Enterprise Management Incentive Scheme

Employee share option arrangements come in many different forms but all are designed to do the same thing – to encourage share ownership amongst your employees to ensure that they have a vested interest in the Company’s success and incentivised to maximise shareholder value.

Depending on your company’s particular situation and organisational structure, you can choose to set up an “approved” or an “unapproved” share option scheme. The difference between the two is simply that approved schemes meet the requirements set out by HMRC to qualify for certain tax perks, whereas unapproved share option plans do not.

It goes without saying, provided the approved scheme provides the flexibility your company needs, you are more likely to choose an approved share option plan.

Of the many different approved share option schemes available, there is one which is the most tax advantageous and therefore most incentivising for your employees. This is the Enterprise Management Incentive Scheme (or “EMI” for short).

EMI comes with one distinct tax advantage: it means that if the company has increased in value between the time of grant and exercise the uplift is received tax-free by the employee.

What is the enterprise management incentive Scheme (EMI)?

The EMI scheme supports employee retention and increased productivity in your company by allowing your employees to obtain shares without incurring income tax or national insurance when EMI options are granted.

What’s more, when your employees eventually sell shares obtained via an EMI share option scheme, they are liable for capital gains tax (CGT) at the entrepreneur’s relief rate of only 10%.

How your company can benefit

The number one benefit is that you will find it easier to attract and retain the most talented and in-demand employees.

There are financial incentives for your company too.

The costs of setting up and administering the EMI will be deductible expenses for corporation tax.

Also, after exit, the net market value of the options exercised by your employees may be an allowable expense, similar to expensing normal employee remuneration.

Qualifying companies are those which are not subsidiaries of another company, are UK based, have gross assets of no more than £30m, have fewer than 250 employees and must participate in a qualifying trade with a view to realising profits.

3 Reasons You Need Our EMI Expertise

Here’s why your company needs our expertise if you plan to use EMI:

The EMI rules are flexible – giving you options

The EMI scheme offers you considerable flexibility as to how the share options may be offered to your employees.

These options may, for example, be subject to certain performance conditions being met.

We can guide you to ensure the EMI scheme is as incentivising as possible.

The Tax rules are complicated

It’s important to agree a market value for the share options with HMRC before granting the share options to your employees.

This involves liaising with HMRC, setting out the rationale for the proposed value.

The share options must be granted in accordance with the detailed and complex HMRC rules in order to qualify for the tax perks.

Employee communications

The whole point of establishing an EMI scheme is to incentivise your employees.

It’s therefore crucial that your appointed advisor is aware of the need to ensure that the employees understand that EMI options offer huge potential value.

What Does It Cost And What’s Involved?

We can undertake an EMI-compliant valuation for a fee of £1,500 plus VAT

The process normally takes 5-6 weeks and has four simple steps.

Scheme Requirements

We discuss your requirements and then advise as to how best structure the scheme.

Examples of points that need to be agreed include the number of options to be granted, the class of share, the performance criteria that will need to be satisfied (if any), and the period of vesting.


We calculate the company’s value for EMI purposes and ensure that you’re comfortable with the approach adopted.

We’ll then apply to HMRC for approval and agreement. Certain documents would be required from you to support this valuation.

Recording of Grant Options

Once HMRC has approved the valuation and the contracts are agreed, we’ll provide you with a Q&A to support you and your employees through the granting process.

Once contracts are signed and options granted, we’ll electronically notify HMRC of the grant of options.

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