Enterprise management incentive (EMI) schemes enable small trading companies to recruit and retain their key employees. This document covers the employee tax consequences of an EMI option, along with the grant, vesting and exercise of an option; disqualifying events; sale of shares; tax on tax charge; NIC agreement; and interaction with entrepreneurs’ relief and restricted securities election.
Points discussed within this guidance note:
This note considers emi options and discusses the rules in relation to an emi guide for employees on a step-by-step basis.
> Grant of option
There is no income tax or NIC charge arising on the granting of an EMI option.
> Vesting of option
This note considers income tax when and EMI option vests, ie becomes available for exercise or vests automatically, eg after a specified period.
> Exercise of option
This is the critical point from a tax perspective. There are two different possibilities which the note considers in detail.
> Disqualifying events
> Sale of shares
> EMI and entrepreneurs' relief
> NIC agreement or election
> Tax on tax charge
> Restricted securities election – general
> EMI options and restricted securities election
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EMI qualifying conditions for companies
To qualify for the tax breaks that Enterprise Management Incentive (EMI) brings, companies must meet a number of requirements. The requirements broadly fall into three categories: the size of the company/group and its structure; terms of the option; and the nature of the company/group's trade. This document also covers the detail on excluded activities.
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