share options lapses

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Update 29.5.2018:

It has been reported that the European Commission has approved the state aid implicit in UK Enterprise Management Incentives.

Post as at 9.5.2018:

The EMI share option scheme introduced in 2000 was the most tax efficient scheme to attract and retain key staff, providing employees in receipt of qualifying options with significant tax advantages. It involves employees being given options to buy shares in the future, but at the market value or less, of the shares when the options are first granted, thus encouraging the employee to try to grow the business, improve the share price and therefore their profit on their share options.

Depending upon the price paid by the employee for their shares on exercise of EMI options, the receipt and subsequent sale of the shares is subject to capital gains tax at just 10% instead of PAYE and NIC.

The EMI status must be granted by the EU but the UK government failed to apply for an extension to the current agreement, meaning that any EMI scheme set up after 6 April 2018 will not longer qualify for the reduced tax rate.

It is expected that the EU will re-approve the scheme so HMRC are recommending that any implementation is delayed until that time.

As with all of our tax tips and web pages this information is necessarily summarised and of a general nature.  If you would like detailed specific advice please contact us.