In what is welcome news for companies, and after more than a month of limbo, on 15 May 2018, the European Commission re-approved the UK’s Enterprise Management Incentive (EMI) scheme under EU state aid rules.
The lapse of the approval was as a result of an oversight by HM Revenue & Customs earlier in the year, which failed to re-apply for approval until March 2018, the previous approval expired on 6 April 2018.The new approval has been extended until the UK ceases to be Member State.
What is the Enterprise Management Incentive?
EMI reduces the taxation of employee share options for qualifying small and medium sized enterprises (SMEs). Under the scheme, employees of SMEs benefit from reductions in income tax and/or national insurance contributions, when exercising their share options. In addition, the employer will benefit from reductions from such contributions.
The aim of the scheme is to allow SMEs to recruit and retain employees and hence incentivise growth.
In the intervening period from 7 April to 15 May 2018, HMRC had suggested that companies consider delaying the granting of EMI share options until the situation was resolved. That was on the basis that any EMI share options granted from 7 April 2018 onwards may not receive tax relief when exercised. Whilst we still await HMRC’s statement on the subject, we recommend that any options granted between 7 April and 15 May 2018 are notified to HMRC in the usual way.
If you are contemplating setting up an EMI scheme, or wish to review an existing scheme, please contact one of our Corporate team for advice.