Client Portal
Hall Morrice

EMI Share Option Scheme Explained

venveo 609390 unsplash
22 May 2019

EMI Share Option Scheme Explained

By Andrew Laurie, tax manager

Enterprise Management Incentive (EMI) is a share option scheme that is perfect for small and growing companies.

It’s well worth considering the benefits that EMI could bring to your business.

Research shows that companies that offer employees share incentives are more likely to outperform those that do not.

EMI share options are a cost-effective and tax efficient way to retain and motivate your team, incentivising them to drive your business growth and profit.

Here’s what you need to know.

What is EMI?

Growing companies can face more challenges when it comes to encouraging staff to remain with the company and work towards its growth compared to their larger counterparts.

HMRC recognises that staff recruitment and retention can be harder for smaller companies to achieve because they cannot offer the same breadth of rewards as larger companies, so have provided the EMI share option scheme to assist.

The scheme enables employees to participate in the growth of a company without having to ‘buy’ shares initially. It allows companies to incentivise their employees without necessarily introducing a lot of employee shareholders.

What are the benefits?

Benefits to employees include the ability to share in the ultimate sale proceeds of a company without any initial outlay and provided certain conditions are met employees are able to claim entrepreneurs’ relief on the disposal of their shares, even when they own a very small percentage of the company.

Benefits to the company include relatively low-cost access to a share option scheme which will incentivise their employees, and the ability to claim corporation tax relief when the share options are exercised.

EMI is tax efficient and inexpensive to operate, so for business leaders seeking to consider a share scheme and a means of rewarding employees, it’s a worthy consideration.

Anything else?

An EMI scheme costs a little more to set up at the beginning because of the need to include various terms and conditions required by tax legislation, and to agree a share valuation with HMRC. But this should not put you off, given the substantial tax advantages and the flexibility allowed for scheme configuration.

Companies that work in ‘excluded activities’ aren’t allowed to offer EMIs, and these activities include banking, farming, property development, provision of legal services and ship building.

In summary

An EMI scheme is attractive to companies seeking to:

  • Reward, motivate and incentivise employees
  • Retain key staff in the medium to long term
  • Align employee interests with the company’s

Want more information?

If you would like to discuss introducing an EMI scheme, please contact us.

Back to News & Articles