EMI Schemes – Spring Budget 2023

The Spring 2023 budget introduced very welcome simplifications to the process of granting EMI options which will come into effect post Finance Bill 2023.

First, what are EMI’s?

These are tax advantaged share option employee incentive schemes which were introduced to encourage and assist small higher risk trading companies that overall meet certain qualifying conditions to recruit or retain key employees. Employees can acquire shares at a heavily discounted price and be taxed at CGT rates, instead of under income tax with national insurance.

What has changed?

  • The EMI option agreement will no longer have to set out the restrictions applicable to the shares under the Articles.
  • The requirement for the company to declare that the employee meets the working time requirement, when issuing an EMI option agreement, is also removed.  The working time requirement remains in place, and these measures simply relax the statement formalities required when the option itself is issued.
  • From 6 April 2024, the government will also extend the deadline for notifying an EMI option from 92 days following grant to the 6 July following the end of the tax year.

When will these changes occur?

The first two changes will apply to EMI options granted from 6 April 2023. Existing EMI share options granted before 6 April 2023 that have not been exercised will also benefit from the changes.

What does this mean for companies and individuals?

Overall, there is no anticipated impact on the macro-economy. However, this will simplify the process of granting EMI options and remove some of the common issues we find when carrying out tax due diligence for potential acquirers.

More information can be found here – Enterprise Management Incentives: Improvements to the Process to Grant Options – GOV.UK (www.gov.uk).

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