Chancellor to double Enterprise Management Incentive share allowances

This measure will take effect for options granted on or after a date which is yet to be specified, and is subject to State Aid approval.

Enterprise Management Incentive (EMI) options were introduced by the Finance Act 2000. They are intended to help smaller companies with growth potential to recruit and retain the best employees, and offer generous tax advantages to employees of those companies which qualify.  The increase in the value of shares which may subject to EMI options has the stated policy objective of helping small and medium enterprises to recruit and retain high calibre employees.

The Government has also announced further reforms to EMI which will be included in Finance Bill 2013, again subject to State Aid approval, so that gains made on shares acquired through exercising EMI options on or after 6 April 2012 will be eligible for capital gains tax entrepreneurs’ relief.

“The increased limit for EMI options is to be welcomed” says Lynette Jacobs, an expert in employee share incentives at Pinsent Masons, the law firm behind Out-Law.com. “Together with the future change to allow gains pursuant to EMI options to qualify for entrepreneur’s relief will allow smaller companies to offer increasingly attractive incentives to new and existing employees". 

Finally, the Government will consult on ways to extend access to EMI for academics who are employed by a company which qualifies to grant EMI options.

More generally in relation to tax-approved share plans, the Government has acknowledged the report from the Office of Tax Simplification and confirmed that it will be consulting on how to take forward a number of proposals in the reports.  Legislation will be contained in future Finance Bills.