EMI Share Options Lose Their Tax Relief

On 4 April HMRC announced that EU State Aid had not been renewed for the Enterprise Management Incentive (EMI) share scheme, which means that EMI share options issued from 7 April 2018 onwards will not qualify for tax relief.

Just to recap, an EMI scheme is an approved employee share scheme that is available to most trading companies, allowing employers to grant share options to key employee’s tax efficiently, as a reward for their efforts within the business and/or to retain and incentivise key staff. These schemes have proved incredibly popular and the loss of tax relief will be of concern to many business and employees.

It currently looks like State Aid approval will continue to apply to options granted up to and including 6th April 2018 but this hasn’t yet been categorically confirmed by HMRC. What is far clearer is that any EMI share options granted from 7 April 2018 onwards will not immediately be eligible for any of the generous tax advantages.

According to Philip Fisher, writing in Accounting Web, “The government presumably hopes that, in the fullness of time, it will manage to negotiate a renewal of State Aid, together with a backdating to 6 April 2018 that would cover all options granted during this embarrassing lacuna. However, they do not currently seem to have as much confidence in their own abilities to negotiate with the powers that be in Europe as we might all expect. One must inevitably ponder whether there could be a message here about what might happen in other negotiations between the two parties over the next few years?”

The advice from HMRC is as follows: ‘Companies may wish to consider delaying the grant of employee share options intended to qualify as EMI options until fresh EU State Aid approval has been given.’

If this is something that you or your business is concerned about, please get in touch with the team at CB Reid as we would be pleased to assist you.