Enterprise management incentives – tax implications

Small and mid-sized firms keen to make use of Enterprise Management Incentive (EMI) schemes will now continue to be able to do so

The schemes have long been used as a tax efficient way of issuing company shares to employees, either as a reward or an incentive to attract and retain talent. The relief associated with EMI options is technically a form of EU state aid to the companies granting the options.  Such relief therefore requires approval from the European Commission to ensure it is not unduly distorting competition in the Single Market.

When the Commission’s approval for EMI schemes expired on 6 April 2018 there was a short period of uncertainty while the scheme was being reviewed under state aid rules. As a precaution, HMRC had published advice to firms considering taking up the scheme that options granted from 7 April 2018, while the state aid approval was pending, "may" have to be treated as non tax-advantaged options.

News that the European Commission has once again approved the scheme provides a green light to companies wishing to offer shares to their employees in a structure that reduces taxation and national insurance contributions for employees exercising their share options, and for the employer. Nonetheless, such schemes require careful planning and it is best to speak to a specialist in order to seek advice that is tailored to your company. Without a detailed discussion of the relevant circumstances, proper advice cannot be given.

The Commission’s decision applies until the UK ceases to be a Member State.

If you would like further information, please get in touch at bpe@bpe.co.uk or call 01242 248248.

These notes have been prepared for the purpose of articles only. They should not be regarded as a substitute for taking legal advice.