The Enterprise Management Incentive (EMI) is a tax advantaged share option scheme introduced in 2000. EMI is targeted at smaller, high growth companies and EMI options provide tax benefits for both employees and employers. In particular, where EMI options are granted with an exercise price at least equal to the market value of the shares at grant - and assuming no ‘disqualifying events’ occur - the gain on exercise would be exempt from income tax and national insurance contributions; instead, capital gains tax would apply on sale, generally at a preferential rate.
The government announced in the 2020 Budget that they intend to review the EMI scheme to ensure that those companies can “recruit and retain the best talent” and to “examine whether more companies should be able to access the scheme”.
The review is likely to affect smaller, high growth companies which do not currently meet all the legislative requirements to grant EMI options.
The timing of the review is currently unknown.
Due to its flexibility and tax advantages, EMI has allowed many smaller companies to recruit, retain and motivate talent in a tax efficient manner. It is therefore encouraging to hear that the government will review EMI both to ensure that this continues to be the case and also to consider whether more companies should be able to grant EMI options.