Enterprise Management Incentives

What Are Enterprise Management Incentives?

Designed for small entrepreneurial companies the Enterprise Management Incentive Scheme (EMI) is a tax-advantaged share option scheme. A company may grant options to selected employees to allow them to acquire its shares over a prescribed period enabling smaller companies to offer the scheme as part of the benefits package to attract and retain employees.

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Which Businesses Can Offer Enterprise Management Incentive?

A company can be quoted or unquoted and must meet the following criteria:

  • Be independent (not a 51% subsidiary of another company or controlled by another company or a company and persons connected to it).

  • Operate a qualifying trade. Certain sectors are excluded such as financial services, property development and farming.

  • Have gross assets of less than £30 million.

  • Have only qualifying subsidiaries: a company must hold more than 50% of the ordinary share capital of any companies it acts with.

  • Trade wholly or mainly in the UK, but not necessarily UK resident.

  • Have fewer than 250 full-time employees.

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Eligible employees

To be eligible, an employee must work for the relevant company/group for at least an average of 25 hours per week or, if less, 75 of the employee’s working time. The employee must not hold, directly or indirectly, more than 30% of the ordinary share capital of the company.

Each employee can be granted options amounting up to £250,000.

Speak to a member of our expert team today

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Speak to a member of our expert team today

Find Out More

Administration of the scheme

The options should be granted in writing between the company and the employee, stating the date at which the options are granted, the number of shares acquired and the price at which the options can be exercised.

Formal approval does not need to be obtained prior to beginning the scheme, however the company must notify HMRC within 92 days of the options being granted. HMRC then have a 12 month window following the 92 days to check the grant complies with EMI rules and to formally approve any share valuations in relation to the scheme. We recommend obtaining advance approval.

An annual return must be submitted within three months of the end of the tax year.

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Setting Up An EMI Share Option Scheme

It’s always advisable to have your share option scheme set up by a qualified tax advisor as it can have impacts on both Tax and NIC (National Insurance Contributions).  A tax adviser can also provide guidance on the disposal of the shares acquired under EMI share options, Capital Gains Tax (CGT) may be payable on any return made.

For more information on an Enterprise Management Incentive scheme for your business, contact our team today on 0161 832 6221 or email info@kjgllp.com.

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